Compliance, innovation and standards top agenda SWIFT Business Forum Moscow 2017
This wrap up report is also available in Russian.
Event pictures available here.
"Russia holds the second place in the world in terms of the number of SWIFT users, and this business forum is number one in Europe and Asia in terms of the number of participants," said Anatoly Aksakov, Head of The Duma Financial Markets Committee, in his opening address.
"It is proof that our lenders and other institutions are paying special attention to their collaboration with this respected organization," he observed.
Aksakov underscored that SWIFT has been loyal to the Russian market, for which the market is grateful.
Russia holds the second place in the world in terms of the number of SWIFT users, and this business forum is number one in Europe and Asia in terms of the number of participants.
Anatoly Aksakov, Head of The Duma Financial Markets Committee
Building for the future
"Many major decisions, related to the development of the financial market, including new technologies, still lie ahead," he concluded. "We are discussing blockchain, cryptocurrencies and biometric factors that could be used to identify participants in our market and even for payments for services provided. The Russian system of payment cards is only making the first steps, but those steps are speeding up turning into running. We are optimistic about the future of the national system of payment cards."
The meeting marked a year of progress after a SWIFT signed a historic country deal in Russia, said Matthieu de Heering, SWIFT’s Head of Russia, CIS and Mongolia, in his address.
“This unique proposal, which was requested by the ROSSWIFT Steering Committee, will allow the entire country to switch for lower tariffs for SWIFT, if Russia reaches 30% growth versus 2015 of domestic SWIFT usage," de Heering added. "And you are well on your way, for which I also thank you!"
This unique proposal, which was requested by the ROSSWIFT Steering Committee, will allow the entire country to switch for lower tariffs for SWIFT, if Russia reaches 30% growth versus 2015 of domestic SWIFT usage. And you are well on your way, for which I also thank you!
Matthieu de Heering, Head of Russia, CIS and Mongolia, SWIFT
Protecting our industry from cyber attacks
Gottfried Leibbrandt, SWIFT's CEO, focused on the current situation and the challenges SWIFT is facing on a global scale, with cyber crime being the most pressing issue.
The Customer Security Programme (CSP), launched in May 2016, is already in full swing and showing early results.
"The threat of cybercrime is growing," he said. "It is no coincidence that cybercrime is emerging just as we are innovating as never before. Despite new opportunities that innovation and technology creates from cybercriminals, it is still possible to effectively fight off this threat,” noted Leibbrandt.
"We think we can turn a potentially existential threat into a manageable nuisance, but that requires true collaboration as an industry, sharing information and sharing experiences," he said. "As an industry, we need to cooperate globally. And we're doing that, we're working with experts around the world, including with Kaspersky Lab here in Russia."
We think we can turn a potentially existential threat into a manageable nuisance, but that requires true collaboration as an industry, sharing information and sharing experiences.
Gottfried Leibbrandt, CEO, SWIFT
An update on the Russian payments system
Аlla Bakina, Head of the National Payment System Department at the Central Bank of the Russian Federation, underscored the importance of collaboration between the regulator and the community of SWIFT users.
"We believe that being on the same wavelength with this respected organization and with the user community is vital," she said.
Bakina also described the rollout of the MIR national payment system. Currently, 333 banks have signed up to the system while 98% of the entire ATM network and 94% of all payment terminals installed in retail networks can accept MIR cards. So far a total of 3.4 million cards have been issued.
According to Bakina, the launch of the MIR payment system is on track and will happen in 2018 as planned.
"I hope that the level of collaboration, openness and trust [between the Bank of Russia and SWIFT] will remain, allowing us to execute the most ambitious tasks," she concluded.
We believe that being on the same wavelength with this respected organization and with the user community is vital.
Alla Bakina, National Payment System Department, Central Bank of the Russian Federation
ROSSWIFT’s 2016 report
In her video address, Natalia Dirks, Sberbank's Senior Vice-President and NMG Chairperson for Russia, mentioned the main directions for ROSSWIFT's development through to 2020, including the infrastructure of transferring financial messages, compliance, standards and the introduction of new technologies.
