James Siswick outlines current developments regarding the first salvo of UK-led sanctions against Russian economic interests, and the steps UK Banking and Financial Institutions can take to protect their systems.
Earlier this week, UK Prime Minister Boris Johnson announced the “first barrage” of UK-led sanctions against Russian economic interests following their invasion of Ukraine. Johnson promised further, more severe sanctions depending on Russia’s actions in the days and weeks to come. Designed to hit the Russian government where it hurts, these economic sanctions combine with international efforts to deter Vladimir Putin from proceeding with threats to Ukraine.
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Which banks have been sanctioned?
Britain has sanctioned five Russian banks as part of their diplomatic solution to dismantle further Russian aggression. The five banks are: Rossiya, IS Bank, General Bank, Promsvyazbank and the Black Sea Bank. These sanctions freeze the assets of the parties involved, restricting access to British Pounds held by these institutions.
The first individual sanctions have been implemented, with action taken against Putin’s allies Gennady Timchenko, Boris Rotenberg and Igor Rotenberg as part of Britain’s economic effort. All three high net worth individuals have had their UK-held assets frozen and are restricted from travelling to the UK. This follows the US banning Americans from doing business in the rebel-occupied areas of Donetsk and Lugansk in Ukraine. The White House has threatened more sanctions should Russia invade further.
The EU has published targeted sanctions – including against all Russian diplomats involved in the decision to invade Ukraine and banks that are financing Russia’s military. Perhaps the strictest of sanctions, they have also revoked Russian state access to EU capital markets and services and issued targeted sanctions toward trade from Donetsk and Lugansk with the EU. The EU has also threatened Russia with more severe financial sanctions if the path towards war continues.
A regulatory emergency: What steps should banks be taking to protect their business?
- Banking and financial institutions must act upon this first tranche of UK sanctions by first checking their customer accounts to see if the sanctioned individuals or entities hold assets with the bank.
- These accounts must be frozen with immediate effect, banking institutions must refrain from dealing with the funds or assets and report any findings to the Office of Financial Sanctions Implementation.
- Payment filters must also be updated to reflect the updates to the sanctions lists and sufficient resources available to handle any spike in alerts.
- Where appropriate, institutions should also ensure that updates to EU and US sanctions lists are reflected in their filters and relevant action taken for any accounts or payments identified.
- Whilst handling the updates to sanctions filters and the alerts generated may not be a big challenge following these initial updates to global sanctions lists, it will become more challenging as further sanctions are implemented.
- Institutions must use the time that follows wisely; with the whole world anticipating further Russian military advancement despite promises of further sanctions, it is imperative to be prepared for further action.
Conclusion – Are you sufficiently equipped to handle these changes?
The possibility of severe sanctions against Russian entities and individuals creates challenges for banking and financial institutions, and the number of variable factors means thorough planning and anticipation of issues is key to successful compliance.
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By GlobalDataYou will need to update all current sanctions filters to reflect the new lists, as well as manage all alerts generated. Are you sufficiently equipped to handle these changes?
Upcoming sanctions may be revealed at a moment’s notice, so being in a position to implement immediate action on clients with Russian economic connections is crucial.
James Siswick is CCO of Efficient Frontiers International
