Curriculum·Graduate·G604
Cross-Border Settlement and Corridor Economics
The Bangladesh Bank heist, February 2016. Attackers who had penetrated the Bangladesh central bank's systems sent fraudulent payment instructions over SWIFT, the messaging network banks use to move money across borders, requesting nearly a billion dollars be transferred out of its account at the Federal Reserve Bank of New York.
Lesson 1 opens on
The Bangladesh Bank heist, February 2016
A cross-border payment is not one transfer; it is a chain of institutions passing instructions, and Bangladesh Bank kept its US dollar reserves in an account at the Federal Reserve Bank of New York. In February 2016 attackers who had penetrated the central bank's systems sent fraudulent payment instructions over SWIFT, the messaging network banks trust to move money across borders, asking the New York Fed to transfer nearly a billion dollars from that account to accounts in the Philippines and Sri Lanka. The New York Fed acted on the messages because they were properly authenticated; the messages were genuine in form and fraudulent in origin.
The lessons
- G604-01A cross-border payment is a chain of trustExplain that a cross-border payment moves through institutions trusting each other's messagesabout 34 min · opens on The Bangladesh Bank heist, February 2016
- G604-02Corridors: liquidity, correspondents, and costDefine a corridor and explain that it exists only while a correspondent bank will serve itabout 33 min · opens on The Somalia remittance corridor and de-risking, 2013
- G604-03Settlement risk and finality across bordersDefine settlement risk: the window between paying one leg and receiving the otherabout 33 min · opens on Bankhaus Herstatt, June 1974
- G604-04Where stablecoins change the corridor, and where they do notExplain what stablecoins genuinely change about a cross-border corridorabout 33 min · opens on Binance and the Nigerian naira corridor, 2024