NBU Governor explains significance of new U.S. sanctions against Russia
The head of the National Bank of Ukraine (NBU), Andriy Pyshnyi (photo: facebook.comNationalBankOfUkraine)
The latest decision by the United States regarding banks that assist Russia in purchasing Western goods for the military industry is extremely effective. Foreign banks will strengthen sanctions checks because mistakes will be costly, according to the head of the National Bank of Ukraine (NBU), Andriy Pyshnyi, on Facebook.
"Undoubtedly, this is one of the most powerful steps of this sanctions year, which will significantly enhance the effectiveness of the restrictions against Russia," he wrote.
The head of the NBU noted that the financial sector is a key player on the "sanctions field," any connections with Russia are toxic, so all relevant transactions should be subject to increased control and scrutiny.
"The latest step by the United States is the culmination of this sanctions year, which will set the trend for 2024," he added.
As Pyshnyi pointed out, the recent changes to U.S. legislation provide for the application of American sanctions to financial institutions for:
- Conducting or facilitating any significant transaction for the benefit of or on behalf of any person in key sectors of the Russian economy that support the country's military-industrial base - in the fields of technology, defense, aerospace, or manufacturing;
- Facilitating significant transactions or providing services involving the involvement of the Russian military-industrial base, including specific production resources and technological materials that Russia seeks to obtain from foreign sources.
In case of violation of these prohibitions, financial institutions may be subject to full blocking sanctions from the United States or a ban/restriction on opening or servicing correspondent accounts.
In addition, the U.S. Office of Foreign Assets Control (OFAC) has published clarification on the steps that financial institutions must take to minimize risks for themselves, including:
- reviewing the customer base;
- informing customers of expectations;
- sending surveys to customers to understand their counterparties;
- mitigating risks regarding customers/counterparties engaged in high-risk activity/refusing to provide requested information;
- conducting compliance training for both "first-line" staff and management.
"In the face of new restrictions from the United States, we expect foreign banks to strengthen their sanctions compliance, as mistakes will be too expensive," added the head of the NBU.
The latest U.S. package
On December 22, U.S. President Joe Biden signed an executive order to strengthen sanctions on financial institutions that assist Russia. These banks may be denied access to the U.S. financial system, meaning the practical destruction of the financial institution.
Compliance is a system of measures, procedures, rules, and control measures aimed at ensuring compliance by an organization or employee with legislation, ethical standards, regulatory requirements, and internal rules.
