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In Russian Sanctions, Uncertainty is a Prime Motivator for Banks
By Brian Monroe and Colby Adams
printCORRECTION APPENDED: U.S. sanctions against 24 Russian individuals and companies, including three banks and the head of one of the nation's largest energy companies, will raise more questions than answers for compliance officers. The designations Monday of SMP Bank, InvestCapitalBank, JSB Sobinbank and others come in response to the Russian Federation's failure to follow through on promises made as part of an April 17 multilateral agreement in Geneva, U.S. Under Secretary for Terrorism and Financial Intelligence David Cohen said in a statement. The United States has blacklisted 64 Russian and Ukrainian entities since Russia's invasion of the Crimean peninsula in...
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U.S. officials are increasingly relying on economic sanctions as a tool of foreign policy, but the effectiveness of sanctions in achieving policy objectives is questionable, according to Bryan Early, political science professor at University at Albany.
Away from Moscow, EU and U.S. sanctions have done more than simply hobble the ability of Russian banks to obtain credit and correspondent accounts. For some institutions in London, the restrictions have resulted in tight constraints on anti-money laundering compliance efforts.
U.S. and European officials are developing a coordinated response to recent attacks on Ukrainian civilians and could announce additional sanctions against Russia as early as this week.
At its highest levels, Russian corruption over the past 20 years has been disguised by networks of shell companies and facilitated by foreign banks willing to turn a blind eye to state embezzlement, according to Karen Dawisha, a political science professor at Ohio-based Miami University.
This time last December, one might reasonably have expected that 2014 would be a year of modest changes for the anti-money laundering and sanctions compliance sector. Then came JPMorgan Chase, BNP Paribas and a convoy of Russian tanks to quash that notion.
Whatever the effectiveness of sanctions meant to sway Russia's involvement in Ukraine, one thing is certain: they've worsened the country's capital flight problem. By year's end, approximately $128 billion will have moved abroad, up from $63 billion in 2013, according to Russia's central bank.
Two new approaches to sanctions targeting Russia are unlikely to be the last innovations to how the United States leverages its financial power, even if such restrictions strain compliance departments.
The U.S. Senate Foreign Relations Committee Thursday unanimously approved a bill that would clear the way for sanctions against foreign banks that transact on behalf of Russia's defense and energy businesses.
The expansion of Western sanctions targeting Russia will require banks to closely vet additional types of credit and transactions tied to financial, energy and defense firms, according to attorneys.
The EU on Monday adopted extended sanctions targeting Moscow's oil and defense industries' measures expected to raise compliance costs for banks in the economic bloc, once implemented.
Military clashes in Ukraine are complicating behind-the-scenes efforts by some EU nations to prevent new sanctions and roll back existing financial restrictions targeting Russia.
The European Union Tuesday further restricted Russia's access to the continent's financial markets and energy technology industry and promised targeted sanctions against individuals and entities on Wednesday.
With the blacklisting of three Russian financial institutions Tuesday, the United States has targeted nearly a third of the assets controlled by the federation's banking sector, according to a senior U.S. official.
The U.S. Treasury Department Wednesday imposed its strongest sanctions to date in response to Russia's role in Ukrainian violence, blacklisting 12 companies in the federation's financial, energy and defense sectors.
U.S. officials are preparing to press their EU counterparts on stronger Russia sanctions ahead of a European Council meeting next week, State Department representatives told the Senate Foreign Relations Committee Wednesday.
Threatened U.S. sanctions against large swathes of Russian businesses would likely target defense and financial firms ahead of energy companies if imposed, according to experts.
The first line of the Ukrainian national anthem could well apply to the battered nation's banks these days: "Ukraine is not dead yet."
The U.S. Treasury Department Thursday blacklisted a Moscow-based financial institution and its chairman for their alleged roles in facilitating transactions for the Central Bank of Syria and a state-owned oil company.
U.S. officials have no plans to negotiate Russia's compliance with an anti-tax evasion law that takes effect this summer and could impose stiff monetary penalties on nonparticipating financial institutions.
Ukraine must improve its efforts to fight corruption and curtail money laundering by political figures and others as part of a $17 billion bailout agreement with the International Monetary Fund.