By Francesco Canepa and Jesús Aguado

FRANKFURT/MADRID – Three sources revealed to Reuters that European Union regulators instructed banks to examine transactions of Russian and Belarusian residents. This is to verify they aren’t used to bypass Western sanctions against Moscow.

According to sources, the European Central Bank supervisors have instructed that tens, if not all, of the EU’s Russian and Belarusian residents are under intense surveillance from their banks. They will be looking out for large deposits and payments, as well as any new credit requests.

The EU sanctions against Moscow do not apply to people with permanent or temporary EU residence permits. But they restrict Russian nationals’ access to banks services. Banks are prohibited from receiving deposits exceeding 100,000 euros from Russian entities or nationals.

The ECB’s move puts EU residents under increased scrutiny. This would make it difficult to open bank accounts. A source claimed that many were already subject to restrictions in Spain. The move comes after Moscow invaded Ukraine. According to the Kremlin, this was a “special operation” to demilitarize and “deNazify the country.

According to a spokesperson from the Frankfurt-based central banking, the ECB has been checking to see that all banks under its supervision have made the right arrangements to comply with the sanctions. This includes transactions with clients and other relationships.

Some ECB Joint Supervisory Teams consisting of staff from the central banks and the national authorities have advised banks to tighten their control on EU residents if they are coming from Russia or Belarus.

Two sources confirmed that the supervisors were concerned about the possibility of banks within the bloc being fined if they channel funds for sanctioned persons, even though it’s not their role.

    Supervisors informed the affected banks between the end of February and early March and gave them a week to comply, two of the sources said, adding an audit of responses is planned. The exact date of completion was unclear.

Sources said the first measures focused on Russian citizens. Then, they expanded the reach to Belarusians.

The majority of Russians who live in the EU reside in Germany. According to Eurostat, there are over 230,000. Spain has more than 81,000. France, Italy and Latvia are also popular destinations.

According to Eurostat data, Belarusians who live in the EU mainly reside in Germany, Lithuania, and Italy.

‘EXISTING RISKS’

    In one instance, a Spanish bank has put around 8,000 Russian clients who are not on the EU sanctions list and are residing in Spain under surveillance, one of the sources said.

They also stated that all new loans to Russians without Spanish residency have been stopped and that at least one bank won’t allow Russians not to open accounts.

According to a fourth source, Italian banks were also monitoring accounts exceeding 100,000 euros that were held by Russian clients, even though they lived in the EU.

    Asked if lenders were intensifying scrutiny of Russian clients, the Bank of Spain told Reuters that both supervisors and banks were “carrying out the necessary controls to assess the situation and the possible existing risks”.      

    The Bank of Italy declined to comment.

The banks that were affected by the transfer stoppage do not need to be stopped, but the three first sources stated they had to conduct additional checks to determine the origin, destination, and purpose of the money.

They also advised banks to be extra cautious when approving loan applications from Russians and Belarusians.

    However, one of the sources said there is nothing to stop banks from granting credit to a well-established Russian customer who is not subject to sanctions.