SWIFT vs. IBAN: How Panama Handles International Bank Transfers

IBAN is an international bank account number used to recognize accounts when international money transfers are made. It simplifies and standardizes bank operations between countries and makes payment processing more precise and quick. Some states have implemented mandatory requirements for the IBAN format to be used in transactions between the banks of different countries. But does Panama use IBAN?

IBAN: What Is It?

An internationally recognized system of numbers that instantly identifies the recipient’s account consists of digits and letters and is used in 70 countries. The number of digits can reach 30 in some jurisdictions. Today, more than one hundred states designate bank accounts using the international standard. Sometimes, this tool is also used for internal transfers within one jurisdiction.

IBAN is a standard created to achieve the following goals:

• Simplify payments in the SEPA area
• Minimize errors when data is entered
• Reduce the number of returned transfers due to incorrect payment details
• Quickly identify the recipients’ accounts
• Accelerate payment processing

Let’s look at the IBAN structure:

1. The two capital letters at the start identify the country where the bank is located – for example, FR stands for France.
2. The letters are followed by two controlling numbers.
3. The next six numbers identify the bank.
4. The length of the account number may vary: it contains up to 30 numbers.

Let’s look at an example of IBAN:

• For Germany: DE89 3704 0044 0532 0130 00.
• For France: FR76 3000 6000 0112 3456 7890 189.

An IBAN cannot contain more than 34 characters or numbers, and each country sets its own standard.

The IBAN system was initially developed to simplify electronic payments between banks in the Eurozone. Later, other states joined it. 

Banks and other financial institutions can charge a commission for IBAN money transfers, so you should check with your bank manager about this.

Does Panama Use IBAN?

The answer is negative! Panama does not currently use IBAN for international transfers – Panamanian banks often use SWIFT/BIC instead. 

Here is a list of some other countries that do not use IBAN:

• United States
• Canada
• China
• Japan
• Australia
• New Zealand

If you need to send some money to the USA and Canada, you will need a route code and a bank account number.

Sending money to or receiving a transfer from a Panamanian account requires the SWIFT code of the bank and the number of the recipient’s account. Panamanian accounts have no European intermediary banks—they use only the ones located in the United States, so transactions are fully completed outside any European IBAN system.

What Is SWIFT?

SWIFT is an international interbank financial message exchange system that enables banks worldwide to safely and efficiently exchange data on transactions.

The main functions of SWIFT:

• Standardization and safety. It uses reliable encryption and protection systems, meaning that the operation participants may rest assured that their data will not be transferred to third parties, and the payment will be credited to the designated account.
• Recognition of banking institutions. Each financial institution connected to the SWIFT system is assigned a unique SWIFT code/BIC (Bank Identifier Code). This code, which contains 8 or 11 characters, is used to identify a particular bank and its subsidiary during international transactions.
• International money transfers. The SWIFT system is used to transfer information about international money transfers between financial institutions.

How SWIFT functions:

1. The sender makes an international transfer, and the banking system simultaneously uses SWIFT messages to transfer the information about the transaction from one bank to another.
2. Before reaching the recipient, payments can pass through several correspondent banks, which route money using their SWIFT codes.

If you want to use SWIFT to make an international transfer, you will need to enter the following information:

• SWIFT code of the recipient bank
• Recipient’s account number
• Recipient’s name
• Additional payment details (bank address, currency)

Panama actively uses SWIFT for international transfers as no mandatory IBAN use requirements are applicable to the country.

What Does a SWIFT Code Look Like?

SWIFT codes are usually shorter than IBAN codes, as they contain 8-11 characters. The code has an AAAABBCCDDD format, where each character contains information about the bank, country, location, and subsidiary.

SWIFT structure:

• Bank code — four letters
• Country code — two letters
• Bank’s headquarters location — two letters or numbers
• Branch code — three letters or numbers

Some banks don’t have special branch codes, so they use an eight-character SWIFT or add XXX at the end.

Example: a SWIFT code of JPMorgan Chase bank in New York is CHASUS33.

You can find your bank’s SWIFT code or BIC in your account statements.

Differences Between SWIFT and IBAN:

The key difference is that SWIFT codes recognize banking institutions, while IBANs identify particular bank accounts and routing information. These two instruments are considered important elements that ensure the smooth operation of the international financial market.

In some cases, you may need both SWIFT and IBAN codes to make international transfers. The SWIFT tells you which bank to send the money to, while the IBAN specifies the bank account to which it will be credited.

Conclusion

Panamanian banks use traditional payment details, such as the account number and the bank code, for internal and international transfers instead of IBAN. If you transfer money to a Panamanian account or receive a transfer from Panama, you will need to enter the bank’s SWIFT code and the payment details of the recipient’s account.