She also pointed to the importance of introducing a Know Your Customer (KYC) Registry. "This is an instrument fully adapted for improving compliance," she said. "And we are glad to report that Russia is a world leader in rolling out this solution, which will allow us to improve not only efficiency, but also the transparency of our market."
"Last year, traffic went up by nearly 18%," Rоman Chernov, ROSSWIFT executive director, said in his report. "Among the 20 biggest SWIFT user countries we have the second highest growth rate."
He added that in terms of traffic distribution, there was no change from the previous year, with the main payment messages accounting for the bulk of the traffic and 70% of all messages sent within the country.
Meanwhile, stock market transaction messages grew by nearly 30% and SWIFT usage in the collaboration between banks and corporations using the ISO 20022 standard is also on the rise.
Still, the number of users declined in 2016 for the third year in a row. Last year, 11 new organizations joined SWIFT, while 88 were deactivated. However, Russia is still second in the world in terms of the number of users.
The unprecedented activity of the conference's participants in the demo zone, where new solutions and products from SWIFT were demonstrated, also testified to the substantial interest in SWIFT by Russian users.
Last year, traffic went up by nearly 18%. Among the 20 biggest SWIFT user countries we have the second highest growth rate. It’s a change that is not only about technology but more fundamentally about how we do business and about changing market practices. We can see many opportunities down the line.
Rоman Chernov, Executive director, ROSSWIFT
Reinforcing the security of the global banking system
The business forum's first panel session was devoted to SWIFT's Customer Security Programme (CSP). Participants shared their understanding of cyber threats in the contemporary world of high technologies and their ideas on how to protect themselves from those threats.
"Russia is actually in a better situation than Europe and America,” said Аleksandr Chebar, a consultant with FinCERT in the Main Office of Security and Information Protection at the Bank of Russia. "The development of cybercrime tools often takes place in one country, with testing in another but the actual attack occurs in a third. By the time attacks reach us, we are ready and can fight them at the front line."
The Bank of Russia supports the CSP. The FinCERT will be inviting Russian banks to the CSP Roadshows on 15 May and 8 June. The Bank of Russia will also cooperate with SWIFT to make sure Russian banks fulfil their self-attestation requirements.
Аleksandr Chebar, Consultant with FinCERT in the Main Office of Security and Information Protection at the Bank of Russia
According to Chebar, the first few months of 2017 showed that perpetrators have moved from mass attacks to more targeted hits, focusing on specific employees of financial organizations, like those in the processing centre, trying to obtain as much information on them as possible.
"The Bank of Russia supports the CSP," he went on to say. "The FinCERT will be inviting Russian banks to the CSP Roadshows on 15 May and 8 June. The Bank of Russia will also cooperate with SWIFT to make sure Russian banks fulfil their self-attestation requirements."
Today's issues related with cybersecurity are, to some extent, caused by the fact that until recently, the SWIFT infrastructure was considered safe and in some financial organizations, sufficient attention was not paid to possible threats, noted Sergey Putyatinskiy, Head of the RTCH, ROSSWIFT’s Technical Consultation Hub, and ROSSWIFT’s Chief Information Security Officer (CISO) representative in SWIFT.
Thanks to SWIFT's efforts, the level of attention paid to the issue by companies' top management, is increasing. Today, security issues are no longer the prerogative of the IT staff, and are discussed at board meetings, as security has become one of the major components of a company's strategy.
Sergey Putyatinskiy, Head of the RTCH, ROSSWIFT’s Technical Consultation Hub, and Chief Information Security Officer (CISO) for NSD
"Thanks to SWIFT's efforts, the level of attention paid to the issue by companies' top management, is increasing," he said. "Today, security issues are no longer the prerogative of the IT staff, and are discussed at board meetings, as security has become one of the major components of a company's strategy."
He added that regulators are also paying increasing attention to security issues.
