Exclusive: ECB places Russians in EU, even residents, under scanner

The headquarters of the European Central Bank (ECB) is pictured in Frankfurt, Germany September 3, 2015. REUTERS/Ralph Orlowski

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  • Banks must verify Russian and Belarusian customers – sources
  • Some said to do extra checks on large payments, deposits
  • Credit applications are subject to additional scrutiny by banks

FRANKFURT/MADRID, March 15 (Reuters) – European Union regulators have asked some banks to carefully review the transactions of all Russian and Belarusian customers, including EU residents, to ensure that they are not used to circumvent Western sanctions against Moscow, three sources told Reuters.

Instructions from European Central Bank (ECB) supervisors mean that tens of thousands of Russians and Belarusians residing in the EU are under intense surveillance by their banks, which are on alert for large payments and deposits as well as for new credit applications, sources familiar with the matter said.

While the EU sanctions against Moscow exempt people with temporary or permanent EU residence permits, they impose certain restrictions on Russian nationals’ access to banking services, including preventing banks from accept deposits greater than 100,000 euros ($110,000) from Russian nationals or entities.

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The ECB’s decision even puts EU residents under greater scrutiny and would make it harder for them to operate bank accounts, with one of the sources saying some already face restrictions in Spain. This follows Moscow’s invasion of Ukraine, which the Kremlin describes as a special operation to demilitarize and “denazify” the country.

The ECB verifies that the banks it supervises “have put in place the necessary arrangements to comply with the sanctions”, including with regard to transactions and relations with customers, but it has not issued any directives going beyond this. beyond EU rules, a spokesman for the Frankfurt-based central bank said.

Some ECB joint surveillance teams, which include staff from the central bank and national authorities, have asked banks to also step up screening of EU residents if they come from Russia or Belarus, the authorities said. three sources, banks and watchdogs.

Although it is not for the ECB to monitor sanctions, supervisors fear that banks in the bloc could face heavy fines if their customers funnel money on behalf of sanctioned individuals, two of the sources said. .

Supervisors notified affected banks between late February and early March and gave them a week to comply, two of the sources said, adding that an audit of the responses is planned. It was not immediately clear when this would be over.

“At first the measures focused on those with Russian nationality, whether resident or non-resident, and later they were extended to Belarusians,” one of the sources said.

Most Russians living in the EU reside in Germany, where Eurostat says there are over 230,000, followed by Spain, with over 81,000. Other popular places are France, Italy, Latvia, the Czech Republic, Austria and Finland.

Belarusians living in the EU are mainly found in Germany, Lithuania and Italy, according to Eurostat data.

“EXISTING RISKS”

In one case, a Spanish bank placed under surveillance around 8,000 Russian customers who are not on the EU sanctions list and reside in Spain, one of the sources said.

All new loans to Russians who do not have Spanish residency have been halted and at least one bank will not allow non-resident Russians to open new accounts, they added.

Italian banks were also monitoring all accounts over 100,000 euros held by Russian customers even if they lived in the EU and were not on the sanctions list, a fourth source familiar with the matter said.

When asked if lenders were stepping up surveillance of Russian customers, the Bank of Spain told Reuters that supervisors and banks were “carrying out the necessary checks to assess the situation and any existing risks”.

The Bank of Italy declined to comment.

While the banks involved do not have to stop the transfers, the first three sources said they must carry out additional checks to establish the source of the money, its destination and its purpose.

Supervisors have also told banks they should be very careful about loan requests from Russians or Belarusians, they added.

However, one of the sources said that nothing prevents banks from extending credit to a well-established Russian customer who is not subject to sanctions.

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Additional reporting by Valentina Za in Milan and Stefano Bernabei in Rome; written by Silvia Aloisi; edited by John O’Donnell and Alexander Smith

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