What the new sanctions against Russia mean for your financial institution

Countries around the world are rapidly trying to figure out how to respond to Russia’s invasion of Ukraine. Over the weekend the US, the European Commission, France, Italy, Germany, the UK, and Canada announced they would remove certain Russian banks from SWIFT. Many countries have issued their own sanctions against Russia due to Putin’s military attack.

In the US, President Joe Biden announced additional sanctions against Russia as well. Biden invoked sanctions on Russian banks and “corrupt billionaires” and their families who are “participating in the Russian regime’s kleptocracy.” Thirteen state-owned companies are now blocked from raising money in the United States, including Russia’s largest financial institution, Sberbank. The US also vowed to sanction two dozen Belarusian individuals and companies, including two significant Belarusian state-owned banks and seven regime-connected officials and elites.

These new sanctions will have significant implications for banks and fintech companies. Financial institutions must stay on top of these evolving regulations because violating The Office of Foreign Assets Control (OFAC) sanctions can result in both civil and criminal penalties.

This situation is still new, complicated and rapidly evolving. Alloy is working with our data partners to help our clients respond appropriately and quickly. There are two main questions that our clients are facing right now as a result of the new regulations.

1. How can I make sure I have not previously onboarded anyone on the new sanctions lists (or anyone that gets added to them), and how can I make sure I don’t onboard anyone on these sanctions lists in the future?

Most organizations already have OFAC screening products built into their onboarding processes as a part of their KYC/AML procedures. OFAC screening products will flag any users who are on sanctions lists or watchlists. But sanctions screenings that take place only during onboarding are not enough, as someone can be added to watchlists at any point after onboarding opening you up to compliance risks.

If you had previously only been running OFAC screenings at the time of onboarding, you will want to re-screen your entire customer base to confirm that you have not previously approved and onboarded anyone now on these watchlists. The next step is to verify that your customers are automatically re-screened on an ongoing basis. We recommend a daily cadence as sanctions are continuously being updated. For Alloy clients, we integrate with data products that enable automatic ongoing sanctions re-screenings.

2. How can I check if any of my customers are transacting with Russia or any entities or individuals on the sanctions lists?

In addition to making sure that none of your customers are on any of the watchlists, you will also need to ensure that your good, non-sanctioned customers do not use your products or services to transact with an individual or business on the watchlists. Use your transaction monitoring solution to set up rules that flag any transactions between your customers and any of the sanctioned organizations or individuals. For clients using Alloy Transaction Monitoring, we developed an out-of-the-box rule that you can implement to help you with this quickly.

Alloy is dedicated to helping our clients stay compliant with the latest sanctions lists, please reach out to your CSM or [email protected] for help. If you’re not using Alloy and need help understanding how you might rescreen your customer list, email us at [email protected].