Risks associated with Russian deposits need to be managed on a near real-time basis. Ensure you understand the latest EU regulation governing this issue, and how you can manage compliance.
The European Union (EU) has been imposing increasingly restrictive measures on Russia in response to aggressive and illegal action taken by the country since 2014. These actions include:
In the summer of 2022, the EU continued imposing new restrictions against Russia with a fresh batch of economic sanctions and regulations introduced in July. One of the latest, Council Regulation 833/2014 EU, states it is “prohibited to accept any deposits from Russian nationals or natural persons residing in Russia, legal persons, entities, or bodies established in Russia or a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50% by Russian nationals or natural persons residing in Russia.” These rules apply if the total value of deposits of that natural or legal person, entity or body per credit institution exceeds €100,000.
You can read the details of this regulation in full by reviewing the FAQs published by the European Commission in October 2022. As a reminder, all EU regulations and sanctions must be complied with by all EU persons – both natural and legal – which in turn includes, all EU incorporated credit institutions.
According to Article 5b of Council Regulation 833/2014 EU, operators must not accept (new) deposits if the total value of deposits of the natural person or legal person, entity or body per credit institution exceeds €100,000. Deposits already accounted for prior to this ruling are permitted to remain there so long as their value does not exceed the new limit of €100,000.
These restrictions do not apply to nationals of a Member State, a country member of the European Economic Area or Switzerland, or natural persons holding a temporary or permanent residency permit in one of these countries.
This means the accounts of Russian nationals who also have the nationality of one the above countries can exceed the €100,000 limit.
While all financial institutions must apply appropriate controls to mitigate their inherent money laundering and terrorist financing risks, the introduction or expansion of regulations, like Article 5b, places further emphasis on tasks such as ultimate beneficial ownership (UBO) discovery.
Firms are already obliged to know who they are doing business with, and this continues in the case of the restrictions and ban Russian deposits. Not only must you know the identity of the natural person behind an account, you must also understand if there are Russian connections given the risk of aggregate Russian ownership greater than 50%. This applies to new customers as part of the onboarding phase and to your existing customer base. As corporate account ownerships can change frequently and without warning, obliged entities should monitor their customers regularly by applying a “perpetual” approach to KYC.
Listen to Episode 1 of the KYC Decoded podcast miniseries to understand more about perpetual KYC.
Institutions that do not have effective UBO controls may fail to comply with applicable regulations and may be unwittingly cooperating with bad actors, risking their organization’s reputation and financial security.
UBO checks must be performed quickly, accurately, and on a near real-time basis. Besides manual controls, KYC operations can be conducted more seamlessly and efficiently through artificial intelligence providers' screening systems for event-based triggers with access to the right data sets.
Moody’s Analytics is a leading source of UBO information. Our tools help you gather and visualize complex control and influence data from comprehensive sources across jurisdictions, and without language barriers. We have coverage of more than 448 million entities worldwide and a proprietary UBO model combining direct, indirect, and circular links to produce an integrated view and ownership percentage.
In addition, we also model for control through other means - what the Financial Action Task Force (FATF) refers to as “beyond the threshold”- via our unique power score.
We have developed a targeted data screening solution specifically built to address the new regulations concerning Russian deposits.
Please get in touch to talk about your approach to managing compliance with the new rules for Russian deposits in the EU - our team of experts is here to help.