FRANKFURT/VIENNA, Feb 17 (Portal) – The U.S. sanctions agency has opened an investigation into Raiffeisen Bank International (RBIV.VI) over its Russia business and is stepping up scrutiny of the Austrian lender, which plays a crucial role in Russia’s economy .
Responding to questions from Portal, the bank said it received a request from the US Treasury Department’s Office of Foreign Assets Control (OFAC) in January to review “RBI’s payments business and related processes in light of recent developments regarding Russia and Russia.” to clarify Ukraine.”
OFAC had asked Raiffeisen for details on its involvement in Russia, partially occupied Donbass, Ukraine and Syria, including on the transactions and activities of specific clients, a source told Portal.
The US agency has requested a response by February, the person said, adding that Raiffeisen’s lawyers negotiated an extension of the deadline and promised to answer the questions in three installments of information that would be sent to in early April, May and June.
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A spokesman for the US Treasury Department declined to comment.
Raiffeisen told Portal in a statement that it is fully cooperating with OFAC and understands that the request was not triggered by any specific transaction or deal. Processes are in place to ensure compliance with the sanctions.
A spokesman said he was “confident that the information provided to OFAC will fulfill their request,” adding that the questions asked were “general in nature.”
Raiffeisen has not been sanctioned in the past, but January’s request for information worries European financial regulators responsible for overseeing the bank as it could eventually lead to penalties against Raiffeisen, two people with direct knowledge of the matter said.
Raiffeisen is deeply embedded in the Russian financial system and is one of only two foreign banks on the Central Bank of Russia’s list of 13 “systemically important credit institutions”, underscoring its importance to the Russian economy, which is grappling with sweeping Western sanctions.
As Austria’s second largest lender, it also supports a large part of the country’s economy and has extensive activities in Eastern Europe. An Austrian official said Austrian authorities are closely monitoring the situation at Raiffeisen and its business in Russia because of the importance of the bank.
Almost a year after Moscow launched a so-called “military special operation” in Ukraine, Raiffeisen is among a handful of European banks remaining in Russia.
But it has faced criticism, including from investors, for its decision to continue doing business with Moscow. The bank has previously defended its position, saying its exposure to Russia is limited.
Raiffeisen made a net profit of around 3.8 billion euros last year, thanks in large part to a 2 billion-euro plus profit from its Russia business. In the meantime, Russian savers have deposited more than 20 billion euros with the bank.
US CLOUT
The US Treasury imposes sanctions and can punish those who break them. Its most aggressive sanctions tool freezes US assets and bars banks from access to US dollars – crucial to international trade and finance.
The most severe sanctions tool in OFAC’s arsenal, known as the SDN List, freezes assets held in the United States and prohibits American companies or citizens from trading in those listed there, barring a bank or individual from all dollar payments .
This grants the United States leverage far beyond its borders to enforce its sanctions. Alternatively, OFAC can also take less stringent measures such as levying fines and sending warnings in the event of sanction violations.
But two former US officials, who asked not to be named, said Washington is normally reluctant to take such draconian steps.
Viktor Winkler, a German sanctions advocate, declined to comment specifically on Raiffeisen, but said it is common for OFAC to request information from banks and that this does not automatically result in penalties.
OFAC has sanctioned five major Russian banks, including state-backed Sberbank (SBER.MM), which is part of a response to that country’s invasion of Ukraine, as well as wealthy oligarchs.
Shortly after the Russian invasion of Ukraine, the United States suspended Sberbank from processing payments through the US financial system. The European branch based in Vienna was closed shortly afterwards.
Sberbank previously said the new sanctions would not have a significant impact on its operations.
In 2018, the US Treasury sanctioned ABLV Bank of Latvia over concerns about illegal activities, mostly related to Russia, prompting the bank to quickly disband.
Johann Strobl, Raiffeisen CEO, told shareholders in March that he was reviewing options for the Russian deal, but that it would take some time to close because the bank is not a “sausage stand” that can be closed overnight.
(This February 17 story has been refiled to say “on” in paragraph 1.)
Additional reporting by Alexandra Alper in Washington, DC; Edited by Paritosh Bansal and Anna Driver
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