Deutsche Bundesbank clarifies financial sanctions amidst evolving regulations

Germany’s central bank, the Bundesbank, has released updated guidance on financial sanctions, addressing multiple questions related to implementation of EU restrictions against Russia and Belarus and including revised criteria for determining ownership and control by sanctioned individuals.

The central bank’s guidance, published last week, clarifies the scope of financial sanctions, noting that they are not limited to cash but encompass a wide range of financial assets. It also provides detailed explanations on the prohibitions of disposal and provision of assets, outlining what constitutes ‘frozen funds’ and the processes involved in freezing accounts.   

The guidance also addresses complex issues including treatment of joint accounts, correspondent banking relationships, securities trading restrictions, and cross-border implementation of sanctions, particularly for EU companies with Russian or Belarusian subsidiaries.

It clarifies that companies with EU headquarters that are majority-owned by sanctioned individuals are not automatically subject to asset freezes, addressing a key question facing compliance officers across the European banking sector.

The Bundesbank FAQs also provide clarity on permissible and prohibited transactions, stating that while there is no blanket ban on payments to or from Russia and Belarus, specific restrictions apply to designated entities and transactions.   

Institutions are expected to implement robust screening systems to comply with these regulations. The Bundesbank has also issued a directive on due diligence for financial institutions to ensure compliance, while cautioning that the legal interpretation of EU regulations is ultimately the purview of the courts.   

The guidance highlights the importance of adhering to these sanctions, as violations can result in penalties under the Foreign Trade Act and the Foreign Trade Ordinance, and in certain cases, criminal charges.

For SWIFT restrictions, the Bundesbank lists several Russian financial institutions currently prohibited from using specialised financial messaging services, including those most recently added on March 17: Ak Bars Holding, Uralsib Bank, Tochka Bank, National Reserve Bank, Roseximbank, Bank SINARA, Primsotsbank, and BBR Bank.

The Bundesbank notes that while EU sanctions rules do not directly apply to Russian subsidiaries of EU companies, parent companies must take ‘best efforts’ to ensure their controlled entities outside the Union do not engage in actions that would undermine sanctions measures.

https://www.bundesbank.de/de/startseite/haeufig-gestellte-fragen-zum-thema-finanzsanktionen-886614