Turkish banks began to refuse to work with Russian ones: reasons, consequences

Turkish banks began to refuse cooperation with Russian financial organizations. Until recently, Nurol Bank and Emlak Bank were among the main participants in settlements with the Russian Federation. Experts say that difficulties in interaction between banks arose a long time ago, but the situation worsened sharply at the end of December 2023. One of the main reasons was growing pressure from the US Treasury Department and authorities, whose representatives warned a number of foreign banks about the risk of falling under secondary sanctions due to cooperation with Russia.

Turkish banks began to refuse to work with Russia for fear of US sanctions

This applies to foreign trade. So far we are talking about both the severance of correspondent relations and the suspension of payment processing without formal closure of contracts. This does not apply to ordinary Russians, their accounts in Turkish banks and purchases with Turkish cards.

One of the main reasons for the massive refusal of Turkish banks to cooperate with Russian financial organizations was the risk of falling under secondary sanctions of the US Treasury. At the same time, it is argued that the risks of severing relations do not affect, for example, subsidiary foreign banks in Russia – an exception has been made for similar organizations in Turkey.

Until recently, Russian banks could open correspondent accounts in the Mediterranean country in various currencies, including lira, dollars and others. However, recently they have been denied such services. Against this background, problems arose in trade relations. In particular, difficulties began to arise with money transfers between companies in the two countries. As a result, since the beginning of 2024, it has become much more difficult for Turkish exporters to receive payments from Russian counterparties.

The reason for the actual suspension of money transfers was the resolution of the structure of the American Ministry of Finance published on December 22, 2023, which, according to experts, “has very broad wording” and actually prohibits foreign organizations from providing intermediary services in all transactions, with the exception of agreements relating to the supply of food and medicine .

Türkiye promised to normalize the situation with money transfers from Russia

Against the backdrop of general concern among Turkish exporters about the worsening situation with money transfers from Russia, the authorities of the Mediterranean country promised to normalize the system of payments from the Russian Federation.

Progress in this issue began after a meeting of local businessmen with the Chairman of the Assembly of Turkish Exporters, Mustafa Gültepe. After business discussions, a representative of a company supplying cosmetics and household products to the Russian market said that the situation with establishing a payment system from the Russian Federation “should normalize in the coming days.”

In other countries, banks have tightened checks against Russian clients

Turkish banks were not the only ones that tightened relationships with Russian clients and financial institutions in response to threats from the US Treasury. Against the backdrop of the risk of falling under secondary sanctions, Chinese state-owned banks have also tightened comprehensive checks of Russian clients.

It was alleged that the revision of policy towards the Russian Federation affected at least two financial organizations of the PRC. As specified, representatives of these banks intend to sever all ties with clients on the sanctions list. In addition, these government agencies promised to suspend the provision of all types of banking services to the Russian military industry, not only in dollars, but also in any other currencies.

At the same time, unnamed Chinese state banks also promised to tighten comprehensive checks of all their clients for connections with Russia. At the same time, we are talking not only about immigrants from the Russian Federation, but also about companies that do business there or supply critical goods through third countries. With this strategy, Chinese banks want to protect themselves from any risks of falling under secondary sanctions from the United States, whose authorities have been reproaching China for years for providing military and financial assistance to Russia after the outbreak of hostilities in Ukraine.

Experts point out that by tightening checks on Russian clients, Chinese banks want to demonstrate to Washington that they do not want relations with the United States to deteriorate. Despite this, China is said to continue to increase trade with Russia in industries not affected by Western sanctions.

Another country whose large banks have tightened checks against Russian clients is Cyprus, which until recently was very popular among Russian citizens for placing assets and funds. At the beginning of April 2023, the largest bank in Cyprus, Bank of Cyprus, began notifying Russian clients that their accounts would be closed soon. The bank explained the decision by saying that such correspondent accounts do not comply with the rules of the Know Your Client procedure. At the same time, as additional reasons, representatives of the financial organization cited the client’s tax residency in the Russian Federation and a short period of residence in Cyprus.

At the beginning of December 2023, the authorities of the island state ordered local banks to stop conducting ruble transactions with Russian clients and limit any financial relations with them. As noted, this step was a response to the results of an international investigation into 29 cases of possible circumvention of anti-Russian sanctions.