On November 21, 2024, the U.S. Treasury Department escalated its sanctions compliance efforts by targeting Gazprombank and several smaller Russian banks believed to be financing the ongoing war effort. This was considered, at the time, a serious escalation by the Biden Administration, which had previously resisted moving against certain banks following Russia’s initial invasion of Ukraine in 2022.
This change in positioning, however, represents an important development for banks, payment companies, crypto firms, and corporates operating cross-border, in terms of knowing their counterparties and staying compliant with sanctions obligations.
The press release, in conjunction with this action by the U.S. Treasury, specifically calls out and highlights an alert underscoring the risk of sanction for foreign financial institutions that join Russia’s System for Transfer of Financial Message (commonly known by its Russian acronym, SPFS, short for Sistema Peredachi Finansovykh Soobshcheniy).
The OFAC alert and U.S. Treasury press release, however, do not highlight the names of these institutions that are a part of the SPFS and who are not already designated.
Our team, working in conjunction with global data providers and other reference data made available to Sigma360, have compiled a list of financial institutions with direct and indirect connection to SPFS. To access this information, please login to the Sigma360 portal or request more information by reaching out directly.
With this alert in mind, as well as the evidence of policy escalation via OFAC’s actions, financial institutions, payment companies, crypto companies, and corporates should evaluate their relation to SPFS as part of ongoing, dynamic risk management and due diligence. Specifically, two questions are key:
Some examples of institutions that are (or recently were) connected to SPFS, who are largely based in CIS countries, but who are not designated by U.S. Treasury’s OFAC, include the following as examples (non-Russian based institutions):
Despite a significant increase in Russian-based banks included in the latest round of sanctions, several others remain unsanctioned and simultaneously connected to SPFS. Some examples of this include, but are not limited to:
It is possible that these institutions aforementioned may withdraw their connection to SPFS or change their business models. However, official documentation from the Russian Central Bank indicates that they are or recently were connected.
In sum, direct and nexus-based exposure to entities and individuals associated with heavily sanctioned countries and industries require additional focus from a due diligence perspective. Tools like Sigma360’s platform provide organizations with the ability to visualize connections through an intuitive network screen of associated entities, enabling users to identify both direct and indirect exposures to high-risk counterparties quickly. By leveraging advanced data and technology, Sigma360 makes it possible to scale compliance efforts efficiently.
See notes.
Note: The banks highlighted above are examples from an extensive list derived from multiple sources. They are not unique or considered higher risk than any other name associated with SPFS.
Note: As a reminder, under E.O. 14024, as amended, OFAC may sanction foreign financial institutions that conduct or facilitate any significant transaction or transactions or provide any service involving Russia’s military-industrial base. Russia’s military-industrial base includes (i) all persons blocked under E.O. 14024, and (ii) any person operating in the technology, defense and related materiel, construction, aerospace, or manufacturing sectors of the Russian Federation economy. Russia’s military-industrial base may also include persons that support the sale, supply, or transfer, directly or indirectly, to the Russian Federation of certain critical items. Please see Updated Guidance for Foreign Financial Institutions on OFAC Sanctions Authorities Targeting Support to Russia’s Military-Industrial Base, as well as FAQs 1151, 1152, and 1181, for further guidance on how to identify sanctions risks and implement corresponding controls. Please see FAQ 1182 for more information about agricultural, medical, and other transactions authorized by OFAC General Licenses.
Note: Foreign financial institutions should be aware that the European Union imposed sanctions on SPFS in June 2024. For more information, see Council Regulation (EU) 2024/1745 of June 24, 2024 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilizing the situation in Ukraine, and the associated press release.
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