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Author`s name Timothy Bancroft-Hinchey

US sanctions hit banks

US sanctions hit banks. 52421.jpeg

So far there have been no sanctions from the United States besides the "black list" of businessmen and officials of the Russian Federation. However, on Friday, some Russians were inconvenienced by the first actions of the United States. Visa and Mastercard have blocked the bank cards of customers of "Rossiya" and "SMP" banks. Should other Russians be concerned about non-cash payments?

Two major international payment systems Visa and Mastercard headquartered in the U.S. have ceased to provide services to the bank customers of "Rossiya" bank on Friday. The credit institution was regarded by the Americans as close to the Russian political circles, and this is why it was the only entity that has fallen under the sanctions. The "black list" includes the name of the holder of 38.45% of the bank shares Yury Kovalchuk. "Rossiya" bank assured its customers that, despite the fact that the organization is not favored by the U.S., it will continue to operate and will make every effort to solve the existing problems.

Later, the clients of "Rossiya" bank were joined by the Russians working with "SMP Bank" owned by Arkady and Boris Rotenberg. "SMP" clients were also unable to use their Visa and Mastercard, but all other bank services remained unchanged. The representatives of the payment systems have not commented on the incident or notified the banks of possible difficulties in advance. The consumers of banking services and the bankers were hit with the issues unexpectedly.

Washington warned about preparing sanctions long time ago. Now it is important to understand how to proceed, because at the moment Visa and Mastercard account for over 85 percent of all issued banking cards in Russia. In fact, everyone knows that almost every other Russian uses cards issued by U.S. companies. When you consider that in recent years the Russian government and the bankers have been actively promoting the transfer to non-cash payments, it becomes evident that the problem created by the U.S. is quite significant. Pravda.Ru interviewed experts to find out whether other Russians should be concerned about their credit cards being blocked.
 

"When decisions are made by the leadership of the United States, I believe Visa and Mastercard will do the same," shared his opinion with Pravda.Ru deputy chairman of the Duma Committee on Financial Markets Vladislav Reznik. He stressed that this violated the law. "In accordance with the existing law "On the national payment system," the payment system must ensure continuity of transactions. It seems to me that by their actions the payment systems took a unilateral decision to block credit card transactions of a number of Russian banks and violated the law "On the national payment system."

In turn, the president of the Association of Russian Banks Tosunyan told Pravda.Ru that blocking Visa and Mastercard was a short-sighted measure:

"To allow the international payment system be a system that cannot be trusted, that may stop operations for certain clients, would undermine the credibility of the international payment systems. No financial institution or business organization should allow such suicidal acts. This, in principle, by definition, is unacceptable. I appeal to my colleagues from all foreign international institutions not to do this. The Association of Russian Banks that includes the affected banks will certainly protect its members. Obviously, if we are cornered, we will be looking for some alternative solutions.

These international payment systems are also working with the Association of Russian Banks, and we, as partners, promise not to do anything like this as it would mean working against ourselves. That would mean working against our country; it is quite shortsighted and unacceptable from the point of view of common sense, elementary ethics and many other human and economic criteria, not to mention legal ones."

At the same time, according to Vladislav Reznik, when this law was adopted in Russia (it entered into force on January 1, 2014), the amendment "On mandatory location of a processing center on the territory of Russia" has not been adopted yet. In this situation, it would level the issue created by the USA. "I think now it is time to revisit this subject," concluded Reznik.
 

Meanwhile, the media (referring to senior diplomatic sources) published information about the negotiations between the Ministry of Finance, Rosfinmonitoring, representatives of the Chinese payment system China UnionPay and the largest bank in Hong Kong HSBC. This may mean that there is an active search for processing systems alternative to the American ones that would allow reducing the dependence of the Russians on the western financial system and escaping the sanctions.

Today Chinese banking cards CUP serving a number of Russian banks such as VTB, Gazprombank, Interprogressbank, Uniastrum Bank, World Bank, Bank of Moscow, and so on are circulated in Russia. There are also Russian banking cards quite capable of replacing the global payment systems. These are the so-called UEC (Universal Electronic Card), as well as "Gold Crown" and UnionCard.

The reaction of Russian deputies to the actions of the U.S. Visa and Mastercard was quite strong. They proposed banning the activities of these processing systems in Russia.
Maria Snytkova

  

 

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