Tinkoff Bank for the first time came under Western sanctions. What is important to know

Tinkoff Bank, which has long avoided Western sanctions, has come under EU restrictions. Now, only two subsidiaries of foreign banks are on the list of systemically important banks not under sanctions. How sanctions will affect Tinkoff clients - in the material of RBC

Tinkoff Bank for the first time came under Western sanctions. They were introduced by the European Union as part of the tenth package of restrictions on Russia, timed to coincide with the anniversary of the start of the military operation in Ukraine.

Tinkoff is the main asset of TCS Group registered in Cyprus, 35% of which is owned by Vladimir Potanin's Interros, about 60% of the shares are in free float, 6.5% belong to management, follows from the information on the group's website.

Until recently, Tinkoff Bank was one of three systemically important credit institutions that were not subject to Western sanctions. Now, the restrictions do not affect only Raiffeisenbank and UniCredit Bank, whose main shareholders are Western banking groups.

At the same time, the EU imposed sanctions against Rosbank and Alfa-Bank, but both of them were already on the US SDN list (implies US blocking sanctions ). If a bank is included in the SDN list, then cooperation with it creates risks for counterparties not only in the US, but also in other countries of the world, so EU sanctions are not terrible for them, explains Yury Fedyukin, managing partner of Enterprise Legal Solutions.

The EU imposed sanctions against Tinkoff, Alfa-Bank,Rosbank and FNB Politics

European blocking sanctions imply the blocking of assets in EU jurisdiction and a ban on transactions with the euro. European structures cannot do business with the persons on the list - this, in particular, leads to a disconnection from the international SWIFT financial messaging system (headquartered in Belgium), used for international trade. The inclusion of three Russian banks on the sanctions list "will have a profound impact on the day-to-day operations of these banks, isolating them from the EU economy and the European financial system," the European Commission said.

In justifying the sanctions against Tinkoff Bank, the EU limited itself to general theses that the bank was included by the Central Bank in the list of systemically important credit institutions and occupies a leading position in the field of financial technologies. “Tinkoff Bank operates in the banking sector, which is a key component of the Russian financial system. He implemented, together with the Russian government, programs to finance and support entrepreneurship,” the EU decision says. This means that the bank is involved in economic sectors that provide a significant source of income for the Russian government, “which is responsible for the annexation of Crimea and the destabilization of Ukraine,” the justification for the sanctions says. Separately, it is mentioned that Tinkoff Bank provided support to clients in the light of mobilization.

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Tinkoff Bank said that they "were well prepared for such a scenario." “Our team has been working for many months to ensure that you can use Tinkoff services as usual, regardless of external circumstances,” the bank wrote in an address to customers on its Telegram channel. The bank also promised more detailed comments after analyzing the text of the EU decision.

The European Union, as an exception, allowed to unfreeze certain funds or assets of Alfa-Bank, Rosbank or Tinkoff Bank, if it is necessary to curtail by August 26, 2023 their operations, contracts or correspondent relations with European structures established before February 25, 2023. Separately, Alfa-Bank is allowed until November 26, 2023 to use the unfrozen funds to transfer money to Russian beneficiaries of the Conference on Jewish Material Claims against Germany (created in 1951).

What sanctions change for bank customers

The introduction of European sanctions against Tinkoff Bank will have an effect similar to how it was previously with other banks: limiting correspondent accounts, limiting work with European startups and financial institutions, possible effects on SWIFT and membership in other organizations and associations, lists the head of the laboratory blockchain and fintech of the Skolkovo School of Management Egor Krivosheya. For end customers, most likely, the effects may not be so noticeable: many banks have been working on scenarios for the imposition of sanctions for some time, so protocols for such an event may be prepared in advance, he notes.

The consequences of sanctions restrictions by the EU, most likely, will not affect most of Tinkoff Bank's clients, but this does not mean that they will not affect anyone, Yuri Fedyukin adds. “Firstly, the sanctions imply freezing, and in fact blocking, the bank's assets and accounts in the EU. In theory, this should lead to the inability for customers to make, for example, currency transfers in euros,” he notes. But the bank limited (actually stopped making) such transfers last year, the lawyer recalls.

