U.S. sanctions authority probes Raiffeisen on Russia By Reuters

(Corrects spelling of ‘an’ in first paragraph)

By John O’Donnell, Francesco Canepa and Alexandra Schwarz-Goerlich

FRANKFURT/VIENNA (Reuters) – The USA’ sanctions authority has launched an inquiry into Raiffeisen Financial institution Worldwide over its enterprise associated to Russia, growing scrutiny of the Austrian lender that performs a essential position within the Russian financial system.

Responding to questions from Reuters, the financial institution mentioned it had acquired a request from the U.S. Treasury Division’s Workplace of International Property Management (OFAC) in January to “make clear funds enterprise and associated processes maintained by RBI in gentle of the latest developments associated to Russia and Ukraine.”

OFAC had requested Raiffeisen for particulars of its publicity in Russia, the partially occupied Donbas, Ukraine and Syria, together with concerning the transactions and exercise of sure shoppers, a supply instructed Reuters.

The U.S. company had requested a reply by February, mentioned that particular person, including that Raiffeisen’s attorneys negotiated an extension, pledging to reply the questions in three tranches of data to be despatched to in early April, Might and June.

A spokesperson for U.S. Treasury Division declined to remark.

Raiffeisen instructed Reuters in an announcement that it was cooperating totally with OFAC and that it understood the request was not triggered by a selected transaction or enterprise. It mentioned it had processes in place to make sure compliance with sanctions.

A spokesperson mentioned it was “assured that the knowledge offered to OFAC will fulfill their request”, including that the questions posed had been of a ‘basic nature’.

Raiffeisen has not been sanctioned previously, however the January data request is worrying European monetary regulators chargeable for oversight of the financial institution due to the potential that it may finally result in penalties towards Raiffeisen, mentioned two individuals with direct data of the matter.

Raiffeisen is deeply embedded within the Russian monetary system and is without doubt one of the solely two overseas banks on the Russian central financial institution’s record of 13 “systemically vital credit score establishments”, underscoring its significance to Russia’s financial system, which is grappling with sweeping Western sanctions.

As Austria’s second-biggest lender, it additionally underpins a lot of that nation’s financial system in addition to having intensive operations in jap Europe. An Austrian official mentioned that Austrian authorities had been monitoring the state of affairs at Raiffeisen and its enterprise in Russia intently due to the financial institution’s significance.

Virtually a 12 months since Moscow launched what it calls a “particular army operation” in Ukraine, Raiffeisen is amongst a handful of European banks that stay in Russia.

However it has confronted criticism, together with from traders over its choice to conserving doing enterprise with Moscow. The financial institution has beforehand defended its place, saying its publicity to Russia is contained.

Raiffeisen made a web revenue of roughly 3.8 billion euros final 12 months, thanks largely to a 2 billion euro plus revenue from its Russia enterprise. In the meantime, Russian savers have lodged greater than 20 billion euros with the financial institution.

U.S. CLOUT

The U.S. Treasury imposes sanctions and may penalise those that break them. Its most aggressive sanctioning device freezes U.S. property and excludes banks from accessing U.S. {dollars} – essential for worldwide commerce and finance.

The hardest sanctioning device in OFAC’s arsenal, generally known as the SDN record, freezes property held in america and bars American firms or residents from buying and selling with these listed, freezing a financial institution or particular person out of all greenback funds.

This grants america affect far past its shores to implement its sanctions. Alternatively, OFAC may also resort to much less stringent measures akin to levying fines and sending warning letters over sanctions violations.

Two former U.S. officers, asking to not be named, mentioned, nevertheless, that Washington was sometimes reluctant to take such draconian steps.

Viktor Winkler, a German sanctions lawyer, declined to make particular remarks about Raiffeisen, however mentioned that it was frequent for OFAC to request data of banks and that it didn’t mechanically result in penalties.

OFAC has sanctioned 5 main Russian banks, together with state-backed Sberbank a part of a response to that nation’s invasion of Ukraine, in addition to rich oligarchs.

Shortly after Russia’s invasion of Ukraine, america minimize off Sberbank from processing funds by way of the U.S. monetary system. Its European arm, primarily based in Vienna, was closed shortly afterwards.

Sberbank beforehand mentioned the brand new sanctions wouldn’t have a major impression on their operations.

In 2018, the U.S. Treasury sanctioned Latvia’s ABLV Financial institution, resulting from considerations about illicit exercise related largely to Russia, prompting the financial institution to rapidly unravel.

Johann Strobl, Raiffeisen’s CEO, instructed shareholders in March that he’s analyzing choices for the Russian enterprise, however reaching a conclusion would take a while as a result of the financial institution shouldn’t be “a sausage stand” that may very well be closed in a single day.