‘Why we must strengthen cyber risk management now’

Mr. Kruger Denis, is the Head, Sub-Sahara Africa, SWIFT (Society for Worldwide Interbank Financial Telecommunication), a global provider of secure messaging services. In this online interview with CLARA NWACHUKWU, he speaks about plans by the international network service provider for Africa and how its specific solutions are helping Nigeria’s monetary institutions to integrate with other financial markets in the region and globally.

Tell us about yourself, what you do and what are your plans for Africa?
I am the head of Sub-Sahara Africa for SWIFT, based in Johannesburg. I joined SWIFT in 2006 and since then have managed countries in East, Central and Southern Africa, including South Africa, Kenya, and the DRC amongst others.

Sub-Sahara Africa is proving to be a significant growth area for SWIFT, not only in terms of traffic volume over the SWIFT network, but also in the take-up of a number of SWIFT’s new solutions and initiatives.

SWIFT traffic growth across the continent is impressive with year-on-year traffic growth exceeding 14% in Sub-Sahara Africa. To help support this growth SWIFT has opened new offices in the past two years in Accra, Ghana and Nairobi Kenya as part of its pan-Africa growth plans.

To help ensure that its development on the continent matches the needs of its African communities, SWIFT has recently established an Africa Advisory Group, involving key stakeholders from various markets with recognised fields of expertise.

The objective is for SWIFT to be proactive in engaging with the community. SWIFT shares with them what we see as crucial international developments and how we see them applying to Africa, while we learn from them about the challenges they face and how, in their view, SWIFT can proactively develop solutions for local markets.

There are several Nigerian representatives on the AAG including Dipo Fatokun, Director of the Banking & Payments System Department at the Central Bank of Nigeria, and Francis Chukwunyem, General Manager & Chief information Officer at Zenith Bank.

Are Swift solutions for the respective countries a one-size-fits-all?
While SWIFT solutions are indeed global, we work closely with our communities to tailor and customise our solutions to fit local requirements.

On a product level, we offer solutions for different types of institution depending on their need and preference. For example, we have several interface products to cater for different demands. Bigger banks that process a large number of payments require a solution that offers high levels of availability, high performance and flexible flows.

Our Alliance Messaging Hub has been developed to provide such a service.

Smaller banks, which send fewer messages, are looking for less complex solutions with lower overhead costs. SWIFT’s community cloud solutions offer smaller institutions a lighter, less expensive solution to meet these needs.

We also provide tailored solutions to meet community requirements. The Nigerian community, for example, stressed its need to tackle the increasing challenge of financial crime compliance regulation. The Central Bank of Nigeria wanted to ensure that Nigeria’s banks adhere to global best practice and comply with all international regulation.

Therefore, in 2014, an agreement was reached with the Nigerian community to customise and implement SWIFT’s Sanctions Screening to support the Nigerian financial community in ensuring it meets global best practices for financial crime compliance.

Several other countries have taken up Sanctions Screening as part of a community approach to address concerns about financial crime and meeting global regulations including Angola, Ghana and Sierra Leone.

In Nigeria, SWIFT also worked closely with the Central Bank of Nigeria and user community to support the development of an effective Real Time Gross Settlement (RTGS) system. The system provides the Nigerian financial system with a future-proof payments infrastructure and helps Nigeria to integrate with other financial markets in the region and globally.

Cyber fraud has become a growing concern globally, and banks are the most hit. What is Swift doing about this given the number of banks connected to its network?
As an industry cooperative, SWIFT is committed to playing an important role in reinforcing and safeguarding the security of the wider ecosystem.

As such, in May 2016, SWIFT announced the introduction of its Customer Security Programme, a dedicated programme supporting customers to reinforce the security of their SWIFT-related infrastructure. The programme supports customers in strengthening their cyber risk management in the face of the persistent threat of such attacks.

The CSP is articulated around three mutually reinforcing areas. Customers first need to secure and protect their local environment, prevent and detect fraud in their commercial relationships and continuously share information and prepare against future cyber threats in collaboration with others.

Actions on the programme include the introduction of mandatory security controls, new services to help prevent and detect fraudulent activity, and community-wide information sharing initiatives.

Having accurate, up-to-date information on relevant cyber threats is critical, and we are supporting greater levels of intelligence sharing across the global community. SWIFT’s CSP will drive greater exchange of cyber threat information between banks and SWIFT.

New solutions are based on technological innovations – first, these technologies don’t come cheap, and second, there is the issue of lack of capacity in terms of those that will manage these solutions. What kind of assistance does SWIFT give in these regards?
As a technology company, SWIFT recognises the significant potential in new, innovative technologies. We are researching how new technologies such as distributed ledger and block chain will influence the future of the financial services industry and are actively engaging with the community during this process to ensure any development meets their needs and requirements.

Many of SWIFT’s solutions are built upon and leverage existing infrastructure. SWIFT’s gpi (global payments innovation) is an example of this. It is business solution that is built upon existing SWIFT infrastructure with limited cost for the end user. This is complemented with service level agreements and an innovative technology layer bringing mutualised benefits to all its participants. Therefore is accessible to all banks, both large and small.

