[LittleNemoInS]

> To simplify heavily, is SWIFT just an accepted and legal alternative to the hawala system?

No. To simplify heavily, Swift is the network on which the hawala system runs.

To transfer cash from a bank to another bank, one can : * call the other bank * send an email * send a letter * send a swift message

Since transfering cash is not as simple as it seems (trust is the key), using an established network with clear fields and backups is a good choice. Thus Swift.

[joshspankit]

Another important point in the article is that cash is typically not transferred, but instead (basically) “your account at my bank is credited equal to the amount that you debit from my account at your bank”

[LittleNemoInS]

Yes.

If I want to wire you some cash from bank A to bank B, my bank (A) will debit my account,and credit their account (called a nostro). There, we have two possibilities :

* The two banks are connected (meaning B has an account in A), A will debit their nostro and credit the account of B in A (called a loro) and inform bank B via swift. B will debit the account of A in B, credit their nostro, debit their nostro and credit your account

* The two banks are not directly connected : A will debit my account and credit their nostro. They will then debit their nostro and credit the account of a third institution (another bank or a clearing house). They will send a message to the bank B and the third institution, telling them that the cash should be credited to you. If the bank B and the third institution are connected, see above. If not, the process goes on, until the cash "reaches" bank B.

This is highly simplified, but it's the principle.

[jaclaz]

Should be nostro and vostro (our and your) not loro (their):

https://en.wikipedia.org/wiki/Nostro_and_vostro_accounts

the loro is used when a third bank is in the process or however is not as common as the two above.

[LittleNemoInS]

You are right, sorry for the confusion. (However, the WP article is not really accurate, nostro accounts can also be our money in our system)

[jaclaz]

No need to be sorry, but yes, Wikipedia articles can be a bit "vague" sometimes, it was just the first reference I found, maybe this one on investopedia is better, though it is also seemingly putting an accent on foreign currency/foreign banks, which I don't believe is the only use (I mean the concept applies to banks in a same country as well, AFAICR):

https://www.investopedia.com/ask/answers/051815/what-differe...

[LittleNemoInS]

Yes, the concept applies to all bank accounts.

As I said, Nostro is also used for own accounts. The account refleting the position of the bank (its own money and assets, not the money or assets deposited by its clients) is also called a nostro, at least in Europe.