The Biden administration is urging international banks not to help Russia evade sanctions, warning that companies risk losing access to markets in the United States and Europe if they back Russian companies or oligarchs facing challenges. financial restrictions due to the war in Ukraine.
Senior Treasury official’s warning highlights US efforts to pressure Russia’s economy through US financial muscle and underscores Biden administration’s broad view of its ability to enforce sanctions as it seeks to isolate Russia from the global economy.
In private meetings Friday with representatives of international banks in New York, Adewale Adeyemo, the deputy treasury secretary, laid out the consequences of helping Russians flout sanctions. He pointed to the ‘material support provision’ which states that even if a financial institution is based in a country that has not imposed sanctions on Russia, the company can still face consequences for violating the restrictions. American or European, including being cut off from these financial institutions. systems.
“If you provide material support to a sanctioned person or entity, we can extend our sanctions regime to you and use our tools to prosecute you as well,” Adeyemo said in an interview on Friday. “I want to say very clearly to those institutions that are domiciled and to other countries that may not have imposed sanctions: that the United States and our allies and partners stand ready to act if they make things that violate our sanctions.”
The Biden administration has imposed sweeping restrictions on Russian financial institutions, oligarchs and its central bank. It has coordinated with allies in Europe and Asia to crack down on sanctions busting; the direct warning to foreign banks was part of this effort.
Financial institutions from China, Brazil, Ireland, Japan and Canada attended the meeting, which was hosted by the Institute of International Bankers.
Mr Adeyemo said US banks had been careful to avoid violating US sanctions, but Russian individuals and companies were looking to create trusts and use powers of attorney as workarounds. He also pointed to companies that could provide support to sanctioned oligarchs trying to move their yachts to different ports to avoid seizure.
Most jurisdictions complied with the sanctions, but some, such as the United Arab Emirates, continued to provide a safe haven for Russian assets. The yachts of several Russian oligarchs have been moored in Dubai.
“You’ve seen a number of Russian yachts leaving ports, from countries that have extended sanctions to countries that haven’t,” Adeyemo said. “We want people to understand that if you are a financial institution and you have a business that is a customer that provides material support to one of these yachts, you, that business, may be subject to our support provision. material. .”
Referring to his message to foreign banks, he added: “You need to make sure that not only do you make sure you are monitoring the flows to your financial institution, but you also need to help by reminding the companies you are supporting that they, neither do you want them to provide material support to Russian oligarchs or Russian companies as well.
Banks and financial institutions around the world have wondered how to stay compliant with the waves of new sanctions against Russia.
Citigroup, the largest U.S. bank in Russia, with about 3,000 employees there, was in “active dialogue” to sell its Russian consumer and commercial banking business, Jane Fraser, its chief executive, told Bloomberg this month. this.
Citigroup reduced its exposure to Russia to $7.9 billion in March from $9.8 billion at the end of last year, a filing showed. “This militarization of financial services is a very, very big problem,” Ms. Fraser told a conference this month. She said she expected global capital flows to fragment as nations developed new financial systems to avoid being overly dependent on Western companies.
Foreign banks with operations in the United States may find themselves caught between conflicting demands. In some cases, US sanctions have forced them to cut off their longtime customers. Those who resisted this learned how serious the authorities could be when it came to tracking down violators and imposing heavy fines.
In 2019, for example, Britain’s Standard Chartered bank paid out $1.1 billion to settle cases brought by the Department of Justice, the Treasury, the New York state banking regulator and prosecutors. Statement regarding transactions it had carried out for Cuba, Syria, Iran and Sudan in violation of US sanctions. Two years earlier, Deutsche Bank paid $630 million after it was caught helping Russian investors pump $10 billion into Western financial centers. International giants HSBC and BNP Paribas have also paid billions over the past 10 years to settle sanctions violations.
Lananh Nguyen contributed report.