Panayiotis Rougalas
Following the uproar caused by the lists of sanctions issued by the US, UK, and European authorities, the European Banking Authority (EBA) is tightening its standards in response. Specifically, the EBA has revised the templates for banks to report deposits that are subject to Russian and Belarusian financial sanctions. These revisions emphasize that the templates now incorporate the latest changes to the sanctions regulations and draw from the experience gained during the first year of reporting after the onset of the Russian-Ukrainian conflict. Accordingly, the Authority has updated the templates, as requested by the EU Commission, to be used for the second annual reporting of information on deposits affected by the Russian and Belarusian financial sanctions regulations.
At the same time, the EBA will make the templates available for voluntary use by the relevant national competent authorities and the EU Commission. This is intended to promote a harmonized approach and reduce associated reporting costs, especially for cross-border banks.
The updated EBA template states that credit institutions should furnish the national competent authority of the Member State where they are established or the Commission with information on deposits. This applies to deposits pertaining to Russian or Belarusian nationals, individuals residing in Russia or Belarus, as well as legal entities established in Russia or Belarus, as defined in the relevant articles.
The guidance also includes instructions for member states whose official currency is not the euro. Additionally, banks are required to provide account-by-account information for all accounts holding deposits in individual and joint accounts. This requirement applies to account holders whose total book value at the credit institution exceeds either EUR 100,000 or EUR 200,000.
With the implementation of the revised and tightened EBA guidelines, specific timelines have been introduced for reporting and remittances. For instance, credit institutions are now required to provide the specified information for Russian and/or Belarusian nationals no later than 27 May of each calendar year. In cases where institutions are unable to meet this deadline, they must notify the competent authorities and propose a new submission date.
The EBA's new guidelines for banks regarding sanctions administration include the establishment of timelines for deposit balances. Furthermore, there are updated legal references and guidance pertaining to account numbers, holder residence, nationality, and other relevant factors.
Close call
The financial and banking restrictions imposed on individuals and entities involved, or allegedly involved, in assisting sanctioned parties have significant financial implications for all countries. This is not the first time that Cyprus has been associated with the East in relation to sanctions, as Cypriot names are now included in the latest round of sanctions. Despite expectations in financial circles that prominent Cypriot service providers would be targeted, the package introduced by US and UK authorities barely passed.
Given the numerous suspicions and the widespread speculation surrounding prominent individuals, it is important not to become complacent, as the saying goes, "Where there is smoke, there is fire." The absence of new Cypriot names in the recent list (unlike the April 12 list), which the Ministry of Finance and the Department of the Registrar of Companies are still working to mitigate the damage to the Cypriot economy in the short term, does not guarantee that there won't be any in the future.
A solution needs to be found for professional sectors operating in Cyprus, providing services without a strict regulatory authority to oversee their compliance, such as banks.
Compliance lessons
In the not-so-distant past of 2018, banks in Cyprus faced a challenging situation, having only one correspondent bank for dollar transactions. This situation placed Cyprus on the brink of being categorized as a high-risk country, deterring potential investors. However, the banks have made significant progress in terms of compliance since then, as evidenced by their current status of having four correspondent banks for dollar transactions.
Initially, Cypriot banks may not have been fully aware of the necessary measures to take regarding sanctions. However, through guidance from higher authorities, they have managed to make substantial improvements. Now, it is crucial for lawyers, particularly those working as accountants and auditors, to demonstrate their willingness to adopt compliance lessons from foreign higher authorities. By doing so, Cyprus can shed its recurring negative media attention and establish a reputation based on positive reasons.
[This article was first published in Kathimerini's printed Oikonomiki edition and translated from its Greek original]
