A cross-border payment needs a legal permission, a bank on each side willing to hold the relationship, a messaging channel between them, and settlement. Those are separate things held by separate parties, and a restriction can remove one while leaving the others standing. Iran shows each of them cut individually: SWIFT was instructed by an EU Council decision to disconnect sanctioned Iranian banks from 17 March 2012, and a dedicated European channel built to work around the problem, INSTEX, completed one transaction before its ten shareholder states liquidated it on 9 March 2023.
A transfer that fails does not usually fail because sending money is impossible. It fails because one specific thing that had to be true was not, and cross-border payments depend on more separate things than most descriptions of them suggest.
Key Takeaways
- A payment needs a legal permission, a correspondent relationship, a messaging channel and settlement, and they are held by different parties.
- A restriction can remove one of them while the others stand, which is why the failure it produces has a particular shape.
- SWIFT was instructed by an EU Council decision to disconnect sanctioned Iranian banks from 16.00 GMT on 17 March 2012.
- The network says it has no authority to make sanctions decisions and no control over the transactions its messages describe.
- A dedicated European channel built to bypass the problem completed one transaction before being liquidated in March 2023.
The four things a payment depends on
Four things, on the way this guide divides them up, and they are not held by the same people. The split below is an organising frame rather than a legal taxonomy anybody publishes, and it is offered because it predicts the shape of the failure.
The first is legal permission. Somewhere there is a rule saying this transaction, between these parties, for this purpose, may happen. That rule belongs to governments.
The second is a correspondent relationship. Banks do not send money to each other in the abstract; a bank in one country holds an account with, or through, a bank in another. That relationship is a commercial decision made by the bank taking on the risk, and nobody can compel it. A remittance that has no such relationship behind it has nowhere to go, whatever else is in place.
The third is a messaging channel. The instruction has to reach the other bank in a form it will act on, which in practice means a shared network with agreed formats. That is infrastructure, and it is owned by whoever runs it.
The fourth is settlement, the actual movement of value, which normally happens across accounts held at a central bank or at correspondent institutions.
Any one of those can be removed on its own, and the removal produces a different failure each time. A payment blocked at the first layer is refused for a reason somebody can cite. A payment with no correspondent simply has nowhere to go. A payment with no messaging channel cannot be described to the other side at all.
The layers are not independent in every direction. Removing the legal permission usually takes the others with it in time, because a bank that may not carry a payment stops holding the relationship that would have carried it. What the split is good for is the reverse case, where one layer is removed and the others are left standing.
The layer the Iranian case removed first
The messaging one, and the record is unusually explicit about who did it.
SWIFT announced on 15 March 2012 that, following an EU Council decision, it had been instructed to discontinue its communications services to Iranian financial institutions subject to European sanctions. The disconnection became effective on Saturday 17 March at 16.00 GMT. Its statement records that the decision, as confirmed by the Belgian Treasury, prohibits companies such as SWIFT from continuing to provide specialised financial messaging services to EU-sanctioned Iranian banks, and that SWIFT is incorporated under Belgian law and has to comply.
The network's own chief executive described what was happening in terms that make the layer distinction visible. Disconnecting banks, he said, is an extraordinary and unprecedented step, and a direct result of international and multilateral action to intensify financial sanctions.
Two clauses in the same statement matter more than the announcement. SWIFT says it has no involvement in or control over the underlying financial transactions contained in the messages of its member banks. And in a later statement of 14 July 2015, made when the Joint Comprehensive Plan of Action raised the prospect of relief, it said that as a utility with a systemic global character it has no authority to make sanctions decisions, and that any decision to lift sanctions rests solely with the competent government bodies and applicable legislators.
The network is not the decision-maker. It carries instructions and it is told who it may carry them for.
| Layer | Who controls it | What removing it looks like |
|---|---|---|
| Legal permission | Governments and legislators | The transaction is prohibited outright |
| Correspondent relationship | The banks themselves | Nowhere to send the money, with nobody to appeal to |
| Messaging channel | The network operator, under instruction | The instruction cannot be sent in a form the other side acts on |
| Settlement | Central banks and correspondents | Value cannot move even where the instruction arrives |
An attempt to rebuild a missing layer
It was attempted, on a state scale, and the result is the most informative part of the record.
INSTEX was set up by France, Germany and the United Kingdom in 2019 to facilitate legitimate trade between Europe and Iran, particularly in humanitarian goods. It eventually had ten shareholder states: Belgium, Denmark, Finland, France, Germany, the Netherlands, Norway, Spain, Sweden and the United Kingdom. In design it was an attempt to supply the missing layers from outside the ordinary banking system.
