As per three sources familiar with the matter at hand, regulators at the European Union have told some banks to scrutinise transactions by all Russian and Belarusian clients, including EU residents, in order to ensure that they are not used to circumvent Western sanctions against Moscow.
Instructions by supervisors from the European Central Bank (ECB) will mean tens of thousands of Russians and Belarusians resident in the EU will now face surveillance and scrutiny by banks.
Although EU sanctions on Moscow exempt persons holding temporary or permanent EU residence permits from sanctions, they however place some restrictions on access by Russian nationals to banking services, including preventing banks from accepting deposits above $110,000 (100,000 euros) from Russian nationals or entities.
The move will bring EU residents under heightened scrutiny and would make it harder for them to operate bank accounts, said a source while adding, some have already started facing restrictions in Spain.
The ECB is ensuring that surveillance systems are in place for banks so that banks can comply with EU sanctions including transactions governing relationships with clients. It has however not issued any guideline beyond the EU’s rules, said a spokesperson for the ECB.
ECB Joint Supervisory Teams have adviced banks to tighten control of EU residents if they come from Russia or Belarus, said three sources.
While it is not the ECB’s role to police sanctions, the supervisors are concerned that banks in the bloc could incur hefty fines if their clients channel money on behalf of sanctioned individuals, said two sources.
“At first, the measures were focused on those of Russian nationality, whether they were residents or non-residents, and later it was extended to Belarusians,” said a source.
The majority of Russians living in the EU reside in Germany. According to Eurostat there are more than 230,000 Russians living in Germany, followed by 81,000 in Spain. Other popular places are France, Italy, Latvia, Czech Republic, Austria and Finland. Belarusians living in the EU are mainly located in Germany, Lithuania and Italy.
As per a source, a Spanish bank has placed around 8,000 Russian clients who are not on the EU sanctions list and are residing in Spain under surveillance.
Lending to Russians who do not have Spanish residency has been halted with at least one bank saying it will not allow non-resident Russians to open a new account.
As per another source, Italian banks are also monitoring Russian accounts above 100,000 euros even if they were living in the EU and were not on the sanctions list.
When asked whether lenders were intensifying scrutiny of Russian clients, the Bank of Spain said supervisors and banks were “carrying out the necessary controls to assess the situation and the possible existing risks”.
The Bank of Italy declined comment.
Supervisors have also told banks that they should increase their due diligence with loan applications from Russians or Belarusians.