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Treasury Warns Foreign Banks Against Helping Russia Evade Sanctions

Referring to his message to foreign banks, he added: “You need to make sure that not only are you making sure that you’re watching flows into your financial institution, but you need to also help by reminding the businesses that you support that they, too, you don’t want them to be providing material support to Russian oligarchs or Russian businesses as well.”

Banks and financial institutions around the world have been grappling with how to remain in compliance with the waves of new sanctions against Russia.

Citigroup, the largest U.S. bank in Russia, with about 3,000 employees there, was in “active dialogue” to sell its Russian consumer and commercial-bank businesses, Jane Fraser, its chief executive, told Bloomberg this month.

Citigroup trimmed its exposure in Russia to $7.9 billion in March, down from $9.8 billion at the end of last year, according to a filing. “This weaponization of financial services is a very, very big deal,” Ms. Fraser said at a conference this month. She said she expected global capital flows to splinter as nations developed new financial systems to avoid being too reliant on Western firms.

Foreign banks with U.S. operations can find themselves caught between conflicting demands. In some cases, U.S. sanctions have required them to cut off longtime customers. Those who resisted doing so learned how serious the authorities could be about tracking down violators and hitting them with big fines.

In 2019, for instance, the British bank Standard Chartered paid $1.1 billion to settle cases brought by the Justice Department, Treasury, New York’s state banking regulator and state prosecutors over transactions it had carried out for Cuba, Syria, Iran and Sudan in violation of U.S. sanctions. Two years earlier, Deutsche Bank paid $630 million after it was caught helping Russian investors sneak $10 billion into Western financial centers. The international giants HSBC and BNP Paribas have also paid billions in the past 10 years to settle sanctions violations cases.

Lananh Nguyen contributed reporting.

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