Market News

(Bloomberg) -- The US Treasury Department warned other countries to be on the lookout for Russian banks that open overseas branches as a way to avoid financial sanctions imposed after the invasion of Ukraine.

Foreign banks could face US sanctions themselves if they do business with the Russian entities, Treasury’s Office of Foreign Assets Control said in an alert. Banks and their regulators “should be cautious” about new branches or subsidiaries of Russian banks, including banks that have not yet been sanctioned. 

“Russia continues to reorient its entire economy and government resources to support its war effort, including through Russian financial institutions,” the alert said, adding that new branches “should be viewed as a red flag for attempted Russian sanctions evasion.”

The move highlights how the US and its allies are looking to put new pressure on foreign financial institutions that Russia has used to circumvent the sweeping sanctions imposed after its invasion of Ukraine in 2022. That pressure campaign accelerated in June, creating new hurdles to payments via previously friendly jurisdictions including China and the United Arab Emirates.

Transactions involving items exempt from sanctions, such as food, agricultural products, medicine, energy and telecommunications are allowed, the alert said.

Russia has massively increased spending since the invasion, pouring money into the military and defense industries. Gross domestic product jumped 4% annually in the second quarter.