Matt Scuffham and David Henry by Pete Schroeder

NEW YORK/WASHINGTON – Senior managers and compliance staff at large banks worked tirelessly this weekend in order to fully understand and comply with the multiple sanctions imposed upon Russia and its banking sector following the invasion of Ukraine.

According to sources from major banks worldwide, the bankers were trying to make sure they fully understood the consequences of restrictions that included the exclusion of some Russian lenders from SWIFT’s international payment system. The SWIFT announcement was made Saturday, but no names were given to the Russian affected banks. This left the sector in wait for more details.

Global financial markets are expected to open in a matter of hours. Bankers describe staff on high alert to implement the sanctions. This includes frantic calls to regulators and governments for additional knowledge.

According to one source, a European bank said that it had asked authorities for additional time in order to implement system changes. This was in response to what they described as an unstable and fast-moving situation.

Industry sources say that while global banks are well-versed in sanctions compliance and have made significant investments in programs to ensure their continued success, Russia’s restrictions have been unprecedented in scale.

Sources said that although banks from Iran and North Korea were kicked off SWIFT previously, they aren’t significant international trade participants.

One source from a U.S. bank stated that banks are known for extreme caution, and that they would continue to do so until all is well. He also said that the bank prioritized changes that could be implemented immediately.

Goldman Sachs (NYSE:), Morgan Stanley (NYSE:), Citigroup JPMorgan Chase and (NYSE:), declined to comment. Bank of America (NYSE 🙂 declined to comment.

SANCTIONS SKIRTING

U.S.- and European bank have been forced to implement sanctions against Russian entities in the past, including 2014 when Russia annexed Crimea.

Many of them have strong business connections with Russia. This has allowed them to make millions by facilitating trade and providing advice on Russian businesses in mergers and acquisitions. This business, along with the high investment banking fees earned by many U.S. bankers is in jeopardy.

Citigroup’s Russian branch of retail banking is being sold by the company since April.

New restrictions by the U.S. in recent weeks have complicated the situation. The new restrictions prohibit banks from having correspondent bank relationships with Sberbank. They also prevent Russia’s largest lender, Sberbank, from making payments to other banks.

According to sources within the banking industry, one of the greatest concerns for U.S. and European bank is inadvertent business dealings with Russian sanctioned entities via shell corporations that might not seem connected.

The Know Your Customer program requires banks to conduct extensive checks of all parties with whom they do business. Since 2014’s imposition of sanctions, U.S. banks are more adept at determining the beneficial ownership of assets.