In separate hearings today with Federal Reserve Chairman Ben Bernanke and Secretary of State Hillary Clinton, Congressman Brad Sherman (D -- CA) urged both officials to work to oust Iran from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) in advance of legislation currently under consideration by in Congress that would sanction the bank network if it continued allow Iranian banks to utilize its communications services.
In response to Sherman's questioning, Secretary Clinton said she believed that "using the SWIFT system is a very effective way of utilizing the financial system to further isolate Iran" and that "we will engage with the Federal Reserve" to provide them with guidance on the issue. Earlier, Bernanke noted that the Fed is one of the supervisors of SWIFT and that it would be feasible for the Fed to work successfully to prevent the network from handling communications for Iranian Banks. Bernanke's comments were in response to Sherman's question.
"In response to my question, Bernanke said he was confident that the Fed could act successfully to exclude Iranian banks from SWIFT, but he wanted input from those responsible for U.S. foreign policy," said Sherman. "That's why it was important for me to get Secretary Clinton to endorse excluding all Iranian banks from SWIFT when she testified later that afternoon."
SWIFT handles secure communications between banks internationally, sending payment orders that are settled through accounts that the banks have with each other. Every time banks make payments for one of their customers to an account in another bank, they utilize the SWIFT system. Iran's banks would find it very difficult to process most transactions without the benefit of the system, and trade with the outside world would become even more cumbersome for Tehran.
Sherman stressed with both officials that all Iranian banks, not just those currently under sanction, should be prevented from using SWIFT's services.
"We need to leave no stone unturned in our effort to economically isolate Iran," Sherman said. "If they cannot process payments with SWIFT members, Iran will find that its remaining trading partners either give up entirely, or will demand more in payment for what they send to Iran, and demand to pay less for what they buy from the Iranians."
Sherman is the lead Democratic cosponsor of legislation introduced in the House, H.R. 3880 that would penalize the network if it did not stop doing business with Iranian banks. Similar legislation was added to the Senate's main Iran sanction's bill earlier in February by an amendment authored by Senator Robert Menendez (D-NJ) and Roger Wicker (R-MS) in the Banking Committee. That bill, the Iran Sanctions, Accountability and Human Rights Act of 2012, awaits action by the full Senate