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EXCLUSIVE- The ECB asks the bank to monitor all its Russian clients

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FRANKFURT/MADRID, March 15 (Reuters) – European Union regulators have ordered some banks to vet the transactions of all Russian and Belarusian customers, including EU residents, to ensure they are not used to circumvent Western sanctions against Moscow, according to Dijon three sources told Reuters.

Instructions from European Central Bank (ECB) supervisors mean that tens of thousands of Russians and Belarusians residing in the EU face intense surveillance from their banks, which are on alert for large payments and deposits, as well as as well as new credit applications, sources familiar with the matter said.

Although the EU sanctions against Moscow exempt people with temporary or permanent residence permits in the EU, they impose some restrictions on Russian citizens’ access to banking services, including preventing banks from accepting deposits of more than 100,000 euros ($110,000) from Russian citizens or entities.

The ECB move subjects even EU residents to greater scrutiny and makes it harder for them to manage bank accounts; one of the sources said that some have already faced restrictions in Spain. It comes after Moscow’s invasion of Ukraine, which the Kremlin describes as a special operation to demilitarize and “denazify” the country.

The ECB is checking that the banks it supervises “have the necessary mechanisms in place to comply with sanctions”, including with regard to transactions and customer relationships, but has not issued any guidelines beyond EU rules. said a spokesman for the Frankfurt-based central bank.

Some joint ECB supervisory teams, which include staff from the central bank and national authorities, have told banks to reference screening EU residents as well if they come from Russia or Belarus, the three sources said. Banks and surveillance agencies.

Although it is not the role of the ECB to monitor sanctions, supervisors are concerned that banks in the bloc could incur heavy fines if their clients funnel money on behalf of sanctioned people, two of the sources said.

Supervisors briefed the affected banks between late February and early March and gave them a week to comply, two of the sources said, adding that a check on the responses is planned. It is not clear when it will take place.

“At first, the measures were focused on those of Russian nationality, they were residents or non-residents, and later it was extended to Belarusians,” said one of the sources.

The majority of Russians living in the EU reside in Germany, where according to Eurostat there are more than 230,000, followed by Spain, with more than 81,000. Other popular ones are France, Italy, Latvia, Czech Republic, Austria and Finland.

Belarusians living in the EU are mainly found in Germany, Lithuania and Italy, according to Eurostat data.

EXISTING RISKS

In one case, a Spanish bank has put some 8,000 Russian clients who are not on the EU sanctions list and reside in Spain under surveillance, one of the sources said.

All new loans to Russians who do not have residence in Spain have been suspended and at least one bank will not allow non-resident Russians to open new accounts, they added.

Italian banks were also monitoring all accounts of more than 100,000 euros held by Russian clients, even though they lived in the EU and were not on the sanctions list, a fourth source familiar with the situation said.

Asked if banks were stepping up scrutiny of Russian clients, the Bank of Spain told Reuters that both supervisors and banks were “doing the necessary checks to assess the situation and possible existing risks.”

The Bank of Italy declined to comment.

Although the affected banks do not have to stop the transfers, the first three sources said they must do additional checks to establish the origin of the money, its destination and its purpose.

Supervisors have also told banks to be more careful about loan applications from Russians or Belarusians, they added.

However, one of the sources said that nothing prevents banks from granting loans to a Russian resident client who is not subject to sanctions.

(Additional reporting by Valentina Za in Milan and Stefano Bernabei in Rome; edited by Silvia Aloisi; edited by John O’Donnell and Alexander Smith, translated by Tomás Cobos)

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