Penn State International Law Review


Thomas J. Karl


Increase in international trade and travel in recent years has increased the volume of international payments, most of which have traditionally been handled by commercial banks. Because paper provided the legal basis for these transactions, they were carried out via fairly complicated documents transmitted by mail. When the sums involved were very large or the time factor particularly important, Telex was used to expedite the procedure.

These factors compelled the banking world to develop a computerized international transfer system. The desired system would facilitate processing international transactions through (1) a high degree of standardization in the types of documents, procedures, and security measures to be adopted; and through (2) the establishment of standards for the various parameters involved, such as currency and country codes, commission, etc. In addition, the system would have to expedite the vast body of transactions conducted by mail and would not be limited to the operations already handled by the Telex System. Furthermore, the system would eliminate a large number of errors, through the use of an automatic message system between the switching network and central computers of participating banks. Finally, tedious manual checking would have to be precluded by this system.

The international electronic funds transfer system, specifically known as the Society for World Wide Interbank Financial Telecommunication System ("SWIFT"), fulfills these requirements. This article will describe the SWIFT System, examine the manner in which risk of financial loss in fund transfer is currently allocated, and determine how these losses would be allocated under the New Uniform Payments Code (New Payments Code).