BoI warns Israeli banks to keep sanctions on Russia

Russia

Israeli banks are being required to verify that sanctions are being observed.

The Bank of Israel has ordered Israeli banks to establish a policy and rules for working with companies and banks in Russia, following the sanctions imposed on Russia by the US administration and the 'European Union. Sources inform "Globes" that the Bank of Israel Banking Supervision Department sent the banks a letter several weeks ago on this issue. The sanctions were imposed on Russia several months ago.

At the same time, the Bank of Israel contacted the banks on this question only several weeks ago, apparently after it was discussed at various political echelons.

"There are international sanctions against certain parties and businesses in Russia. The sanctions regimes are complicated, with different consequences," the Bank of Israel wrote in its letter. "Since it is possible that the sanctions will also apply to other banks and financial institutions, you are hereby required to keep informed, and obtain legal advice about it," the Bank of Israel's letter continues.

The Bank of Israel demanded that a discussion be held by the management of the banks on this issue in order to verify that the banks were not deviating from the sanctions imposed. Among other things, the banks are being required to scan their credit portfolio in order to check whether they are working with parties subject to sanctions. They are also being required to establish rules for identifying and avoiding new transactions with parties subject to sanctions, and to define work procedures vis-a-vis the relevant parties. The Bank of Israel is also requiring occasional reporting to the bank's management and board of directors on these questions.

In its letter, the Bank of Israel also allows the banks to refuse to carry out new transactions, or to discontinue an existing agreement with the parties subject to sanctions. "This will be considered a reasonable refusal to provide a service under the Banking Law," the Bank of Israel wrote in its letter.

The US administration and the European Union imposed sanctions on Russia following the crisis with Ukraine and the annexation of the Crimea to Russia. Under the sanctions, US citizens are not allowed to invest in the Crimean peninsula, or to conduct trade relations with people or companies in the area. The US also announced that it would freeze assets in its territorial jurisdiction belonging to people or companies operating in the Crimean peninsula, and which are found to be cooperating with the new leadership there.

In the framework of the sanctions, a list has been published of businessmen who were involved in events, and the US has banned their entry into its territory and confiscated their assets there. The various sanctions have generated pressure on the Russian economy, which is in a downward spiral.

Published by Globes [online], Israel business news - www.globes-online.com - on May 10, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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