Michelle Price and Pete Schroeder

WASHINGTON (Reuters). Despite being well prepared for Western sanctions imposed so far on Russia in response to its aggression against Ukraine, U.S. bank executives say they are still working out the details. They also worry about the possibility of new restrictive measures increasing the complexity and cost of enforcing them, according to industry leaders and lawyers.

Russian President Vladimir Putin has authorized military operations in Ukraine’s eastern region on Thursday. The operation appeared to signal the beginning of war across Europe, following Russia’s request to end NATO’s Eastward Expansion.

U.S. President Joe Biden stated that he will announce additional sanctions against Russia Thursday in addition to the financial measures already imposed during this week.

After Moscow’s recognition, Tuesday saw the United States and Britain announce new sanctions against Russia. Their main targets were Russian banks, and their international operations.

Washington took the most severe measures Monday to stop investment and trade between the United States and two regions of Ukraine. It also moved on Tuesday, cutting off the U.S. financial systems from Russia’s state-owned Promsvyazbank/Vnesheconombank as well as 42 other Russian subsidiaries.

U.S. Treasury ordered the freezing of assets that relate to certain Russian elites as well as their families.

Sanctions are enforced primarily by financial institutions.

Although they were previously fined for their incompetence, the banks pulled out of the Crimea region after Russia sanctioned them for annexed the Crimea.

According to LexisNexis, the U.S. spent $35.2 billion in financial crime compliance, which includes anti-money laundering checks, and controls against illegal activity – just for 2020.

Three industry sources claimed that the Biden administration kept in contact with the sector for several weeks regarding potential measures. They also alerted banks in advance of Tuesday’s announcement to ensure the industry was prepared.

“The new U.S. sanctions should not be hard to implement because, at least for now, the Russian bank designations are fairly discrete and, post-Crimea, U.S. and global banks have had ample time to address the nuances of these kinds of sanctions,” including identifying beneficial asset owners, said Mario Mancuso, international trade partner at Kirkland & Ellis LLP.

However, executives in the industry who started to implement the rules Wednesday stated they wanted more clarity from Treasury about some details including the exact geographical boundaries of the territory breakaway.

According to Andrew Shoyer (a partner in Sidley Austin), “Those jurisdictions can be defined by Ukraine law, but they could or might not be what breakaway jurisdictions claim is within their claimed sovereignty. That may change,” he said.

He stated that the Treasury gave companies a 30-day deadline to adhere, which was one of the most difficult it sets out.

The Treasury spokesperson did not respond immediately to our request for comment.

MORE IS TO COME

According to the White House, and others around the world, Tuesday’s actions are not complete. Additional sanctions like broadening their range to include additional Russian banks or people would be easy to manage.

Executives raised concerns about the possibility of divergence in sanctions approaches between jurisdictions if there were disputes over Russian aggression. Reuters last week reported that both the U.S. government and its allies have not reached an agreement on how to respond to non-military Russian aggressors like identified cyber attacks.

Executives stated that it would take more effort and cost to enforce conflicting sanctions.

A major concern is whether Biden will impose “secondary sanctions,” on foreign parties doing business with sanctioned entities. Because of the difficulty of identifying business connections, these are even more complicated to apply.

Many financial executives also informed the government that they are against any sanctions targeting Russia’s access at SWIFT (a payment service provider used in more than 11,000 institutions across 200 countries).

While it could cause financial problems for Russian banks, it will also have a disruptive effect on the global payments system. This would make it more difficult for Russian creditors to return their Russian debts.

The White House may have downplayed this possibility, but lawmakers might pursue it. BTIG policy director Isaac Boltansky said, despite Congress being in recess this week that he anticipates Congress to move legislation soon to stop Russia from taking action.

He said that Russia will be expelled from SWIFT’s international payment infrastructure, although there is concern about Russian creditors who are still waiting for funds.