A Quiet Financial Squeeze: How Banks Are Isolating Russian Money Beyond Sanctions

Banks across several countries, including Armenia, Serbia, Kazakhstan, Tajikistan, and Oman, have significantly tightened compliance procedures for clients connected to Russia.

The Gaze informs about it, referring to a statement made by Ukraine’s Foreign Intelligence Service.

Both private individuals and corporate entities are facing heightened scrutiny. In some cases, financial institutions are freezing transactions or closing accounts altogether. The measures are formally aimed at combating money laundering, fraud, and regulatory violations, but their real impact extends much further.

Banks are now conducting deeper checks into the origin of funds and the economic justification of transactions, particularly cross-border transfers and foreign-exchange operations. 

Clients are increasingly required to provide extensive documentation confirming long-term residence, official employment, or legitimate business activity. Failure to meet these requirements often results in blocked accounts or rejected payments.

The tightening comes in the wake of a December 3 decision by the European Commission, which placed Russia on a list of high-risk jurisdictions with “strategic deficiencies” in combating money laundering and terrorist financing. While the decision is EU-based, it effectively compels banks in third countries to apply enhanced due-diligence measures to any transactions involving Russian residents.

According to the Foreign Intelligence Service of Ukraine, the primary driver behind the shift is banks’ concern over potential secondary sanctions from the United States and the European Union, as well as mounting reputational risks.

The result is a growing pattern of de facto financial isolation for Russian individuals and businesses that goes beyond the formal sanctions regime. Even in countries that have not officially joined Western sanctions, links to Russian capital are increasingly viewed as an unacceptable liability.

As The Gaze reported earlier, Chinese manufacturers are rapidly taking over key sectors of the Russian economy as local producers struggle with weakening investment, high borrowing costs, and declining export revenues.

Read more on The Gaze: Currency Operations for Sanctions Evasion: How the Yuan and Dirham Save the Kremlin and Why This Weakness Can Be Blocked