Ukraine imposes sectoral sanctions against all banks and financial services providers operating in Russia

On 22 February 2023, the National Security and Defense Council of Ukraine introduced a set of sectoral special economic and other restrictive measures (sanctions) against the Russian banking and financial sector.^[1] This is the first set of anti-Russia sectoral sanctions imposed by Ukraine.

To become effective, the Decision must first be approved by a resolution of the Ukrainian Parliament within 48 hours.[2]

The sanctions will apply for 50 years to the following entities providing financial services and registered or located in the Russian Federation:

1. all banks, including the Central Bank of the Russian Federation,
2. non-bank credit institutions, payment systems operators, professional stock market participants, insurance companies, investment funds and other institutions providing financial services,

jointly (“Russian Financial Institutions“).

The sanctions provide for:

1. suspension of transactions involving assets owned by the Russian Financial Institutions
2. prohibition on establishing business relations (including correspondence relations) with the Russian Financial Institutions
3. prohibition on executing transactions with the Russian Financial Institutions
4. prohibition on maintaining business relations (including correspondence relations) with the Russian Financial Institutions
5. prohibition on the purchase of securities and other financial instruments issued by the Russian Financial Institutions (except for the alienation of such securities (including free of charge) in favor of Ukraine);
6. suspension of the performance of financial and economic obligations (including the transfer of dividends, interest payments and other payments) in favor of the Russian Financial Institutions
7. prohibition on investments in or in favor of the Russian Financial Institutions
8. suspension of the service of electronic means of payment (including transfers, settlements and cash withdrawals) issued by the Russian Financial Institutions
9. prohibition on crediting funds to the accounts of individuals / legal entities under transfers initiated by electronic means of payment issued by the Russian Financial Institutions
10. cancellation of registration and prohibition on further registrations by the National Bank of Ukraine of the following:
    1. the international payment system — if its operator is a Russian Financial Institution
    1. a participant of the international payment system — if the operator of the international payment system is a Russian Financial Institution
    1. a participant (Russian Financial Institution) of the international payment system — if the operator of the international payment system is a resident of Ukraine.

Individuals and legal entities are prohibited from executing transactions aimed at the circumvention of the above restrictions. The Decision will become effective on the day it is approved by the Ukrainian Parliament.

[1] Presidential Decree No. 89/2023 dated 22 February 2023 “On the Decision of the National Security and Defense Council dated 22 February 2023 ‘On Imposing Sectoral Special Economic and other Restrictive Measures (Sanctions) against Financial Institutions of the Russian Federation'” (“Decision“).

[2] Art. 5 (2) of Law of Ukraine “On Sanctions” dated 14 August 2014 No. 1644-VII.