Chinese Banks Revamp Ties With Russian Businesses to Avoid Sanctions, Report Says

Several Chinese banks are working to make sure they can maintain business with Russian clients and also avoid Western sanctions, Reuters reported Thursday (March 3).

Western countries have been heavily throwing sanctions at Russia due to its invasion of Ukraine last week. While the Chinese banking regulator has confirmed that it won’t be joining the sanctions, some Chinese banks have stopped issuing dollar-denominated letters of credit for purchases of physical commodities.

Now, some leading Chinese bank executives have been looking into alternate payment systems, as well as maybe passing some of their business to smaller, domestic peers, so as to avoid secondary sanctions — which refers to restrictions on entities that do business with U.S. dollars with the underlying sanctioned entity.

Entities violating those could be cut off from sources of dollar liquidity. One workaround could be for smaller, local Chinese banks to work on transactions that larger peers with overseas business interests have to avoid, according to one anonymous banker that Reuters spoke with.

Big Chinese banks, who have business and branches overseas, could become more cautious with Washington and allies able to sanction operations in the Western markets if there are violations, according to ex-SWIFT member Wang Yongli.

“Smaller (Chinese) banks that don’t have much presence overseas might dare do so as you cannot come to China to sanction them,” Wang, who is also a former executive director of Bank of China, said on a call with investors on Wednesday.

PYMNTS wrote that, with the new war in Ukraine and its financial punishments, crypto regulation debates have taken on a new tone.

Read more: Amid War in Ukraine, Crypto Regulation Refocuses on the Dark Side of Digital Assets

The conversation has moved away from the darker side of the law, with the strong growth and mainstreaming of cryptocurrency in 2021, but things are changing again.

At a hearing Wednesday (March 2), Federal Reserve Chair Jerome Powell said that more action needs to be taken regarding crypto being used to circumvent sanctions.

“There isn’t in place the kind of regulation framework that needs to be there,” Powell said. “What’s needed is a framework, in particular ways to prevent these unbacked cryptocurrencies from serving as a vehicle for terrorist financing and just general criminal behavior, tax avoidance and the like.”