About blocking accounts of Russian citizens inthe UAE
Dubai’s second largest bank, Emirates NBD (ENBD), has recently begun blocking the investment accounts of its Russian clients. They said that if account holders are not residents of the European Economic Area, Switzerland or the United States, income from their assets will be transferred to a separate account not controlled by clients .
In other words, coupons, dividends and proceeds from the sale of securities will be transferred to a segregated account, from where Russian clients will not be able to transfer them to their ENBD account.
This ENBD step is in line with the EU Directive. Even those Russian citizens who are residents of the UAE will not be exempted from this.
What is ENBD?
Emirates NBD is the leading banking group in the United Arab Emirates and one of the largest banks in the Middle East. It appeared in 2007 as a result of the merger of the two largest banks in the UAE – Emirates Bank International and National Bank of Dubai. ENBD offers a wide range of products and services, including retail banking, corporate banking and asset management.
ENBD is widely represented in Russia, many Russian clients use the bank’s investment accounts.
What is the reason for the decision of the bank?
The ENBD leadership took these measures as a result of a direct requirement from the United States to comply with the sanctions regime. The UAE authorities are forced to comply with this regime, albeit to a limited extent. The bank’s decision is formally connected with the imposition of blocking sanctions against certain Russian banks, brokers and the National Settlement Depository (NSD).
ENBD complies with the requirements of the Clearstream and Euroclear depositories. Previously, such requirements were mandatory only for European and Swiss banks.
Why did the assets of Russian clients end up in the UAE?
After the start of the CBO in Ukraine, Russian investors massively withdrew assets held in European depositories. Euroclear has even created a dedicated section for Russian clients.
The only way to regain control of their assets was to transfer the portfolio from Europe to a “friendly” jurisdiction . Clients often chose ENBD in the UAE for this purpose.
How did the sanctions pressure build up?
Even in the fifth package of sanctions, it was indicated that Russian citizens and residents without citizenship or a residence permit in the EU are limited to the amount of €100,000 on deposits and accounts in European banks. The seventh package of sanctions extended this measure to the European accounts of foreign companies controlled by Russians. On March 30, the management of the Russian broker BCS Cyprus warned clients that Russian accounts with Euroclear and Clearstream would be blocked if the balance on them exceeded €100,000, and the funds would be blocked in full .
The restrictions apply to all foreign brokers that have Russian accounts with Euroclear and Clearstream. If a Russian does not have citizenship or a residence permit in the EU, assets stored in Euroclear and Clearstream become inaccessible. These include Eurobonds and shares of European companies.
What is the way out of the situation?
There are two options:
➖Sell European assets and withdraw money outside the US-controlled financial system;
➖obtain citizenship or a residence permit of one of the EU countries.
Possible consequences
Emirates NBD’s decision to block the investment accounts of its Russian clients is part of a strategy of total control of the financial system, which the United States is implementing through the FATCA mechanism and pressure on Euroclear and Clearstream depositories.
With a high probability, this pressure will increase, forcing other banks in the UAE to comply with US requirements.
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