U. S. checks Raiffeisen for compliance with sanctions against Russia
2023.02.18 07:43
U. S. checks Raiffeisen for compliance with sanctions against Russia
By Kristina Sobol
Budrigannews.com – The sanctions authority of the United States has launched an investigation into Raiffeisen Bank International regarding its Russian-related business, intensifying scrutiny of the Austrian lender that is so important to the Russian economy.
The bank told Reuters that in January, the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department had asked it to “clarify payments business and related processes maintained by RBI in light of the recent developments related to Russia and Ukraine.”
According to a source, OFAC had inquired about Raiffeisen’s exposure in Russia, the partially occupied Donbas, Ukraine, and Syria, as well as the transactions and activities of specific clients.
According to that individual, the U.S. agency had requested a response by February. Additionally, the person stated that Raiffeisen’s lawyers had negotiated an extension and promised to respond to the questions in three separate informational packages that would be sent to the agency in early April, May, and June.
In a statement to Reuters, Raiffeisen stated that it understood that the request was not prompted by a specific business or transaction and that it was fully cooperating with OFAC. It claimed to have procedures in place to guarantee that sanctions were adhered to.
A spokesperson stated that the questions posed were of a “general nature” and that the company was “confident that the information provided to OFAC will satisfy their request.”
According to two people who have direct knowledge of the situation, European financial regulators that are in charge of overseeing the bank are concerned about the January information request because of the possibility that it could ultimately result in penalties for Raiffeisen. Although Raiffeisen has not been sanctioned in the past, the request for information is concerning.
One of only two foreign banks on the Russian central bank’s list of 13 “systemically important credit institutions” is Raiffeisen, highlighting its significance to Russia’s economy, which is battling severe Western sanctions. Raiffeisen is deeply ingrained in the Russian financial system.
It is Austria’s second-largest lender, supports a significant portion of the country’s economy, and it has extensive operations throughout eastern Europe. Due to the significance of the bank, an official from Austria stated that Austrian authorities were closely monitoring the situation at Raiffeisen and its Russian operations.
Raiffeisen is one of a few European banks that are still based in Russia, despite the fact that it has been almost a year since Moscow launched what it calls a “special military operation” in Ukraine.
However, it has been criticized for continuing to do business with Moscow, including from investors. The bank has previously stated that its exposure to Russia is contained in its position.
Last year, Raiffeisen made a net profit of approximately 3.8 billion euros, largely due to a profit of more than 2 billion euros from its Russia business. In the meantime, Russian savers have given the bank more than 20 billion euros.
Those who violate sanctions can be punished by the United States Treasury. Its most severe sanctioning tool prevents banks from obtaining U.S. dollars, which are essential for international trade and finance.
The SDN list, OFAC’s toughest sanctioning tool, freezes assets held in the United States, prevents American businesses or individuals from trading with those on the list, and freezes a bank or individual out of all dollar payments.
This gives the United States more power to impose its sanctions far beyond its borders. For sanctions violations, OFAC can also use less stringent methods like imposing fines and sending warning letters.
However, two anonymous former officials stated that Washington was typically reluctant to take such drastic measures.
A German sanctions lawyer named Viktor Winkler did not say anything specific about Raiffeisen, but he did say that OFAC frequently requested bank information and that this did not always result in penalties.
In response to Russia’s invasion of Ukraine, OFAC has sanctioned five major Russian banks, including the state-backed Sberbank, as well as wealthy oligarchs.
The United States stopped Sberbank from processing payments through the American financial system shortly after Russia’s invasion of Ukraine. Shortly thereafter, it shut down its Vienna-based European subsidiary.
Sberbank previously stated that their operations would not be significantly affected by the new sanctions.
Concerns about illegal activity largely linked to Russia led the U.S. Treasury to sanction Latvia’s ABLV Bank in 2018, which quickly collapsed.
In March, Raiffeisen CEO Johann Strobl told shareholders that he is looking into options for the Russian company. However, since the bank is not “a sausage stand” that could close overnight, reaching a decision would take some time.
