08 March 2022
On 02/15/2022, CURENTIS described the far-reaching consequences of a SWIFT exclusion for Russia and Europe. In the meantime, Russian aggression is in full swing and events have come to an absolutely terrifying head. As a result of the sanctions imposed on Russia, some Russian banks have been excluded from SWIFTNet. CURENTIS describes the implications for German banks regarding these exclusions and the consequences of more far-reaching exclusions.
On February 26, 2022, the German government, together with the United States, Canada, the United Kingdom and the EU Commission, announced the exclusion of some Russian banks from SWIFTNet in the wake of the Ukraine crisis. Since then, these banks have no access to SWIFTNet and are thus practically separated from international payments. So far, only those banks are part of this exclusion that were already part of EU sanctions before.
The first effects of these and other sanctions were already felt at Russian ATMs and bank branches as many Russian citizens withdrew large amounts of cash and the exchange rate of the ruble dropped drastically.
For the Russian banks concerned, there are still possibilities to send money. Alternative systems are, for example, CIPS from China or the CFPS system of the Russian central bank. However, both systems are not as cost-effective, fast and reliable as SWIFT. In any case, the exclusion of SWIFTNet and the sanctions imposed on it, such as the freezing of foreign currency abroad, create a critical situation for Russian banks.
Switzerland's commitment to European sanctions against Russia and the exclusion of Russian financial institutions by Visa and Mastercard also make it increasingly difficult for Russian individuals to make payments to Europe, or to import European and American goods.
The impact on German and European banks and their payment transaction departments is currently rather minor. Many European banks primarily use SWIFT to process their payments. Payments from Russian banks hardly reach European banks anymore. Payments to Russia, i.e. to Russian banks, are no longer executed because the SWIFTNet information of the transactions can no longer be processed. The transactions stop in the outgoing payment of the European bank, because there is no exchange of information via SWIFTNet, before the transaction.
European banks can also use alternative systems to SWIFT. However, the alternatives are hardly attractive for European banks for the reasons described above.
The exclusion of 26.02.2022 affects only a part of the Russian banks and is primarily intended to weaken the Russian central bank by preventing the use of foreign currency parked abroad. Therefore, further steps by the European Commission and its allies towards a complete exclusion of Russian banks from SWIFTNet are possible and conceivable.
The consequences of this complete exclusion would be much more far-reaching for the Russian economy and banking landscape, but also for the Russian civilian population and the European economy.
The Anti Financial Crime Team of CURENTIS AG supports financial institutions in complying with sanctions.
We provide support in the calibration of screening systems, resolution of complex ownership structures and classification of hits in sanctions screening.
About the Author:
As Special Matter Expert Sanctions Compliance, Mr. Jan-Ole Vietz is responsible for the news around the topic of sanctions. Together with the AFC team, he will continue to monitor global sanctions policy and summarize the most important developments for you.