Raiffeisen Probed by U.S. Sanctions Authority

PeopleOther ♦ Published: February 18, 2023; 00:29 ♦ (Vindobona)

Raiffeisen Bank International, an Austrian lender that plays a critical role in the Russian economy, is under investigation by the US sanctions authority over its Russia-related business.

There are hard times ahead for Raiffeisen International with its headquarters in Vienna. / Picture: © Raiffeisen Bank International AG / S. Klimpt

Austrian companies continue to do big business in Russia. Raiffeisenbank International, in particular, has often come under international and Ukrainian criticism for its business in Russia, as Vindobona.org reported.

As reported by Reuters, Raiffeisen Bank International (RBI) has been targeted by U.S. sanctions authorities over its Russian business. The bank reportedly received a letter in January from the Office of Foreign Assets Control (OFAC), a division of the U.S. Treasury Department responsible for monitoring and implementing sanctions against Russia. In a response to questions from Reuters, the bank said these factual circumstances and that "RBI's payments business and related processes need to be clarified in light of recent developments regarding Russia and Ukraine."

Reuters reported that OFAC asked Raiffeisen for information about its exposure in Russia, the partially occupied Donbas, Ukraine and Syria, including transactions and activity of certain clients. Despite this, RBI was informed that the request was not triggered by a specific transaction or business activity. The bank stated that it was cooperating fully and had processes in place to ensure that it complied with the sanctions.

A person familiar with the matter told Reuters that the U.S. authority had asked for a response to the letter by February. Raiffeisen asked for an extension of the deadline and agreed to respond in three steps - in early April, in May and in June, he said. The U.S. authority is at an early stage of the investigation, according to the insider.

In the past, as reported by Reuters, Raiffeisen has not been sanctioned, however, two people with direct knowledge of the matter said the January information request concerns European financial regulators responsible for overseeing the bank because it could ultimately result in fines against Raiffeisen.

Embedded in Russia's financial system

RBI, which has been active in Russia for almost 30 years, is deeply embedded in the country's financial system and, along with Italy's UniCredit, is one of two foreign banks on the list of 13 systemically important credit institutions. For the past eleven months or so, the Vienna-based bank has been considering all strategic options up to and including an exit from Russia.

RBI is Austria's second-largest bank and is considered one of the largest lenders in Eastern Europe. Last year, its Russian business contributed more than half of the Vienna-based bank's billion-dollar profit. However, RBI cannot withdraw profits from Russia due to the sanctions.

As a result of its Russia business, Raiffeisen made a net profit of roughly 3.8 billion euros last year. Over 20 billion euros have been deposited with the bank by Russian savers.

About OFAC

Treasury sanctions can be enforced and penalized by the U.S. Treasury. In OFAC's arsenal, the SDN list is the toughest sanctioning tool, freezing assets in the United States and barring American companies and citizens from trading with those listed.

By doing so, the United States can enforce its sanctions far beyond its borders. Over sanctions violations, OFAC may also levy fines and send warning letters as less stringent measures.

U.S. Department of the Treasury