"Sberbank sees cybercrime as a growing trend that could do real damage to its business," said Alexey Volkov, Managing Director and head of IT Security at Sberbank. "The goals of these criminals have shifted away from just stealing data by infecting the infrastructure and or breaking into servers and accounts. Now their goal is to secretly manage the entire infrastructures of banks and commercial enterprises."
"We've seen that attacks on the infrastructure have become a trend as attacks on individual users are less effective and bring perpetrators less profit from the greater effort needed to prepare an attack," agreed Alexander Markov, information security manager at VTB Bank. "These criminals are attracting external experts to learn how to manipulate the market."
With this in mind, the participants of the panel discussion spoke highly of SWIFT's Customer Security Programme (CSP).
"The programme is in line with international standards," said Chebar. "And at least the first 16 programme points, which are mandatory, are there to resolve the security issues of a financial organization."
"What is important is that we have control over the programme's implementation," said Putyatinskiy. "Neither SWIFT, nor the regulator will force us to implement any clause of the programme. This is our responsibility and we need to realize how important it is."
"Ensuring the security of a financial organization is becoming more and more expensive," he said. "But, if you don't spend money on that, bad things will happen, and they will happen more and more often."
The Customer Security Programme is in line with international standards. And at least the first 16 programme points, which are mandatory, are there to resolve the security issues of a financial organization.
Аleksandr Chebar, Consultant with FinCERT in the Main Office of Security and Information Protection at the Bank of Russia
The new age of compliance
Participants in the panel session "The New Age of Compliance" discussed tracking and controlling global transactions by Russian financial institutions. Special attention was paid to SWIFT’s KYC Registry, which allows users to immediately upload documentation for partners all over the world and to just as automatically and centrally check on the identity of these partners.
"The KYC Registry is moving in the same direction as global regulation," noted Larisa Zalomikhina, Head of Compliance at Sberbank. She underscored the importance of the programme for the lender, which needs to understand "not only who our clients are but also, who the clients of our clients are."
"We will invite our partners to join the system. We will send individual letters to them as this is something that can really facilitate and speed up the due diligence processes," she added.
"Knowing, where SWIFT is headed to promote its KYC Registry, we understand the usefulness of this resource for facilitating work aimed at document collection and identification," said Anna Spivak, Head of Global Financial Crimes and Compliance at JP Morgan Moscow.
She stressed that the Bank of Russia allows the use of SWIFT’s KYC Registry data by Russian financial institutions and it meets the legal requirements for confirming data veracity. However, for the full use of KYC Registry in Russia, more legal work needs to be done.
"If a working group is created, me and my colleagues from JP Morgan will be glad to participate as we see a number of advantages in creating a single registry rather than collecting information from various sources," she concluded. "This will facilitate work and speed up the process."
The KYC Registry is moving in the same direction as global regulation. We will invite our partners to join the system. We will send individual letters to them as this is something that can really facilitate and speed up the due diligence processes.
Larisa Zalomikhina, Head of Compliance, Sberbank
The evolution of standards
The panel session "The evolution of standards" was devoted to the prospects of switching to the ISO 20022 standard and SWIFT’s role as the register of this standard.
Svetlana Romashkina, Deputy Head of the Payment System Regulation Division at the Central Bank of the Russian Federation, spoke about plans for the development of the Prospective Payment System (PPS), an important part of which will be a switch to the second phase of the ISO 20022 standard.
"The main approach is that the functioning rules of the current system should not change before the migration. Migration will be smooth," she stressed. "During the entire transition period, the existing and prospective systems will exist."
"Over 1 million messages in ISO 20022 have gone through the National Settlement Depositary," said Yulia Khodakova, Head of Electronic Document Management and Client Applications Division at the National Settlement Depositary.
"Currently, we are observing a new wave of interest in ISO 20022," said Elena Barabanova, director of the Correspondent Accounts Department at VTB Bank. “In Russia, this is primarily linked to the fact that the Bank of Russia has said it will be the central standard for the Prospective Payments System. It's important that the Bank of Russia decided to make the transition to the Prospective Payment System and roll out the ISO 20022 standard separately.
