A SWIFT ban for Russia may sound important but there are many ways the country can get around it, according to experts

• Western nations recently cut Russia out of the SWIFT global banking system. 
• But one expert says the initial claims of how damaging it would be for Russia were exaggerated. 
• In reality, Russia has many mechanisms to get money out of the country, another said.

In recent weeks, Russia has been hit with a list of economic sanctions from Western states for its invasion of Ukraine. 

One of the earliest sanctions imposed by the US, EU, UK, Canada, and other Western allies was barring select Russian banks from the SWIFT global banking system.

SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is a Belgian communications system that was launched in 1973. It serves as a neutral platform for banks to chat about financial transfers, transactions, and trades. 

In a joint statement last month, Western allies said the move will target “selected Russian banks,” in an attempt to “ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.”

But according to finance experts, there are many ways Russia can get around a SWIFT ban. 

Mitch Thomas, head of product development at a New York-based fintech company, FinLync, told Insider: “It sounds good to be able to say that we’ve restricted communication with these banks via SWIFT but in reality, [Russia] has got a number of different mechanisms to get money out of the country.”

His comments chime with Dmitri Medvedev, the deputy chairman of the Security Council of Russia, who said that cutting Russia off from the SWIFT banking system wouldn’t be “a catastrophe,” but would make bank communication “more difficult,” Insider’s Ben Winck reported. 

Nathanael Tilahun, an assistant professor and economic sanctions expert at Coventry University, told Insider’s Grace Dean he had similar sentiments. He said blocking transactions from the Central Bank of Russia was the most impactful sanction so far and overrode the SWIFT ban because it “effectively wiped out Russia’s foreign currency reserve.” 

According to Thomas, SWIFT is “just a communication-enabling platform.” He said: “There are other ways that messages can be communicated and other ways to move funds out of Russia.”

He added: “In the whole scheme of things, from a sanctions perspective, it may have been a start, but I don’t think with just SWIFT sanctions alone you can get the desired result that people are looking for.” 

Thomas pointed out that moving money from one country to another doesn’t have to require SWIFT. Russia can “easily transfer funds from their local banks in Russia to their foreign branches that are operating in other countries,” he said. And they can utilize global clearing systems on both sides to be able to move money with very little impact, he added.

Peter Klein, co-founder of FinLync, added that financing coming through loans from other countries doesn’t mandate the need to go through SWIFT as a third party. “As foreign banks are still operating in Russia, then financial transactions can take place over Russia’s own domestic payment networks,” Klein told Insider. 

Klein believes that harsher sanctions need to be imposed to create a more significant effect on Russia. “If Europe, really intends to disconnect Russian banks’ international and financial system, all global banks then need to act,” he said.

He added: “All banks should block transactions to and from any Russian bank domiciled in any country globally.”

In terms of the recent sanctions leveled against Russian oligarchs, Thomas said, they are critical. “It’s been proven over history that there’s a tight group of financiers as far as from Putin’s perspective, that is the backbone of the Russian economy.” 

Restricting them essentially restricts their ability to fund the Russian military effort and the Russian economy in general, according to Thomas.

How and when the sanctions imposed on Russia will be removed is still uncertain. But according to Thomas,  there will be a “walking back of a number of these sanctions,” once the war between Russia and Ukraine ends.

“Those sanctions are solely focused on stopping this conflict so I think if the conflict resolves, those sanctions will fairly quickly start to be removed from a Western perspective,” Thomas added.