Swiss Bank Credit Suisse has frozen $5 billion of funds in Russia-linked accounts, to avoid crossing US sanctions.
Reuters reported on August 22nd that one of Switzerland’s biggest banks, Credit Suisse’s actions show the widespread fear among banks of reprisals from Washington for working with targeted Russian individuals or entities. The bank owned aircraft surrendered by Russian tycoon Oleg Deripaska and had lent money to Russian oligarch Viktor Vekselberg before the sanctions.
“Credit Suisse works with international regulators wherever it does business to ensure compliance with sanctions, including compliance with sanctions involving Russia,” said a spokeswoman for the bank, the owners of the funds were not identified. For the Russian elite, this could close off an important avenue for finance as well as a safe haven for billions of rubles, as reported by Reuters.
Roughly $6.2 billion, or 14 percent of total Russian cross-border outflows, went to Switzerland in 2017 — almost three times as much as went to the United States, according to Russian central bank data.
ZeroHedge reported that the abovementioned money could now be blocked after earlier this month, members of Congress called for more action, including introducing new sanctions legislation “from hell”, to punish the Russian “menace.”
The US sanctions do not apply to neutral Switzerland. However, its banks are forced to comply because they depend on access to the US dollar and could be blackballed by the US. ZeroHedge further claimed that this was a demonstration of the implied US veto power on global financial transactions that use “neutral” Swift as an intermediary and the reason behind yesterday’s call by Germany’s foreign minister Heiko Maas for the creation of a new payments system independent of the US.
Two of Credit Suisse’s rivals UBS and Julius Baer said that they also respected international sanctions, however they declined to admit whether they’ve taken similar steps. “UBS … implements worldwide at least the sanctions currently imposed by Switzerland, the U.N., the EU and the U.S.,” said a spokesman for UBS. A spokesman for Julius Baer told Reuters that it “cooperates with international regulators … in the field of sanction regulations”.
Credit Suisse took action most likely due to a $500 million settlement with US authorities over dealings with Iran, which at the time was also under sanctions.
As reported by ZeroHedge, other European banks have also been punished for ignoring US dominance in global fund flows: in 2014, France’s BNP Paribas agreed to pay a record $8.9 billion for violating U.S. sanctions against Sudan, Cuba and Iran.
Bloomberg reported that Credit Suisse and UBS earlier in 2018 halted trading in companies owned by Russian oligarch Victor Vekselberg. In April, Vekselberg and his investment company Renova Group appeared on a list of oligarchs, companies and senior government officials subject to sanctions.
In April the latest round of sanctions was announced by U.S. Treasury Secretary Steven Mnuchin to penalize Russia for its annexation of Crimea, involvement in the war in Syria and “attempting to subvert Western democracies”.
FINMA, the Swiss banking regulator does not require banks to adhere to foreign sanctions, however they have said that banks have a responsibility to minimize legal and reputational risks.
The sanctions imposed by the US on Russia on August 8th in relation to the alleged Russian poisoning of ex-spy Sergei Skripal and his daughter were supposed to come into effect around August 22nd, as of August 23rd they’ve not been enforced. However, they target exports to Russia of goods and technology considered to be sensitive on national security grounds.