Major Israeli banks are taking measures to segregate accounts belonging to Russian citizens or Russian tax residents in light of recent EU sanctions against Russia. The sanctions specifically target securities linked with EU clearing house Euroclear, prompting Israeli banks to comply with these restrictions. The move comes after Euroclear introduced requirements for financial institutions outside the EU to segregate accounts linked to Russian residents, extending beyond initial restrictions on EU-based institutions.
According to Mark Oigman, founder of SmartGen, the restrictions were put in place due to Euroclear blocking accounts at Russia’s National Settlement Depository (NSD) last year. This impacted Russian investors who managed assets held in foreign jurisdictions through the NSD. Under Euroclear’s guidance, Russian residents with investment portfolios exceeding €100,000 had coupon income, dividends, and proceeds from asset sales credited to a segregated account. This limited the ability of Russian clients to manage their assets and provided Euroclear with the means to block them in the event of sanctions violations.
Furthermore, the article touches upon instances where similar segregation measures were implemented at the UAE’s NBD Bank and the Kazakhstan Stock Exchange. In November, Israeli financial institutions were reportedly instructed to segregate accounts belonging to Russians.
It’s reported that Israeli banks have started verbally warning their clients about potential account blockages, prompting some clients to liquidate their assets to avoid segregation. Oigman estimates that only a few securities were blocked due to these preemptive measures, indicating that many private banking clients were able to sell off assets subject to segregation.
Aleksey Kovalenko of Israel-based legal firm Kovalenko and Partners commented on the complexity of the situation, noting that Israeli banks are in the process of negotiating with Euroclear, especially given the number of account holders with dual Russian-Israeli citizenship and permanent residence in Israel. The lawyer stated that Israeli banks are insisting that account holders with Israeli citizenship should not be subject to the same restrictions as Russians, even if they hold a second Russian passport.
In light of these developments, experts have advised Russian investors to de-risk their holdings by selling assets linked with Euroclear and instead considering investments in Israeli or American securities that are not connected to the depository.
In conclusion, it’s clear that the financial landscape for Russian investors is becoming increasingly complex due to the implementation of restrictions by Euroclear and the subsequent actions taken by various global financial institutions, including Israeli banks. The ongoing negotiations and potential implications for Russian clients highlight the far-reaching effects of economic sanctions and the importance of navigating these complexities in an ever-evolving financial and geopolitical environment.