Chinese state-owned banks are tightening controls on servicing Russian clients after the US approved secondary sanctions on financial institutions found aiding Russia's military-industrial complex, Bloomberg reported on Tuesday, citing people familiar with the matter.
In December, US President Joe Biden signed an executive order authorizing “secondary sanctions to go after financial institutions” cooperating with enterprises related to Russia’s military industrial complex.
The new restrictions enable Washington to target institutions that are providing goods and financial services to Russia and facilitating cross-border transactions. Banks under sanctions would be denied access to the US financial system.
According to Bloomberg, at least two Chinese lenders have begun reviewing their dealings with Russian customers, focusing in particular on cross-border transactions. These banks will reportedly cut business ties with sanctioned customers and stop providing financial services to the Russian military industrial complex “regardless of the currency or the location of the transactions,” the outlet said.
“The lenders are stepping up due diligence on clients, including checks on whether their business registrations, authorized beneficiaries and ultimate controllers are from Russia,” the outlet wrote, citing people with knowledge of the matter.
Non-Russian clients doing business in Russia or supplying sensitive items to Russia via third countries will also be subject to a review, sources told Bloomberg.
The outlet pointed out that Washington’s move to impose secondary sanctions is “controversial” due to its potentially unpredictable impact and the risk of “unintended consequences.” In particular, the measures could push banks wary of violating restrictions to abandon entire sectors even if they’re not subject to sanctions.
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