Bank of Cyprus closes accounts of Russians: what to expect next

The largest bank in Cyprus, Bank of Cyprus, has begun sending notices about the closure of accounts of clients from Russia.

Limassol-based consulting company Main Partner Trust was the first to report this. publishing in his telegram channel the text of the corresponding message that some Russians received. Later this information confirmed Forbes source in banking.

Who will have their accounts closed?

According to Alena Sakharova, director of Main Partner Trust, the bank began sending notifications last week. The letter informs customers that their accounts will be closed within two months of receiving the letter, as the user’s data does not comply with the rules of the “Know Your Customer” procedure, the publication reports. Forbes.

As explained in the Main Partner Trust, the “trigger” for the bank may be the tax residency of Russia. A cause for concern in this case may be the situation when the bank began to request too often to check the utility bill – it is likely that this is how compliance finds out whether the client has really lived on the island for a long time. Also, the reason for closing an account may be the presence of income from a sanctioned business in Russia (for example, dividends or salaries for remote employees of sanctioned companies), an “atypical” residence permit, for example, type “F” or “visitor”. Including this concerns those who are in Cyprus on a digital nomad visa.

Bank client in the Russian-language “Cyprus Chat” wrotethat the Bank Of Cyprus account was used only for utility bills. There were no large movements in the account, but she still received a notification that it was closed. Another user shared that she had opened an account for a long time, for the purchase of real estate. She has never transferred money from Russia to Cyprus, has long retired and, nevertheless, also received a letter about closing the account.

Reference: In 2022, the US Department of Justice created the KleptoCapture group, which monitors compliance with sanctions imposed in response to Russia’s invasion of Ukraine.
Bank Of Cyprus is considered the largest in Cyprus. According to the results of last year, Russians (excluding Cypriot companies owned by Russian citizens) kept more than seven hundred thousand euros in bank deposits. This is 6% more than the year before. About 15% of all Russians living in Cyprus can have accounts in Bank Of Cyprus.

Not only Bank Of Cyprus

A Forbes source in the banking market says that Bank Of Cyprus has closed accounts for Russians before. Moreover, even old accounts of clients who have long lived in Cyprus fell under this procedure. “I know for sure that there are quite a lot of such clients. And here the main problem is related to the fact that they close a large number of corporate accounts, that is, problems arise not only for individuals, but also for legal entities, ”says Forbes’ interlocutor.

Bank Of Cyprus is considered the largest in Cyprus. At the end of last year, Russians (excluding Cypriot companies owned by Russian citizens) kept more than €700,000 in bank deposits. This is 6% more than a year before. According to Sakharova, about 15% of all Russians living in Cyprus may have accounts in the Bank Of Cyprus. In the structure of the bank itself, the share of deposits of Russians, Belarusians and Ukrainians is even more modest – about 6%, should from the annual report of the credit institution.

The bank is currently leads operations in Russia and Ukraine, the report says. He sold the Ukrainian “daughter” in 2014 to Alfa Group. In 2015 Bank Of Cyprus sold and a Russian subsidiary, Uniastrum Bank, which later became part of Orient Express Bank. At the same time, according to a Forbes source in the banking market, problems with closing accounts are experienced not only by Bank Of Cyprus customers, but also by those who are serviced by the divisions of the Greek Hellenic Bank and Alpha Bank.

What to expect next

The decision to close the accounts of Russians in a Cypriot bank in the Main Trust Partner is associated with the fear of British and American sanctions. They prohibit the provision of consulting, marketing, IT, legal, engineering services to both companies and individuals from Russia, the company points out in clarifications on the Telegram channel. Recent US sanctions packages include measures that stop circumvention of previous restrictions. In the latest package, Cyprus was in the lead in terms of the number of people added to the SDN list for helping to circumvent past sanctions, so Bank Of Cyprus spends significant resources to comply with all restrictions.

“Now only the Bank of Cyprus has initiated the procedure for closing accounts, but second-tier banks will follow at some point,” says Sakharova from Main Partner Trust. The bank is trying to play it safe and exclude any possibility of being used to circumvent sanctions, says Andrey Ryabinin, partner, head of the sanctions practice at the Delcredere Bar Association. In his opinion, this is easier than spending a lot of resources on compliance and eventually getting a fine or other problems. Ryabinin is sure that this is the result of an explanatory campaign being carried out in the jurisdictions so far accessible to Russians by the American and European authorities.

The restrictions of the Cypriot bank are related to the recent expansion of US blocking sanctions, Yevgeny Zubkov, a lawyer at Forward Legal, agrees. It indicates that each new SDN list extends its action not only to the members of the list, but also to the persons affiliated with them. Interaction with both of them can lead to secondary sanctions, which companies fear. “Thus, with each new expansion of the SDN-list, the number of sanctioned persons and the level of associated risks will increase exponentially, which each time will be accompanied by a refusal to cooperate and existing contracts,” says Zubkov.

The US Treasury has an Office of Foreign Assets Control (OFAC) that oversees sanctions compliance. It also maintains an SDN list. Getting into it for the bank means freezing assets in the United States and a ban on settlements in dollars with any American counterparties. It is also prohibited to buy foreign stocks and currencies through the brokers of these banks. In 2022, the US Department of Justice created the KleptoCapture group, which monitors compliance with sanctions imposed in response to Russia’s invasion of Ukraine.

Yury Fedyukin, partner at Enterprise Legal Solutions, agrees with Zubkov: if a bank or broker cannot eliminate the risks of serving people under sanctions and does not want to incur high operating costs, it is easier to refuse service.

Zubkov believes that statements about the termination of work with the Russians by foreign banks will sound more than once. Although there are few examples of the application of any kind of sanctions against Cypriot banks, according to Fedyukin. The most notable of these is a $583,000 fine imposed in 2020 on the US arm of Deutsche Bank for non-compliance with Crimean sanctions.

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