The Russians were able to withdraw part of the blocked securities from a bank in Dubai

Clients of one of the largest banks in the UAE, faced with an asset freeze due to European sanctions, were able to withdraw some of them. Lawyers told RBC about such cases. But this can only be done with US papers and money.

A number of Russian investors managed to unfreeze part of the assets on investment accounts with Emirates NBD (the second largest bank in the UAE), three lawyers in international law who specialize in such operations told RBC. We are talking about securities of American issuers and part of the funds on investment accounts in ENBD, experts said. Access to European securities and payments on them (coupons, dividends, redemptions) remains limited.

The blocking of assets on investment accounts of Russians in ENBD became known in April 2023. The bank placed the assets of the Russians on segregated (separated from the general mass) accounts, limited free transactions with securities and the withdrawal of money, Forbes wrote . The measure was taken in connection with EU sanctions , which imply a ban on the provision of financial services to Russians and the sale of euro-denominated securities to them. And since the European depository Clearstream is present in the chain of accounting for foreign securities of Russians on ENBD investment accounts, the Dubai bank must comply with the sanctions requirements .

Now a number of ENBD clients from Russia have managed to regain free access to some of the blocked securities by transferring them to other depositories, Daria Nevskaya, founder of the law firm Nevskaya Consulting, told RBC. The information that other depositories accept the assets of Russians from ENBD was confirmed by Dmitry Dvoretsky, a lawyer at BGP Litigation’s compliance and sanctions practice.

Tamrin Darbakov, a lawyer at Uppercase Legal, knows that several clients have managed to unlock funds on investment accounts by obtaining licenses from European regulators. According to Nevskaya, without obtaining additional permits, it is possible to withdraw from brokerage accounts to settlement accounts the money that the account holders themselves previously credited there (for example, to purchase securities).

RBC sent a request to Emirates NBD.

How it works with securities

How it works with money

What operations can not be carried out

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How it works with securities

According to Nevskaya, the only way to unlock securities now is to transfer them to other depositories registered outside the EU. But this can only be done with assets that are not denominated in euros, for example, with securities of American companies in dollars.

“American securities are not subject to sanctions, so they can be transferred to an American depository on the basis of the owner’s order,” the expert says. To do this, you need to open a brokerage account in a company registered outside the European Union and using non-European depositories to record assets, and transfer assets there. For example, accounts for Russians (with the exception of residents of new territories and Crimea) are opened by American Interactive Brokers (IB). RBC sent a request to Interactive Brokers.

Initially, there were doubts whether ENBD would “give up” American papers, but several successful client cases show that such an option is now possible, Nevskaya notes.

“The US did not impose restrictions on Russian investors for its own securities market, by analogy with the EU. We are seeing how American depositories and brokers accept securities owned by Russians, including from accounts with ENBD,” confirms Dvoretsky.

However, the withdrawal of assets by Russians from the UAE to the American economy is associated with the risks of blocking, and therefore this practice is not widespread, the expert says. According to him, jurisdictions that are not included in the list of unfriendly ones by the Russian government remain much more popular.

How it works with money

You can withdraw funds from investment accounts, but only those that ENBD clients themselves credited to their brokerage accounts (for example, to purchase assets), Nevskaya continues. This money can be transferred to regular current accounts in ENBD, which are not subject to any restrictions, the expert points out. In addition, the same settlement accounts can be used to withdraw funds from new accounts with another broker to which assets were transferred from ENBD, she added.

Despite the absence of sanctions restrictions on settlement accounts, it is difficult for Russians to work with them. “Practice shows that access to the UAE financial system is not free for Russians: it is no secret that opening accounts for a Russian person in a UAE bank is associated with a number of requirements, including the availability of a work visa and the transfer of a salary project to such a bank. This is followed by a long process of screening and compliance verification to make a decision on opening accounts in manual mode, ”Dvoretsky lists.

What operations can not be carried out

Previously, Russian investors could structure assets by transferring them to controlled foreign companies (CFC, an organization registered abroad controlled by a tax resident of Russia), trusts or family foundations registered in the UAE, since the initial interpretation of the sanctions did not classify them as persons in respect of which these sanctions restrictions apply, says Nevskaya.

“But as of last week, the situation was such that restrictions on the use of securities denominated in euros and the withdrawal of funds from these securities were also extended to Russian companies registered outside the EU. Clearstream interprets the sanctions broadly, including CFC in them,” the expert explained.

As for the securities of European issuers and payments on them, they cannot be “unblocked” using a transfer; for such assets, ENBD strictly follows the EU sanctions against Russian investors - they cannot make transactions with securities denominated in euros and cannot be serviced European depositories.

“The United Arab Emirates is the financial hub of the Middle East, developing as an international investment banking center. Obviously, the UAE cannot afford to allow the development of a situation where EU restrictive measures can be introduced against the financial system and banks of the UAE,” says Dvoretsky. Thus, in order to unlock funds and assets from such accounts, you must have a residence permit (residence permit) or citizenship in one of the EU countries, says Nevskaya. To unlock payments on securities, it is necessary to obtain a license (permit) from the European regulator, Darbakov recalls: there are such successful cases, but there are very few of them.