By John O’Donnell, Francesco Canepa and Alexandra Schwarz-Goerlich
FRANKFURT/VIENNA, Feb 17 (Reuters) – The United States’ sanctions authority has launched an inquiry into Raiffeisen Bank International RBIV.VI over its business related to Russia, increasing scrutiny of the Austrian lender that plays a critical role in the Russian economy.
Responding to questions from Reuters, the bank said it had received a request from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) in January to “clarify payments business and related processes maintained by RBI in light of the recent developments related to Russia and Ukraine.”
OFAC had asked Raiffeisen for details of its exposure in Russia, the partially occupied Donbas, Ukraine and Syria, including about the transactions and activity of certain clients, a source told Reuters.
A spokesperson for U.S. Treasury Department declined to comment.
A spokesperson said it was “confident that the information provided to OFAC will satisfy their request”, adding that the questions posed were of a ‘general nature’.
Raiffeisen is deeply embedded in the Russian financial system and is one of the only two foreign banks on the Russian central bank’s list of 13 “systemically important credit institutions”, underscoring its importance to Russia’s economy, which is grappling with sweeping Western sanctions.
As Austria’s second-biggest lender, it also underpins much of that nation’s economy as well as having extensive operations in eastern Europe. An Austrian official said that Austrian authorities were monitoring the situation at Raiffeisen and its business in Russia closely because of the bank’s importance.
Raiffeisen made a net profit of roughly 3.8 billion euros last year, thanks in large part to a 2 billion euro plus profit from its Russia business. Meanwhile, Russian savers have lodged more than 20 billion euros with the bank.
The U.S. Treasury imposes sanctions and can penalise those who break them. Its most aggressive sanctioning tool freezes U.S. assets and excludes banks from accessing U.S. dollars – critical for international trade and finance.
The toughest sanctioning tool in OFAC’s arsenal, known as the SDN list, freezes assets held in the United States and bars American companies or citizens from trading with those listed, freezing a bank or individual out of all dollar payments.
This grants the United States influence far beyond its shores to enforce its sanctions. Alternatively, OFAC can also resort to less stringent measures such as levying fines and sending warning letters over sanctions violations.
Two former U.S. officials, asking not to be named, said, however, that Washington was typically reluctant to take such draconian steps.
Viktor Winkler, a German sanctions lawyer, declined to make specific remarks about Raiffeisen, but said that it was common for OFAC to request information of banks and that it did not automatically lead to penalties.
Shortly after Russia’s invasion of Ukraine, the United States cut off Sberbank from processing payments through the U.S. financial system. Its European arm, based in Vienna, was closed shortly afterwards.
Sberbank previously said the new sanctions would not have a significant impact on their operations.
In 2018, the U.S. Treasury sanctioned Latvia’s ABLV Bank, due to concerns about illicit activity connected in large part to Russia, prompting the bank to quickly unravel.
Johann Strobl, Raiffeisen’s CEO, told shareholders in March that he is examining options for the Russian business, but reaching a conclusion would take some time because the bank is not “a sausage stand” that could be closed overnight.
(Additional reporting by Alexandra Alper in Washington, D.C.; Editing by Paritosh Bansal and Anna Driver)
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