Biden Mulls Barring US Banks From Processing Transactions From Russian Banks

The Biden administration is preparing sanctions against Russia that would come with banning U.S. financial institutions from processing transactions from Russia’s biggest banks if Russia invades Ukraine, Reuters reported Monday (Feb. 21).

The measures would strike against the Russian economy by removing the “correspondent” banking relationships between the two countries’ banks.

Authorities have said the restrictions would be part of the sanctions, though the idea of cutting down on banking ties hadn’t been reported before. Anonymous sources said some of the banks targeted could include VTB Bank, Sberbank, VEB and Gazprombank.

The U.S. could also place some Russian individuals and companies on the Specially Designated Nationals (SDN) list, which would basically remove them from the U.S. banking system entirely through barring their trade with Americans and freezing their assets in the country.

While the correspondent banking tool wouldn’t be as powerful as the SDN designation, Reuters reported that banks could still be hurt if it is more difficult for them to deal in U.S. dollars, as it is the global reserve currency and most global trade is transacted in dollars.

“Since a significant number of global trade transactions are in U.S. dollars this is a sanction with bite, but without the more complicated and deadly sanction of being placed on the SDN list and having all assets in the U.S. or in the hands of U.S. persons frozen,” Washington lawyer Kay Georgi, an expert in international trade, told Reuters.

Earlier in February, regulators said the tensions between Russia and the Ukraine might end up spurring a Soviet cyber attack.

Read more: Regulators Warn Banks to Prepare for a Russian Cyberattack

There were around 100,000 Russian troops at the border as of early February, and European leaders were afraid of the impact of an invasion. The European Central Bank had been on alert for any cyber attacks.

The regulator has been looking into scams because of the accelerated risk because of COVID, and the Ukraine crisis has honed the attention on Russian attacks. The potential threats have had banks readying cyber tests to make sure they can fight an attack.