Summary: Pursuant to a congressional request, GAO provided background information on the: (1) Federal Reserve Communications System (Fedwire), operated by the Federal Reserve System; (2) Clearing House Interbank Payments System (CHIPS), operated by the New York Clearing House Association; and (3) the Society for Worldwide Interbank Financial Telecommunication System (SWIFT).
GAO found that: (1) Fedwire is the primary wholesale electronic funds transfer system in the United States and links the 12 Federal Reserve banks and their branches, U.S. government agencies, and about 10,000 depository institutions; (2) in 1987, Fedwire processed about 55 million fund transfers with an aggregate value of about $153 trillion and processed about 8.6 million securities transfers with a face value of about $102 trillion; (3) CHIPS, a private-sector system created in 1970, is the nation's primary wholesale electronic funds transfer system for processing international transfers between U.S. and international banks; (4) CHIPS links 138 domestic depository institutions and branch offices of foreign banks located in New York City; (5) in 1987, CHIPS processed about 31.9 million transfers with an aggregate value of about $140 trillion; (6) SWIFT, which became operational in 1977, is a major international message processing system used by banking institutions to transmit information critical to international electronic funds transfers through Fedwire or CHIPS; and (7) as of December 1987, SWIFT connected 2,360 institutions in 56 countries and processed about 1 million messages daily. GAO also found that: (1) the Federal Reserve periodically examined Fedwire operations; (2) the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corporation jointly examined CHIPS; (3) SWIFT was not subject to federal examination; and (4) generic risks in using electronic funds transfer systems included operating errors, fraud, credit risk, service disruptions, and national security threats. In addition, GAO provided: (1) descriptions of how the three systems processed typical transactions; and (2) listings of officials within each organization responsible for system oversight.
