It is undeniable that Russia’s invasion of Ukraine violates human rights. The European Union has made official the list of Russian institutions that will be removed from SWIFT from 12 March 2022 onwards. This is the high-security system that permits financial transactions and supports the world economy.
European Commission President Ursula von der Leyen said, “At the speed of light, the European Union has adopted three waves of heavy sanctions against Russia’s financial system, its high-tech industries and its corrupt elite. This is the largest sanctions package in our Union’s history. The decision to disconnect key Russian banks from the SWIFT network will send yet another very clear signal to Putin and the Kremlin.”
Three banks are on the EU Consolidated Financial Sanctions List dated 2 March 2022:
On the same day the European Commission released a press statement that the EU agrees to exclude key Russian banks from SWIFT. The banks targeted by this measure were chosen as these banks are already subject to sanctions by the EU and other G7 countries. From 12 March 2022 the measure will stop these banks from conducting their financial transactions worldwide in a fast and efficient manner.
According to Article 5h of the official Journal of the European Union released on 2 March 2022, “It shall be prohibited as of 12 March 2022 to provide specialised financial messaging services, which are used to exchange financial data, to the legal persons, entities or bodies listed in Annex XIV or to any legal person, entity or body established in Russia whose proprietary rights are directly or indirectly owned for more than 50 % by an entity listed in Annex XIV.”
Annex XIV lists the following beside the above listed banks:
According to Article 5i of the official Journal of the European Union released on 2 March 2022, “it shall be prohibited to sell, supply, transfer or export EUR denominated banknotes to Russia or to any natural or legal person, entity or body in Russia, including the government and the Central Bank of Russia, or for use in Russia.”
The sanctions imply that the above mentioned seven banks will be unable to use SWIFT to transmit or receive payment messages to any other SWIFT-connected bank or institution anywhere in the globe. This means that all the legal entities in the supply chain that use accounts at those banks on the sanction list or any subsidiary of them must be reviewed by the companies in the EU. Transactions to those accounts are prohibited. Furthermore, companies must review their risks regarding the type or goods (dual use goods) purchased or delivered to Russia or Russian companies, the direct and indirect ownership of the companies in Russia and Donezk and Luhansk. For example, if a company is indirectly controlled by an individual named in the sanction list, companies in the EU are not allowed to maintain business relations with the company or its subsidiaries.
Among others, Russian oligarchs Alexander PONOMARENKO and Alisher USMONOV and Pyotr Olegovič AVEN are on the EU sanctions list. Individuals associated with the sanctioned banks are also affected. Like Mikhail Maratovich FRIDMAN, founder and one of the main shareholders of the Alfa Group, which includes the major Russian bank Alfa Bank. All dealings with these persons and related companies are banned.
However, the EU measures does not apply to two of the country’s most important banks. According to Reuters Sberbank (SBER.MM), Russia’s largest lender, and Gazprombank were not included because they are the main channels for payments for Russian oil and gas. Russia provides almost 40% of the gas utilized by the Europe.
According to Statista Russia delivered a total of around 168 billion cubic metres of natural gas to Europe via pipelines in 2020. Germany was the most important customer for Russian natural gas within the European Union, with a total of around 56.3 billion cubic metres of imported natural gas via pipelines.
Germany is heavily dependent from Russian gas deliveries.
The SWIFT restriction forms part of various other financial penalties imposed on Russia by the Europe and its allies in the hopes of weakening Russia’s war machine. The value of the rouble has dropped to an all-time low, borrowing prices have risen, and the stock market is closed to avoid a disaster. Given the significant trade balance with Russia, the sanctions are also anticipated to affect the EU’s economy, but the extent of the impact is still undetermined. Read this statement of EC regarding upcoming measure:
A risk based Due Diligence and Enhanced Due Diligence is more important to mitigate risks of business in Russia and with Russian natural and legal persons.
Please read more regarding Enhanced Due Diligence services. The Smart Integrity Platform can be used as a Secure Form with customizable questionnaire for your business partners to disclose any relations to persons on sanction lists. An encrypted communication hosted on German servers ensure safe interaction with your business partners.
If your company has business in the USA or has a US person in the Board of Directors or as a major shareholder/Beneficial Owner, then the US OFAC sanction list and the secondary sanctions of the US regime must be considered.
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