FOUR FAST FACTS ON: BANKING SANCTIONS MARCH 2022
Sanctions in finance documents
Sanctions against Russia
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In response to Russia’s invasion of Ukraine, governments worldwide have imposed economic sanctions against Russia. In particular, the European Union, the United Kingdom, the United States and Canada have so far successfully sought to have seven Russian entities (and their designated Russia based subsidiaries) disconnected from SWIFT.
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This issue of Four Fast Facts considers the implications of sanctions in financing transactions, the role of SWIFT, and the impacts of disconnection from it.
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Broadly speaking, most forms of loan agreements require that funding cannot be provided to borrowers that are subject to governmental sanctions directly, or have material operations in jurisdictions that are subject to sanctions. As such, the implementation of economic sanctions against Russia will likely affect access to credit (including the ability to rollover existing arrangements) by Russian incorporated companies, and by non-Russian companies who have significant operations in, or relationships with, Russia.
What is SWIFT?
Why does it matter?
Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a global member-owned secure instant messaging system that facilitates transfers of money across borders.
At the time of publication, seven Russian financial institutions have been banned from SWIFT, and will be disconnected from 12 March 2022.
SWIFT links more than 11,000 financial institutions in more than 200 countries. It allows these financial institutions to make secure international transfers with other member institutions, sending millions of messages each day involving trillions of dollars.
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SWIFT is based in Belgium, and is therefore subject to Belgian and EU laws.
BANKING & FINANCE Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to its content.
Removing Russian entities from SWIFT severely curtails their activities in the international financial system. Without SWIFT, the banned institutions will need to deal directly with counterparties or look to use alternative systems, which will have significant timing, security and cost implications. Payment flows will be severely disrupted, ultimately adversely impacting Russian government revenues.