Secondly, we are talking about disconnecting from SWIFT, and this is already a serious limitation, he continues. “Despite the fact that recently Tinkoff has been making transfers using SWIFT to an extremely limited list of countries, among them are those in which there is now a fairly high concentration of citizens working remotely who receive income in Russia (including Kazakhstan, Armenia, Turkey , Tajikistan, Kyrgyzstan),” Fedyukin draws attention. For this category, as well as for a no lesser group of clients who use such transfers to send money to families abroad, disconnecting Tinkoff from SWIFT can become, if not insurmountable, but a very serious problem, the expert believes.

Sanctionsagainst Russia on the anniversary of the special operation.What is important to know Economics

Disconnecting a bank from SWIFT complicates any cross-border transactions, as this system is used by banks around the world when sending currency transfers. On February 20, Tinkoff Bank’s technical support, even before the imposition of sanctions, reported that the credit institution had been “long and actively” working on alternative SWIFT options, including the Financial Message Transfer System (SPFS) created by the Bank of Russia. However, the number of participants in SPFS is much smaller than in SWIFT. As Alla Bakina, Director of the National Payment System Department of the Central Bank, reported in February 2022, 469 participants joined the SPFS, of which 115 are non-residents. For comparison: SWIFT users are about 11 thousand organizations, including banks, according to the official page of the system.

The number of Russian banks that still make SWIFT transfers continues to decline, Fedyukin notes: there are practically none left among the largest banks in terms of the number of individual clients. “This, of course, stimulates the shadow market and an increase in the number of frauds associated with the implementation of money transfer operations,” the lawyer warns.

What will change for Tinkoff Investments clients

Tinkoff Investments has already announced that it has developed an infrastructure solution that "will allow, within one to three weeks, seamlessly for clients to transfer assets to a new non-sanctioned company." “All the usual investment tools and services will be fully available in the Tinkoff Investments app,” the company promised.

As of the end of July 2022, the number of registered clients of Tinkoff Investments is more than 11 million people. Another 2 million people are shareholders of Tinkoff Capital Management Company.

Tinkoff broker will transfer clients' assets to an unsanctioned company Investments

In general, EU sanctions mean that Tinkoff Investments clients will no longer be able to purchase European currency on the stock exchange. What will happen to the euro balances placed on brokerage accounts, the company has not yet commented. Earlier, the Bank of Russia sent out a letter to market participants, in which it recommended including a clause on possible forced currency conversion in client agreements, as well as describing in detail the mechanism for setting the exchange rate at which such conversion can be carried out.

As for securities denominated in euros, they have not been available to all Russian investors for a year now. In February 2022, the EU imposed sanctions prohibiting Russians from buying shares and bonds denominated in euros and opening deposits in European banks in the amount of more than €100,000. After that, the Russian St. Petersburg Exchange, where foreign assets are traded, stopped trading in all types of securities, denominated in euros.

How Tinkoff managed to avoid sanctions

The UK imposed personal sanctions against the founder of Tinkoff Bank, Oleg Tinkov, back in March 2022. Then these sanctions did not affect the work of the bank in any way, since in April 2020 Tinkov left the post of chairman of the board of directors of the Tinkoff group and transferred ownership of the TCS Group to a family trust. At the beginning of 2021, the share of Tinkov's voting shares decreased from 84% to 35%. Sanctions do not automatically apply to the assets of a sanctioned entity if the ownership interest in the company is less than 50%.

In April 2022, 35% of TCS Group was sold to Vladimir Potanin's Interros. As Tinkov later said, he was forced to sell his stake in the bank “for a penny” after he published a post against the military operation in Ukraine.

New Tinkoff shareholder Potanin came under US blocking sanctions in December 2022. The rule of non-proliferation of sanctions on Tinkoff Bank also worked here, since Potanin's structure owns less than 50% in it.