Five more Russian credit institutions, including Tinkoff Bank, fell under tough US sanctions

Five more Russian credit institutions, including Tinkoff Bank, fell under tough US sanctions. A feature of all of them was active activity in the foreign exchange market, which the sanctions make virtually inaccessible. SDN status has already affected bank customers – Tinkoff and Solidarity recommended not to use UnionPay cards abroad. Experts warn that customer transactions in other, even “non-toxic” currencies may also be affected. However, the experience of other sanctioned banks shows that even the most severe restrictions do not completely stop their foreign activities.

On July 20, the United States included in the SDN list another systemically important credit institution and one of the largest players in the retail market – Tinkoff Bank. In addition, Loco-Bank (in the top 50), Solidarity and St. Petersburg Social Commercial Bank (both in the top 100), as well as Unistream, one of the five largest Russian players in cross-border transfers, were blacklisted by the US Treasury.

According to OFAC, Tinkoff Bank is “partially” owned by Vladimir Potanin, who is on the SDN list. The bank is also under UK and EU sanctions, which it disputes (see “Kommersant” dated May 25).

All five banks that fell under the sanctions were given general licenses to curtail activities until October 18.

Until recently, new persons on the SDN list were quite active in foreign exchange transactions, including those under contracts for foreign economic activity.

In particular, Tinkoff Bank carried out dollar transfers for retail clients to China and several CIS countries, only transfers to Russia were available in euros and pounds, there were outgoing transfers in rupees to India (see “Kommersant” dated June 22), outgoing and incoming transfers in RMB to 139 countries. Among the currencies available to customers are also Kazakhstan tenge, Turkish lira, Belarusian ruble, Hong Kong dollar and Armenian dram.

PSCB works with 20 foreign currencies, including yuan, dirham, rupee and lira. Solidarity Bank actively issued cards of the Chinese payment system UnionPay to customers in rubles, euros and yuan. Unistream has partners in the CIS countries, Europe, Asia, transfers could be made to 17 countries, including Cyprus, Great Britain, Vietnam. Loko-bank offers corporate clients transfers in more than ten currencies, including yuan, lira, tenge.

The sanctions have already affected the clients of credit institutions.

Tinkoff Bank said that from July 21, UnionPay cards will stop working abroad. Solidarity Bank advised the owners of such cards to withdraw cash abroad. Loko-Bank is confident that the restrictions will affect only the availability of dollar payments. Unistream stated that they intend to continue working with partners around the world, for this, “in order to ensure uninterrupted settlements,” it is proposed to “use national currencies”.

At the same time, Tinkoff Investments reported that trading in securities denominated in US dollars continues as usual.

However, lawyers note that the transition of sanctioned banks to settlements in “non-toxic” currencies is not always available. “If instead of making a payment in dollars, which will be unavailable, you make another currency payment, then this may be perceived as a circumvention of sanctions, so it is easier for counterparties to simply limit them,” Andriy Timchuk, partner at Delcredere law firm, explains.

In particular, according to the lawyer, SDN banks do not process payments in UAE dirhams, they close correspondent accounts in euros, and payments in Chinese yuan are also likely to be complicated. Turkish banks also work extremely poorly with persons from the SDN list, Mr. Timchuk clarifies. Banking lawyer Nina Semina notes that even if SDN banks continue to connect to SWIFT, specific correspondent banks may refuse to make payments for fear of secondary sanctions.

As Ms. Semina explains, despite the fact that banks with SDN status continue their international activities, “it cannot be ruled out that jurisdictions that are conditionally favorable now will turn out to be less comfortable in the future.”

In her opinion, there are two ways for those sanctioned: to use the possibilities of a license to complete operations and make a transition to other financial institutions, or the most likely scenario is that banks will reorient themselves to work with other counterparties, other assets and offer customers alternative products and tools.

Many banks already on the SDN list not only retain their jobs in other areas, but also find new niches, although this is mainly associated with the countries of Southeast Asia and the CIS. For example, MTS-Bank, after being included in the sanctions lists, began to offer customers to issue virtual dollar cards. Alfa-Bank advertises a service for issuing foreign bank cards through the Cardlist service. Sberbank is actively developing its business in India, while the subsidiary bank VTB continues to operate in Kazakhstan.

A Kommersant source in the banking market is confident that UnionPay cards will quickly stop working abroad, but payments in currencies other than the dollar may continue. According to him, counterparties “can take a break, think, rethink, but then resume work.”

Olga Sherunkova