Sanctions On Alfa Bank: Belarus In Focus

In April 2022, the US government imposed sanctions on Alfa Bank, Russia's largest privately-owned bank, in response to the country's invasion of Ukraine. The sanctions, which were also placed on Sberbank, Russia's largest bank, were part of a broader set of measures that included export restrictions on Russian civil aviation and the suspension of permanent normal trade relations with Russia and Belarus. The US Treasury Department's Office of Foreign Assets Control added Alfa Bank and its subsidiaries to the Specially Designated Nationals and Blocked Persons List, prohibiting all transactions with US persons. The UK has also sanctioned CJSC Alfa Bank Belarus, with the bank appearing on the country's consolidated international sanctions list.

The US imposed sanctions on Alfa Bank and its subsidiaries in April 2022

On April 6, 2022, the US Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed sanctions on Alfa-Bank, Russia's largest privately-owned financial institution and fourth-largest financial institution overall, along with six of its subsidiaries. This action was part of a series of economic measures taken by the United States, the G7, and the European Union to hold the Putin regime accountable for its atrocities in Ukraine.

The sanctions included adding Alfa-Bank and its subsidiaries to the Specially Designated Nationals and Blocked Persons List (SDN List), effectively freezing their assets and prohibiting US persons from dealing with them directly or indirectly. The subsidiaries sanctioned were:

• Alfa Capital Markets LTD (Cyprus)
• Alfa-Direct (Russia)
• Alfa-Forex LLC (Russia)
• Alfa-Lizing OOO (Russia)
• Amsterdam Trade Bank NV (the Netherlands)
• Subsidiary Bank Alfa-Bank JSC (Kazakhstan)

Additionally, five vessels owned by Alfa-Lizing OOO were identified as blocked property:

• Products tanker Lady Leila (IMO 9683740)
• Chemical/oil tanker Lady Rania (IMO 9784893)
• Products tanker Lady Sevda (IMO 9683738)
• General cargo vessel Sv Konstantin (IMO 9203710)
• General cargo vessel Sv Nikolay (IMO 9482926)

The sanctions against Alfa-Bank and its subsidiaries were intended to disrupt and degrade Russia's ability to fund its war in Ukraine, isolate its economy, and prevent it from accessing the global financial system. These measures were part of a coordinated effort by the United States and its allies to impose severe economic costs on Russia for its invasion of Ukraine.

Alfa Bank is Russia's largest private bank

Alfa Bank has 280 offices across Russia and abroad, including subsidiary banks and affiliate and branch offices in Kazakhstan, the Netherlands, Cyprus, the US, and the UK. The bank serves more than 2.6 million individuals and over 51,000 corporate clients, including many of Russia's top 200 companies.

Alfa Bank offers a wide range of products and operates in all sectors of the financial market, including corporate and retail lending, deposits, payment and account services, foreign exchange operations, cash handling services, custody services, investment banking, and other ancillary services.

In terms of equity, assets, branches, retail deposits, and funds under management, Alfa Bank is one of Russia's largest privately-owned banking groups. The bank has been recognised for its strong growth and has received numerous awards, including Best Bank in Russia from Global Finance magazine in 1999 and Best Trade Finance Bank in Russia in 2007 from Global Finance.

In April 2022, the US Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed full blocking sanctions on Alfa Bank as part of sanctions against Russia for its war against Ukraine. These sanctions prohibit US persons from dealing directly or indirectly with the bank and its subsidiaries.

Alfa Bank has also been sanctioned by the EU, with the UK imposing sanctions in March 2022, which were increased in March and December 2023 to include a prohibition on correspondent banking relationships.

US persons are prohibited from dealing with SDNs and entities owned/controlled by SDNs

On April 6, 2022, the US Department of the Treasury's Office of Foreign Assets Control (OFAC) added Russia's largest private bank, Alfa-Bank, and its subsidiaries to the Specially Designated Nationals and Blocked Persons List (SDN List). As a result, US persons are prohibited from dealing directly or indirectly with SDNs and entities owned 50% or more by one or more SDNs. This includes any property or property interests held by these entities. Non-US persons can also be held liable for "causing" violations by US persons involving transactions with SDNs and can face secondary sanctions risks, such as being designated as an SDN themselves.

US persons are generally prohibited from engaging in any transactions with SDNs and must block any property or interests in property belonging to blocked persons that come into their possession. This includes individuals, groups, and entities such as terrorists and narcotics traffickers designated under non-country-specific programs. US persons are also prohibited from engaging in transactions with entities owned or controlled by blocked persons, even if those entities are not on the SDN List. This is because a blocked person is considered to have an interest in the property of an entity in which they own a 50% or greater interest.

OFAC's 50% Rule states that entities directly or indirectly owned 50% or more in the aggregate by one or more blocked persons are considered blocked. This rule only applies to ownership and not control; an entity controlled but not owned 50% or more by blocked persons is not automatically blocked. However, OFAC may designate such an entity under available sanctions criteria or identify it as blocked property if it is determined to be controlled by designated persons. US persons should exercise caution when considering transactions with non-blocked entities in which blocked persons have a significant ownership interest or control through means other than majority ownership.

US persons should refer to OFAC's website for the most current SDN List and conduct due diligence when doing business with foreign individuals or organizations to ensure compliance with US economic and trade sanctions. Violating prohibitions or failing to fulfill obligations imposed by sanctions can result in civil and criminal penalties.

Alfa Bank's subsidiaries provide a variety of financial services

Alfa Bank, founded in 1990, is a universal bank that carries out all major types of banking operations, including private and corporate clients, investment banking, trade finance, and asset management. It is the largest private bank in Russia in terms of total assets, total capital, loan portfolio, and deposit size. Alfa Bank has 672 branches in all regions of Russia and abroad, including a subsidiary bank in the Netherlands and financial subsidiaries in the United States, Great Britain, and Cyprus.

In addition to its core banking services, Alfa Bank has developed innovative products such as the AlfaPay wristwatch, which integrates a debit card using PayPass technology. The bank has also introduced contactless ATMs to improve security and enhance user experience. Alfa-Bank also cooperates with prostheses manufacturer Motorika to develop bioelectric prostheses with a special mount for a PayPass contactless payment card, making purchases more convenient for people with disabilities.

Alfa Bank has a strong focus on social responsibility and community engagement. It supports charitable initiatives such as "Life Line," a programme to aid seriously ill children, and has established scholarship programmes like "Alfa-Chance" to support students from various regions of Russia in pursuing higher education. The bank also actively promotes cultural and educational activities, particularly in the field of national art.

Alfa Bank (Ukraine) is not subject to sanctions

OFAC added Russia's Alfa-Bank and its subsidiaries to the Specially Designated Nationals and Blocked Persons List (SDN List) on April 6, 2022. This action was taken in response to Russia's invasion of Ukraine and resulted in US persons being prohibited from dealing directly or indirectly with the designated entities.

However, it is important to note that Alfa Bank (Ukraine) is a separate entity and is not included in the sanctions imposed by the US government. This means that Alfa Bank (Ukraine) is not subject to the same restrictions as its Russian counterpart and can continue its operations without the same legal and economic limitations.

The distinction between Alfa Bank (Ukraine) and Joint Stock Company Alfa-Bank (Russia) has been explicitly clarified by the US Department of the Treasury and the UK government. This differentiation highlights the targeted nature of the sanctions, ensuring that only specific entities directly linked to Russia's aggression in Ukraine are impacted.

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