Austrian Bank Under Scrutiny by US Sanctions Officials

Raiffeisen Bank International, one of only two foreign banks on the Russian central bank’s list of 13 “systemically important credit institutions”, is facing scrutiny from U.S. sanctions officials over its Russia business. This comes at a time when Russia is grappling with sweeping Western sanctions.

Raiffeisen shares experienced a sharp decline after the bank received a request for information from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to clarify its payments business and related processes maintained by RBI in light of recent developments related to Russia and Ukraine.

In response to concerns about the inquiry, Austria’s finance ministry issued a statement, playing down any cause for concern. The ministry stated that sanctions authorities naturally keep themselves informed about Austrian companies doing business in Russia, and that the inquiry is a normal process.

Raiffeisen has assured OFAC that it is fully cooperating with the inquiry, and that the request was not triggered by a specific transaction or business. The bank has processes in place to ensure compliance with sanctions.

The Austrian finance ministry has also addressed concerns from parliament about Raiffeisen’s activities. The bank is deeply embedded in the Russian financial system and has drawn increasing domestic political scrutiny.

However, the Greens, the junior party in Austria’s ruling coalition, expressed concerns that the issue could damage Austria’s reputation as a financial center. The party’s concerns come after media reports suggested that Raiffeisen would attempt to acquire the remains of the Vienna-based European subsidiary of Russia’s Sberbank, which was forced to close after the outbreak of the war in Ukraine.

The finance ministry, however, welcomed the prospect of such a deal, suggesting that it could prevent losses to savers and deposit insurance of hundreds of millions of euros.

The scrutiny of Raiffeisen comes amid increased tensions between Russia and Western countries. The West has imposed several rounds of sanctions on Russia, targeting individuals and businesses for their alleged involvement in Russia’s annexation of Crimea and its support for separatist rebels in eastern Ukraine.

Raiffeisen is not the first bank to face scrutiny over its Russia business. In 2019, French bank Societe Generale agreed to pay $1.3 billion to settle U.S. and French investigations into its violation of sanctions against Russia.

The U.S. has also imposed sanctions on Russian banks, including the country’s largest lender, Sberbank, and VTB Bank, as well as on senior Russian officials and businessmen. The sanctions have affected the Russian economy, with the country’s GDP growth slowing down and its currency, the ruble, losing value.

Raiffeisen’s involvement in the Russian financial system and its importance to Russia’s economy underscore the complexity of the situation. The bank has operations in 14 countries, including Russia, and has a significant presence in Central and Eastern Europe.

Raiffeisen’s response to the inquiry and its assurances of compliance with sanctions are likely to be closely watched by U.S. authorities. The outcome of the inquiry could also have implications for the bank’s business in Russia and its reputation as a responsible corporate citizen.