EU Imposes New Sanctions, Cutting Off Certain Russian Banks from SWIFT
On March 2, 2022, the European Union (EU) published new sanctions in response to Russia’s continued activities in Ukraine, including the significant step of excluding seven of Russia’s major banks and their subsidiaries from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a Belgian-based messaging service provider for more than 11,000 financial institutions around the world. This exclusion severely limits Russia’s access to the global financial system.
Starting March 12, 2022, an EU person is prohibited from providing specialized financial messaging services to the seven Russian financial institutions and any entity owned 50% or more, directly or indirectly, by such entities.
The seven banks are:
- Bank Otkritie
- Bank Rossiya
- VNESHECONOMBANK (VEB)
- VTB BANK
Rather than actually sending money, SWIFT facilitates the transfer of funds by allowing participating financial institutions to securely transmit transfer instructions and requests. These new EU sanctions now prohibit SWIFT from facilitating those communications. While there are alternative financial messaging services from both Russia and China, neither have the same global reach.
The exclusion from SWIFT follows several other sanction measures imposed on Russia by the EU, including targeting more Russian government officials and oligarchs as well as prohibiting the supply of euros to Russia, subject to certain exceptions. Meanwhile, the White House said it is contemplating imposing sanctions on Russia’s oil and gas industry but is still evaluating the impact such actions could have on energy markets.
We will continue to monitor the sanctions and export control restrictions as they emerge.
© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.