Its shareholders voted to dissolve it at an extraordinary general assembly on 9 March 2023. Their joint statement records that Iran agreed to a single transaction, in early 2020, for the export of medical goods from Europe to Iran, and that further proposals were subsequently blocked; the shareholders concluded there was no more ground for maintaining INSTEX operational.
The two governments' accounts of why it failed differ, and this guide does not adjudicate that. What is not in dispute is the number. A payment channel built and maintained by ten states for four years carried one transaction.
That is the useful finding, and it holds regardless of who was at fault. A payment rail is not only its technology. It is a technology plus every party willing to use it, and a channel that nobody on one side will send anything through is not a channel.
What this means in practice
That "sanctions" describes a category, not a single condition, and the practical question is always which layer.
Some restrictions prohibit a transaction. Some prohibit a party. Some remove access to infrastructure while leaving the transaction lawful in principle. And some of the effect is not a restriction at all but a commercial withdrawal: a bank that is permitted to hold a relationship and decides the compliance cost is not worth it.
For anyone dealing with the Australian dollar to Iranian rial pair, that distinction is the whole of the practical advice. Whether a route exists between two particular accounts is decided by the four things above, in a specific order, by four different parties, and none of them publishes an answer to the general question.
Where to look next
how international transfers work sets out the ordinary version of the same stack, and who maintains the codes on a transfer covers the identifiers that travel with it. For the live figures, see the AUD to IRR page.
Sources
- Swift, Swift instructed to disconnect sanctioned Iranian banks following EU Council decision, 15 March 2012 - the instruction following an EU Council decision, the disconnection effective on Saturday 17 March at 16.00 GMT, the confirmation by the Belgian Treasury, Swift's incorporation under Belgian law and obligation to comply, the chief executive's description of the step as extraordinary and unprecedented, and the statement that Swift has no involvement in or control over the underlying financial transactions
- Swift, Iran sanctions agreement, 14 July 2015 - the statement that as a utility with a systemic global character Swift has no authority to make sanctions decisions and that any decision to lift sanctions rests solely with the competent government bodies and applicable legislators
- Federal Foreign Office of Germany, Joint statement by Germany, France and the United Kingdom on INSTEX, 9 March 2023 - INSTEX set up by France, Germany and the United Kingdom in 2019 to facilitate legitimate trade particularly in humanitarian goods, the ten shareholder states, the single transaction agreed in early 2020 for the export of medical goods, the subsequent blocking of further proposals, and the vote to dissolve at the extraordinary general assembly of 9 March 2023
- Council Regulation (EU) No 267/2012 of 23 March 2012 - the EU instrument the disconnection was made under
General information about cross-border payment infrastructure and financial sanctions. Not financial advice, and not a recommendation of any product or institution. Reviewed by the Tradergy editorial team, September 2026.
Common questions
What are the layers of a cross-border payment?
Four, on the division this guide uses: a legal permission for the transaction to happen at all; a correspondent relationship, meaning a bank somewhere willing to hold an account for the bank on the other side; a messaging channel to carry the instruction between them; and settlement, the actual movement of value. It is a way of organising the question rather than a taxonomy anybody publishes, and its use is that each part is controlled by a different party, so a payment fails if any one of them is missing.
Why can Iranian banks not use SWIFT?
Because a government instructed the network to disconnect them. SWIFT announced on 15 March 2012 that following an EU Council decision it had been instructed to discontinue communications services to Iranian financial institutions subject to European sanctions, with the disconnection effective on Saturday 17 March at 16.00 GMT. SWIFT is incorporated under Belgian law and stated that it had to comply with the decision as confirmed by its home country government.
Does SWIFT decide who is sanctioned?
No, and it has said so explicitly. In a statement of 14 July 2015 it said that as a utility with a systemic global character it has no authority to make sanctions decisions, and that any decision to lift sanctions on countries or individual entities rests solely with the competent government bodies and applicable legislators. It also states that it has no involvement in or control over the underlying financial transactions contained in the messages its member banks send.
What was INSTEX?
A payment channel built to sit outside the ordinary one. It was set up by France, Germany and the United Kingdom in 2019 to facilitate legitimate trade between Europe and Iran, particularly in humanitarian goods, and eventually had ten shareholder states. Its shareholders voted to dissolve it at an extraordinary general assembly on 9 March 2023.
How much did INSTEX actually move?
One transaction. The joint statement by Germany, France and the United Kingdom records that Iran only agreed to a single transaction, in early 2020, for the export of medical goods from Europe to Iran, and that further proposals were blocked. Whatever the reason, a channel built and maintained by ten states for four years carried one payment, which is the clearest available measure of how hard a missing layer is to replace.