Sanctions and SWIFT explained
What are sanctions
Sanctions are measures or actions taken against a target to influence its behaviour, policy or actions. They have 3 main components:
- An economic action...
- taken against a target (a state, class of persons, an individual person, or even a function)...
- to influence the target’s actions.
Sanctions can restrict trade, financial transactions, diplomatic relations and movement. They can be specific or general in their implementation and enforcement.
Economic sanctions may sometimes be accompanied by exceptions/licences related to specific activities and/or time duration.
The EU, the UN, the US Treasury (OFAC) and HMT (GBR) are some of the major international organisations and countries that impose economic sanctions.
What are the different types of sanctions
The EU takes a targeted and differentiated approach to restrictive measures known as sanctions:
- Aimed at specific policies – Preventive measures which allow the EU to respond swiftly to political challenges and developments that go against its objectives and values (e.g. terrorism, nuclear proliferation activities, human rights violations, annexation of foreign territory and deliberate destabilisation of a sovereign country).
- Focusing on specific areas – Sanctions in a broad sense (diplomatic sanctions) and sanctions in a narrow sense (e.g. arms embargoes, travel bans, freezing of assets and economic sanctions).
- Under UN or own initiative – UN sanctions, mixed sanctions regimes or EU autonomous sanctions
Find out more about the different types of sanctions.
What is SWIFT
The SWIFT (Society for Worldwide Interbank Financial Telecommunication) network is a private entity registered in Brussels. It provides an electronic messaging system used to wire financial transactions across the world.
It is a gateway that connects thousands of banks and money transfer services, allowing them to send and receive payments on behalf of their customers.
Exclusion from SWIFT vs. sanctions compliance
As of 12 March 2022, it is prohibited to provide specialised financial messaging services to a number of Russian banks, while 3 Belarusian banks have also been prohibited. As a service provider, SWIFT must comply with this obligation. However, the process for the banks is automatic in this case.
Conversely, when entities and persons are included in the sanctions lists, the banks need to conduct an analysis of their business relationships to determine whether their customers fall under the scope of the sanctions. This includes examining the ownership and control structures of their customer entities.
Therefore, in the latter case, the process requires expert knowledge and experience, as well as significant resources for ensuring compliance.
The main EU-imposed sanctions so far
Since 23 February 2022, the EU has introduced multiple tranches of sanctions in response to the events in Ukraine. These are expected to have a profound and wide-ranging impact on trade between Russia and the EU.
The broad categories of these sanctions are:
- Financial sanctions – They include expanded capital market restrictions, restrictions preventing Russian persons from accessing certain financial services within the EU, restrictions cutting off certain banks from SWIFT and restrictions on physically taking euros into Russia.
- Asset freezes and travel bans – They target prominent Russian businessmen, Russian banks and Russian state-owned institutions. Most recently, the asset freeze regime has targeted individuals in Belarus considered to be assisting Russia in its military actions in Ukraine.
- Trade restrictions – They apply for aircraft, oil refinery-related products and technology products (broadly covering advanced technology, including micro-processors and other advanced systems) and are more comprehensive for dual-use goods.
- Investment restrictions – They include restrictions on public (i.e. EU and government) financing for trade or investments in Russia, and on investing, participating or contributing to projects that are co-financed by the Russian Direct Investment Fund.
- Media restrictions – They prohibit the broadcast of or contribution to the broadcast of a number of key Russian stations.
- Transport restrictions – They cut off Russian air carriers from operating with the EU.
In collaboration with the G7 countries and other like-minded partners, the EU will stop treating Russia as a Most-Favoured-Nation within the World Trade Organization (WTO) framework. This will result in a ban on the imports or exports of specific goods.
For further information about the EU sanctions in force:
- EU sanctions against Russia following the invasion of Ukraine, official website of the European Union.
- Sanctions adopted following Russia’s military aggression against Ukraine, official website of the European Union.
The status of transactions
On 5 March 2022 VISA and Mastercard issued statements suspending their activities in Russia:
For information about money transfers and international payments to/from Russia, Ukraine and Belarus, have a look at the FAQs about the situation in Ukraine and payments.
The current EU legal framework
The sanctions on Russia adopted by the EU in 2014 are laid down in:
- Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine.
- Commission Guidance Note on the implementation of certain provisions of Regulation (EU) No 833/2014.
Following Russia’s invasion, the EU adopted further sanctions in March 2022:
- Council Implementing Regulation (EU) 2022/396 of 9 March 2022 implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.
- Council Regulation (EU) 2022/394 of 9 March 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine.
- Council Regulation (EU) 2022/355 of 2 March 2022 amending Regulation (EC) No 765/2006 concerning restrictive measures in view of the situation in Belarus.
Furthermore, the leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada, and the United States issued a Joint Statement on further restrictive economic measures on 25 February 2022.