Reuters FRANKFURT/VIENNA The US sanctions authorities have begun an investigation into Raiffeisen Bank International for its Russia-related activities, raising pressure on the Austrian lender that plays an important role in the Russian economy.
In response to Reuters’ concerns, the bank stated that it received a request in January from the US Treasury Department’s Office of Foreign Assets Control (OFAC) to “clarify payment operations and associated processes maintained by the RBI in light of recent developments connected to Russia and Ukraine.”
According to Reuters, OFAC had demanded information from Raiffeisen on its exposure in Russia, the partially occupied Donbas, Ukraine, and Syria, including the transactions and activities of specific clients.
According to that individual, the US government had demanded a response by February, but Raiffeisen’s attorneys negotiated an extension, promising to address the questions in three tranches of material to be given in early April, May, and June.
The US Treasury Department’s spokeswoman declined to comment.
In a statement to Reuters, Raiffeisen said it was completely complying with OFAC and that it understood the request was not driven by a specific transaction or activity. It stated that it has procedures in place to guarantee that punishments are followed.
A spokeswoman said it was “confident that the information given to OFAC would meet their request,” adding that the inquiries presented were of a ‘general nature.”
Raiffeisen has never been sanctioned, but the January information request is troubling the European financial authorities in charge of overseeing the bank since it has the potential to lead to fines against the business, according to two people with direct knowledge of the situation.
Raiffeisen is firmly ingrained in the Russian financial system and is one of just two foreign banks on the Russian central bank’s list of 13 “systemically essential credit institutions,” highlighting its significance to Russia’s economy, which is coping with sweeping Western sanctions.
Being Austria’s second-largest lender, it also supports much of the country’s economy and has considerable activities throughout Eastern Europe. According to an Austrian official, because of the bank’s importance, Austrian authorities are constantly following the situation at Raiffeisen and its operations in Russia.
Raiffeisen is one of a few European banks that remain in Russia nearly a year after Moscow initiated what it called a “special military operation” in Ukraine.
Nonetheless, it has drawn criticism, notably from investors, for continuing to conduct business with Russia. The bank has defended its position, claiming that its exposure to Russia is limited.
Raiffeisen achieved a net profit of over 3.8 billion euros last year, due in large part to a 2 billion euro profit from its Russia operations. Meanwhile, Russian savers have deposited almost 20 billion euros in the bank.
Clout in the U.S.
The United States Treasury enforces sanctions and can penalise people who violate them. Its most severe sanctions weapon freezes US assets and prevents banks from accessing US dollars, which are essential for international commerce and banking.
The SDN list, the most severe sanctions instrument in OFAC’s arsenal, freezes assets held in the United States and prohibits American corporations or persons from engaging with those designated, thereby shutting a bank or individual out of any dollar payments.
This gives the US leverage to implement its sanctions well beyond its borders. Instead, OFAC can take less severe steps, including as levying fines and sending warning letters, if penalties are violated.
Two former US officials, who did not want to be identified, said that Washington was usually hesitant to take such drastic measures.
Viktor Winkler, a German sanctions lawyer, declined to comment specifically on Raiffeisen, but noted that OFAC frequently requests information from banks and that this does not always result in fines.
OFAC sanctioned five major Russian banks, including state-backed Sberbank, as well as rich oligarchs, in retaliation to Russia’s invasion of Ukraine.
Sberbank previously stated that the new penalties would have no impact on their activities.
The US Treasury sanctioned Latvia’s ABLV Bank in 2018 owing to suspicions about illegal behaviour linked in significant part to Russia, forcing the bank to collapse fast.
Raiffeisen CEO Johann Strobl told shareholders in March that he is looking at possibilities for the Russian company, but that it would take time because the bank is not “a sausage stand” that can be closed overnight.