The U.S. sanctions office is looking into Raiffeisen about Russia.
The US sanctions authority is looking into Raiffeisen Bank International’s business with Russia. This means that the Austrian bank, which is very important to the Russian economy, is getting even more attention.
In response to questions from Reuters, the bank said it had been asked by the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department in January to “clarify payment business and related processes maintained by the RBI in light of recent events in Russia and Ukraine.”
A source told Reuters that OFAC had asked Raiffeisen for information about its risks in Russia, the partially occupied Donbas, Ukraine, and Syria. This included information about transactions and activities involving certain clients.
This person said that the U.S. agency had asked for a response by February. However, Raiffeisen’s lawyers were able to get an extension by promising to answer the questions in three parts that would be sent in early April, May, and June.
A representative for the U.S. Treasury Department would not say anything.
In a statement to Reuters, Raiffeisen said that it was fully cooperating with OFAC and that it thought the request had nothing to do with a specific transaction or business. It said it had plans in place to make sure sanctions were followed.
A spokesperson said, “We are confident that the information we gave OFAC will answer their questions.” The questions were of a “general nature,” the spokesperson said.
Raiffeisen has never been fined before, but the January information request worries European financial regulators who are in charge of keeping an eye on the bank because it could lead to fines for Raiffeisen in the end, according to two people with direct knowledge of the situation.
Raiffeisen is a big part of the Russian financial system. It is one of only two foreign banks on the list of 13 “systemically important credit institutions” made by the Russian central bank. This shows how important it is to Russia’s economy, which is struggling with wide-ranging sanctions from the West.
As Austria’s second-largest lender, it supports a large part of that country’s economy and has a lot of business in eastern Europe. Because Raiffeisen is such an important bank, an Austrian official said that the government was keeping a close eye on the situation at the bank and its business in Russia.
Raiffeisen is one of only a few European banks that are still in Russia almost a year after Moscow started what it calls a “special military operation” in Ukraine.
However, its decision to continue doing business with Moscow has been criticised by some, including investors.The bank has defended its position in the past by saying that its risk exposure to Russia is limited.
Last year, Raiffeisen made a net profit of about 3.8 billion euros. This was mostly due to a profit of more than 2 billion euros from its business in Russia. While that was going on, Russian savers put more than 20 billion euros in the bank.
Sanctions are put in place by the U.S. Treasury, and people who break them can be punished. Its strongest tool for imposing sanctions is freezing U.S. assets and preventing banks from using U.S. dollars, which is very important for international trade and finance.
The SDN list is OFAC’s toughest sanctioning tool. It freezes assets held in the United States and prevents American companies or citizens from doing business with those on the list. This keeps a bank or person from getting any dollar payments.
This gives the US power far beyond its borders to make sure its sanctions are followed. Of course, OFAC can also use less severe measures like fining people and sending warning letters when sanctions are broken.
Two former U.S. officials, who asked not to be named, did say, however, that Washington rarely took such harsh measures.
German sanctions lawyer Viktor Winkler didn’t want to say anything specific about Raiffeisen, but he did say that it was common for OFAC to ask banks for information and that it didn’t always mean that the banks would be punished.
As a response to Russia’s invasion of Ukraine, OFAC has put sanctions on five major Russian banks, including the state-owned Sberbank, as well as some wealthy oligarchs.
Shortly after Russia invaded Ukraine, the U.S. stopped Sberbank from using the U.S. financial system to process payments. Its European branch, which was based in Vienna, was shut down soon after.
Sberbank had said before that the new sanctions would not have a big effect on how they do business.
In 2018, the U.S. Treasury put sanctions on Latvia’s ABLV Bank because it was worried about illegal activity linked to Russia. This caused the bank to fall apart quickly.
In March, Johann Strobl, the CEO of Raiffeisen, told shareholders that he is looking at different options for the Russian business, but that it will take some time to decide because the bank is not “a sausage stand” that can be shut down in a day.