Thousands of accounts to be closed because of sanctions

More than 4,000 accounts held by Russians in Cypriot banks could be closed over the next two months following the imposition of sanctions on a number of individuals in Cyprus, by the United States and Britain.

Although, the number of accounts affected has not been confirmed by any bank, one newspaper reported that the Bank of Cyprus had sent 6,000 letters to Russian customers asking them to confirm that they were permanently residing in Cyprus. Another report said that 4,000 Russian customers of the bank not residing permanently in Cyprus have been told their accounts would be closed in two months.

What is clear is that local banks have wasted no time in complying with the sanctions announced by the US and UK last week; the EU is expected to follow suit soon. A local bank source told the Cyprus Mail on Thursday that Cypriot banks are complying fully with the sanctions, despite not being legally bound to do so, both in terms of the sanctions imposed by the United States, and those enacted by the United Kingdom.

“If there were any open accounts belonging to any of these sanctioned individuals, or any other sanctions for that matter, regardless of the country or what issue they are related to, their accounts will be frozen,” the source said.

“It doesn’t matter what the origin of their country is. If they have been sanctioned, their accounts will be frozen and no banking activity whatsoever will be permitted,” they added.

An article published by Forbes on April 19, said the Bank of Cyprus had began notifying its Russian citizen customers that their accounts will be closed within two months due to non-compliance with regulations.

One possible reason for these closures, the article said, may be the status of a resident taxpayer in Russia, or the existence of income from business activity in Russia, which is subject to sanctions. Customers are informed their user’s details do not meet the regulations of ‘know your customer’ process.

Cyprus’ entire banking sector is affected by the newest wave of sanctions imposed on Russian individuals. The Cyprus Bank Association’s representative Andreas Kostouris told Trito radio on Thursday there was a “freezing of accounts of those who fall under the sanctions, regardless of nationality”. He also noted that Cypriot banks have been complying with American sanctions for a decade now.

This point was also made at a presidential palace meeting on Wednesday, by Central Bank governor Constantinos Herodotou, who said that in the last few years 43,000 shell companies, operating in Cyprus, shut down while 123,000 bank accounts were closed.

Asked about the closing of accounts of Russian customers, Kostouris stressed the fact that thousands of accounts had been closed in recent years and it was wrong to say that the issue concerned only people of a certain nationality.

He explained that this issue concerned the banks’ risk assessment policy. “Banks evaluate specific countries, industries, persons and fields of activity and if the data indicates that the risk is particularly high, then they do not work with them,” he said.