Banks Race to Pinpoint Sanction Risks After Russia Clampdown


At a fintech company in London last week, algorithms fielded thousands of queries per second from banks and businesses trying to get Russian clients off their books.

ComplyAdvantage’s computers and human staff scoured 25,000 information sources, aiming to alert clients within 15 minutes of a new target appearing on the various government sanction lists drawn up since Vladimir Putin’s invasion of Ukraine. Algorithms searched for the names of Russian lawmakers, originally written in Cyrillic, and now in languages including Korean, Chinese and Japanese. 

“It’s all hands on deck,” said Charles Delingpole (picture), founder and chief executive officer of ComplyAdvantage, whose clients include trading platform eToro and Banco Santander SA. The business has had huge amounts of data requests in recent days and traffic to its website soared 30-fold.

Multiple rounds of sanctions targeting Russia rank as among the most complex ever enforced and have thrust a cottage industry of experts into the spotlight. Armies of lawyers, compliance specialists and fintechs are being deployed to help banks avoid the billion-dollar scandals that previous sanctions have wrought.

“It’s been like the Super Bowl of sanctions,” said Joel Lange, head of business management at Dow Jones Risk & Compliance, which handles many banks. 

It is a race against time to track down the funds, as the targets of sanctions usually try to move their money swiftly, according to Delingpole. “There are huge challenges and new fronts for attack. Have the oligarchs just moved their assets to Bitcoin?” 

Banks also use companies like LexisNexis and Refinitiv World-Check to carry out similar work. Bloomberg LP, the parent company of Bloomberg News, competes with Dow Jones, LexisNexis and Refinitiv to provide financial news, data and information. 

Lenders have also lent heavily on their own compliance teams and external lawyers, stretching the capacity of the U.K.’s pool of sanctions experts. 

Their task is particularly challenging due to the speed of the Russia prohibitions and because the emerging rules are not fully aligned across jurisdictions, according to experts. Matthew Townsend, sanctions partner at law firm Allen & Overy, said there aren’t enough specialized lawyers to deal with the challenge. “We’re seeing an unprecedented demand for sanctions-related services, there is a big capacity squeeze,” he said. 

Tehran Lesson

The stakes are high, as banks have learned the hard way from falling foul of government sanctions against Iran and other countries in the past. 

BNP Paribas SA agreed to pay almost $9 billion in 2014 after admitting to processing banned transactions involving Sudan, Iran and Cuba. UniCredit SpA agreed in 2019 to to pay $1.3 billion to settle U.S. charges for violating sanctions against Iran that had been hanging over the company since 2011. The same year Standard Chartered Plc agreed to pay more than $1 billion to resolve an investigation into its Iran business.

Banking executives believe mistakes are likely as the industry rushes to impose the still-growing measures against Russia, potentially triggering fines later. Arguments that the problems could not be avoided will not be accepted, as lawmakers and the public have seen banks’ multi-billion pound profits and large bonuses being paid to staff, according to a senior industry figure.  

The direction is to err on the side of caution by extensive dropping of clients, said Michelle Linderman, a partner at Crowell & Moring LLP: “People are talking about totally de-risking. Russia could become like Iran was a few years ago, where it’s almost completely isolated from the western world’s financial institutions.”

European and U.S. banks’ ties to Moscow are limited due to caution in recent years about the political environment, but there are still many individuals, their relatives and multiple businesses which need to be sifted through. Citigroup became one of the first banks to disclose its level of connections, saying in a regulatory filing on Monday that it has $9.8 billion exposure to Russia, including through consumer and institutional banking services in the country.

Deliberately Unclear

The challenge is compounded by the overlapping of sanctions regimes. The past few days have seen more than 1,000 pages of sanctions legislation from the European Union, U.K., U.S., Canada and others, according to Crowell & Moring’s Linderman. “With Russian companies often the structure is opaque,” she said. “Where oligarchs have been added there is a heck of a lot of work, people are literally firefighting.”

Added to the problem is what lawyers call “strategic ambiguity” about the kind of trade that’s prohibited. Guidance from government agencies is often deliberately vague, said Anna Bradshaw, a partner at law firm Peters & Peters. “The reason is the more uncertain you are the more likely you are to be risk averse,” she said. “It’s almost like chess — you have to think several steps ahead at all times.”

It’s all creating work for the sanctions industry. ComplyAdvantage is looking to recruit dozens more staff to help clients ensure they do not break the rules. Dealing with sanctioned entities “is the kiss of death”, said Delingpole.