As part of the future roadmap of gpi, SWIFT has also launched a Proof of Concept to determine whether distributed ledger technology could help banks to improve the reconciliation of their nostro databases in real time, optimising their global liquidity.

SWIFT provides end-to-end assistance for all its users. All SWIFT members have access to SWIFTSmart. Launched last year, this is an eLearning platform which provides a catalogue of courses with animations, exercises and quizzes to help users understand and use SWIFT more effectively. Additionally, SWIFT members have access to a 24-7 helpline for any urgent enquiries. We also have a local expert and consulting team based on Johannesburg and Dubai that are available to provide on the ground support when needed.

Since the 1970s, there is only one African (South Africa) on your Board, none in the Management. How do you derive their membership compositions?
SWIFT’s Board composition is designed to reflect usage of SWIFT messaging services, ensure SWIFT’s global relevance, support its international reach and uphold its strict neutrality. Each nation or region’s usage of SWIFT’s messaging services determines both SWIFT shareholding allocations and the number of Board Directors that each nation or region is entitled to.

SWIFT shareholdings are determined by a set formula, and the nomination process and the composition of the Board follow rules set out in SWIFT’s by-laws. The more SWIFT users make use of SWIFT messaging services, the larger their shareholding in SWIFT becomes at the next share re-allocation. This ensures that the composition of the Board reflects SWIFT’s shareholders around the world.

Given the Board and Management compositions, how do you build confidence among African countries in Swift?
SWIFT’s co-operative nature and structure is designed to ensure that its network, products and services continue to meet the evolving needs of its customers. The SWIFT National Member Groups have a significant role in this context. SWIFT has National Member Groups in 35 countries in Africa. They represent SWIFT shareholders and users and serve in an advisory capacity to the Board of Directors and SWIFT management. In addition, each National Member Group serves the interests of the shareholders and users of the nation they represent by coordinating their views and feeding this back to SWIFT. National Member Groups usually meet four times per year.

SWIFT also holds numerous events across Africa, with the aim of bringing together the African financial community to discuss the trends and opportunities most relevant to their business. The African Regional Conference is our flagship event. Now in its 24th year, this attracts almost 500 leading financial services executives from more than 45 countries across Africa, including financial institutions, market infrastructures, international corporations and technology partners to do business and shape the future of Africa’s financial industry.

Additionally, we have business forums across the region that focus on the interests of particular communities. Last year, for example, we held the first Business Forum West Africa in Lagos, Nigeria. These business forums are an ideal opportunity for senior SWIFT executives to meet the representatives from the local financial and business sectors, report back on our activities and find out more about the needs of the communities.

You said the African Regional Conference is now in its 24th year, what have been the impacts of these conferences over the years?
ARC has grown into one of the largest financial services events in Africa. In the last ten years alone, the number of delegates has increased from 200 to almost 500. We change the location of the conference every year, from Morocco to South Africa, Botswana to Mauritius, in order to raise awareness of and draw attention to the many growing financial hubs across Africa.

ARC also provides a unique platform for the African financial services industry to discuss key financial trends and issues from across the continent. Bringing together academics, experts and high level financial representatives from across Africa, delegates use ARC as an opportunity to develop solutions to common challenges together with their peers.

ARC also provides an opportunity for the SWIFT African Advisory Group and the National Member Group representatives to meet together and with the broader financial community.

Additionally, delegates have direct access to SWIFT experts. This allows us to understand the community’s needs and challenges and adapt and innovate according to their needs.

Finally, what is the future for Swift in the global financial system?
In 2015, following consultation with our community, SWIFT launched SWIFT2020, a new five year strategy. SWIFT2020 continues to focus on operational excellence in its core financial messaging services in order to deliver on the highest expectations of customers, while also addressing new cyber-security and geopolitical challenges. We will continue to focus on growing and improving our products and services to support the community, and to drive down costs for our users.

With rapid change occurring in both the payments and securities landscapes, ramping up innovation at SWIFT is very much on the agenda. We are researching and testing new technologies in practical use-case scenarios and working together with banks to rejuvenate the correspondent banking model.

To this end, we launched SWIFT gpi in 2015, which will improve corporate customers’ experience of correspondent banking by increasing the speed, transparency and predictability of cross-border payments. More than 90 leading transaction banks from Europe, Asia Pacific, the Americas and Africa and including ABSA, Standard Bank of South Africa, FirstRand Bank and Ecobank, are already signed up and more are expected to join. Thousands of cross-border payments are already being sent using this new standard.

When it comes to combating financial crime, financial institutions are increasingly in the frontline of defense. Regulators the world over require financial institutions to meet stringent Know Your Customer (KYC), anti-money laundering and sanctions rules and regulations. Complying with such obligations in multiple jurisdictions is demanding – and increasingly costly – but the costs and reputational impact of non-compliance are even higher.

SWIFT has a broad finance crime compliance portfolio, developed with the SWIFT community. It’s a suite of managed and shared services that leverages our platform, technology and standards expertise to cut through the complexity and give the industry simpler, more cost-effective ways to meet the challenges of financial crime compliance.