Exclusive: ECB puts Russians in the EU, even residents, under control

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Exclusive: ECB puts Russians in the EU, even residents, under control

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The headquarters of the European Central Bank (ECB) is pictured in Frankfurt, Germany on 3 September 2015. REUTERS / Ralph Orlowski

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  • Banks said they were checking the sources of Russian and Belarusian customers
  • Some have said they do extra checks on large payments, deposits
  • Credit applications subjected to further scrutiny by banks

FRANKFURT / MADRID, March 15 (Reuters) – European Union regulators have told some banks to monitor the transactions of all Russian and Belarusian customers, including EU residents, to make sure they are not being used to circumvent Western sanctions against Moscow, three sources told Reuters.

The instructions from the supervisory authorities of the European Central Bank (ECB) mean that tens of thousands of Russians and Belarusians residing in the EU face intense surveillance by their banks, which are on high alert for large payments and deposits, as well as for new credit applications, sources familiar with the matter said.

While EU sanctions against Moscow exempt people holding temporary or permanent EU residence permits, they do impose some restrictions on Russian citizens’ access to banking services, including preventing banks from accepting deposits above € 100,000 ($ 110,000) from Russian citizens or entities.

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The ECB’s move also subjects EU residents to a thorough scrutiny and would make it more difficult for them to manage bank accounts, with one of the sources saying some were already facing restrictions in Spain. This follows Moscow’s invasion of Ukraine, which the Kremlin describes as a special operation to demilitarize and “denazify” the country.

The ECB is verifying that the banks it supervises “have the necessary provisions to adhere to the sanctions”, including with regard to transactions and relationships with customers, but has not issued any guidelines outside the EU rules, spokesman of the headquartered central bank said.

Some ECB joint supervisory groups, which include central bank and national authority staff, have told banks to tighten scrutiny over EU residents as well if they come from Russia or Belarus, the three sources said, from banks and from guard dogs.

While it’s not the ECB’s job to monitor sanctions, supervisors fear that banks in the bloc could face hefty fines if their clients funnel money on behalf of sanctioned individuals, two of the sources said.

Supervisors informed the affected banks between late February and early March and gave them a week to comply, two of the sources said, adding that a review of the responses is expected. It was not immediately clear when this would be completed.

“At first, the measures focused on those of Russian nationality, resident or non-resident, and were later extended to Belarusians,” said one of the sources.

Most Russians living in the EU reside in Germany, where Eurostat says there are more than 230,000, followed by Spain, with over 81,000. Other popular places are France, Italy, Latvia, the Czech Republic, Austria and Finland.

Belarusians living in the EU are mainly found in Germany, Lithuania and Italy, according to Eurostat data.

‘EXISTING RISKS’

In one case, a Spanish bank placed around 8,000 Russian customers who are not on the EU sanctions list and reside in Spain under surveillance, one of the sources said.

All new loans to non-resident Russians have been suspended and at least one bank will not allow non-resident Russians to open new accounts, they added.

Italian banks were also monitoring all accounts above € 100,000 held by Russian customers even if they lived in the EU and were not on the sanctions list, a fourth source familiar with the situation said.

Asked whether lenders were stepping up their scrutiny of Russian customers, the Bank of Spain told Reuters that both supervisors and banks were “carrying out the necessary checks to assess the situation and possible existing risks.”

The Bank of Italy declined to comment.

While affected banks should not stop transfers, the top three sources said they need to carry out further checks to establish the origin of the money, its destination and purpose.

Supervisors also told banks they should pay particular attention to loan applications from Russians or Belarusians, they added.

However, one of the sources said there is nothing stopping the banks from lending to an established, non-sanctioned Russian customer.

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Additional reports by Valentina Za in Milan and Stefano Bernabei in Rome; writing by Silvia Aloisi; edited by John O’Donnell and Alexander Smith

Our Standards: Thomson Reuters Trust Principles.

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