Charles-Raymond Boniver, lead expert of the SWIFT Standards department, underlined that while in cross-border payments or securities space, the withdrawal of the MT message standards was not seen in the foreseeable future, initiatives involving Market Infrastructures, across all business areas, are already based on ISO 20022. This created the need for a harmonisation in the implementation of this standard, which is why the SWIFT ISO 20022 Harmonisation Charter was created in 2015 and signed by 30+ Market Infrastructures, of which the National Settlement Depository is one.
Barabanova added that the Payments Market Practice Group also endorsed this initiative, as Russia’s representative in this group.
Currently, we are observing a new wave of interest in ISO 20022. In Russia, this is primarily linked to the fact that the Bank of Russia has said it will be the central standard for the Prospective Payments System.
Elena Barabanova, Director, Correspondent Accounts Department, VTB Bank
A new era for correspondent banking
The panel discussion "Are you fully equipped for the future?" was animated by four distinguished guests: Maria Shevchenko, COO and Board member of Alfa Bank; Vadim Kotov, CIO, Managing Director of Innovation Department CIB Sberbank; Alexandre Yakovlev, Head of decentralized solutions direction NSD, Moscow Exchange Group, member of Hyperledger Architecture Working Group and DLT evangelist; and Vincent Debast, SWIFT Projects and Market Initiatives department expert.
All the panellists highlighted the need to innovate, as well as the importance of new technologies in the banking industry, and in particular in cross-border payments business. The discussion was built around the impact that new technologies will have on the business today, and how they will shape the future.
Both banks (Alfa and Sberbank) have stressed that they believe that SWIFT gpi is the solution that will help solve many of today’s industry issues and help banks stay relevant tomorrow. The community needs to invest in projects that make the business “future-proof”. Maria Shevchenko has invited Russian banks to support the initiative and to join gpi, to ensure its success.
The testing of new technologies, such as Distributed ledger Technology (DLT), was also discussed by the panellists. Debast explained the scope and the specific SWIFT approach when it comes to running DLT Proofs of Concept (PoCs) . Yakovlev elaborated on what NSD is doing in that space.
The panel concluded that the SWIFT gpi offering could help many Russian banks to continue providing cross-border payments services to their customers, reduce the current burdens and increase efficiency.
"We are participating in this initiative because we understand our clients' needs," Kotov said. "At this point, it isn't clear yet what the banks will make money from. But we believe that if we act in our clients' interests, our investment will be recouped in one way or another."
Discussing SWIFT gpi in more detail, the participants in the panel mentioned the tracker.
"The tracker is the most innovative instrument," said Shevchenko. "This is what we will build in our systems for distant customer service. We don't want them to call us and us to have to respond to their calls. We want them to see all that information on the tracker."
"In addition to the instruments included in the initiative, its value is that participating banks will conclude a Service Level Agreement (SLA), which guarantees the speed of payments," Kotov added.
The final question addressed by the panellists was: how do you see GPI evolving by 2020? The answer was, “at SWIFT we are convinced that it will become a new standard in cross-border payments space.”
We are participating in this initiative because we understand our clients' needs. At this point, it isn't clear yet what the banks will make money from. But we believe that if we act in our clients' interests, our investment will be recouped in one way or another.
Vadim Kotov, CIO, Managing Director of Innovation Department CIB, Sberbank
Bringing the day to a close
The event concluded with a special address by Nikolay Zhuravlev, First Deputy Chairman of the Council of Federation's Budget and Financial Markets Committee, in which he underscored that Russian agencies and regulators are paying special attention to cybersecurity issues and actively collaborate with SWIFT in that direction and, especially in the CSP Programme.
"The Bank of Russia actively cooperates with SWIFT to make sure that within the framework of the SWIFT system, the relevant management structures and procedures for risk management are created," he said.
The Bank of Russia actively cooperates with SWIFT to make sure that within the framework of the SWIFT system, the relevant management structures and procedures for risk management are created.
Nikolay Zhuravlev, First Deputy Chairman of the Council of Federation's Budget and Financial Markets Committee
Wrap up report in Russian