Bank 131 explains scenarios available for Russian banks and their foreign customers.
Updated on 28/03/2022 at 3.40 pm
The payment activities of companies, their ability to receive and send money in Russia or abroad are affected by sanctions from the United States, the European Union, Great Britain and also Russian counter-sanctions.
Foreign companies of all countries are allowed to:
- Send money to Russia in any currency
- Transfer money in any currency within Russia
- Pay Russian employees, vendors, providers and customers
- Make payments from Russian citizens to foreign stores and online services
Foreign companies are not allowed to:
- Collect money for goods and services in Russia, with Visa and MasterCard
- Transfer money from Russia to abroad: to foreign and Russian companies, and to the own bank accounts if the company is included into the list of «unfriendly countries»
- Exchange rubles for currency temporarily if the company is included into the list of «unfriendly countries»
- Transfer money from Russia abroad to individuals if the company is on the list of «unfriendly countries»
- Receive a loan from Russian companies or individuals in foreign currency. In rubles with certain restrictions.
Foreign companies temporarily can not:
- Buy USD, EUR and other foreign currency in the Russian bank if the company is from the so called «unfriendly countries».
Bank correspondent accounts: why blocking them is worse than SWIFT cut
Payments for goods or services, as well as money transfers between Russia and foreign countries, works as a chain of correspondent banking relations. Russian banks hold accounts in foreign countries and vice versa.
If foreign banks have cut the accounts of a Russian bank, their clients’ international settlements stop. The clients of Russian banks are any businesses such as banks, payment providers, and Russian and foreign companies. Cutting the way to settle is the worst-case scenario.
SWIFT ban is indeed a slowdown for settlements speed. However, if there are no settlements at all, then SWIFT cut for banks with frozen accounts is not a crucial concern. Also the SWIFT ban was not for all the banks.
Money flows to Russia from the outside:
- The United States has blocked (search by Russia, bank, SDN List) correspondent accounts of 117 Russian banks, including their subsidiaries. 7 largest banks that provided settlements for foreign companies in Russia and Russian companies abroad:
VTB Bank (and subsidiaries)
Otkrytie(and subsidiaries)
Promsvyazbank (and subsidiaries)
Sovcombank (and subsidiaries)
Novikombank (and subsidiaries)
Rossiya Bank (and subsidiaries)
Vnesheconombank (VEB) (and subsidiaries)
- The vast majority of the world's banks are required to comply with the restrictions imposed by the United States as part of the AML/CFT procedures. The degree of compliance and extreme compliance is decided by each bank personally: from compliance «by letter» to refusal to interact «in spirit» of the law. But in any case, this means that transfers to Russia through these banks have effectively stopped.
- On the European Union side, correspondent relations and accounts were also blocked for some banks from the US list.
- On the UK side, the accounts of banks from the list of the USA and several others are blocked.
- The European Union has banned SWIFT for banks from the US list.
- Visa and MasterCard are not available, but only abroad. They continue to work inside Russia.
- Apple Pay is not available for the listed banks both domestically, and abroad.
Other Russian banks, including Sberbank, Alfa-Bank, Tinkoff, were not subject to the blocking of accounts abroad. Meaning non-sanctioned banks and their clients, Russian and foreign companies, can still accept currency from abroad as a part of their service to Russian and foreign clients.
Panicking, foreign banks refuse to transfer funds from their clients to Russia, regardless of the sanctions applied. As an alternative to them, foreign companies can open a corporate account in a Russian bank. This could be a solution to keep paying salaries to Russian employees, settling with Russian vendors, customers and providers.
There is a way to transfer money from abroad to Russia. This road is not blocked.
Money flows from Russia to other countries:
- On the Russian side, counter-sanctions were imposed. Sanctions prohibit sending of funds and outgoing payments in any currency to countries that have announced sanctions against Russia. These countries are now called «unfriendly». Meaning there are no payments possible initiating from the Russian banks to these 46 countries. It will affect the foreign companies which collected the revenue on the Russian bank account and then transferred them abroad.
- Incoming transfers to Russian companies’ and individuals’ bank accounts in any currency are allowed for all countries.
- Companies from the «unfriendly» countries cannot transfer money to individuals' accounts in the foreign banks (foreign cards included). Companies from other countries are not affected in this respect.
- Russian individuals can still pay for goods and services to foreign companies. There are no restrictions on such payments. However, payments may not go through due to restrictions set on the side of the company itself, its bank, or payment provider.
List of «unfriendly» countries
There are still ways to work with the Russian market, pay for services and goods there, pay salaries, process payments from Russian users for the foreign services and online stores. But currently getting money out of Russia is restricted.
