Chinese banks scrutinize trade payments from Russia: report

Chinese companies face disruptions at Chinese banks in receiving money from Russia, Yicai says

Since February, Chinese banks, including in their roles as intermediary and receiving banks, have heightened scrutiny over money transfers from Russia to China, disrupting Chinese companies in business with Russia, Chinese media outlet Yicai said in a report that has been taken offline.

The state-run financial news portal says the heightened scrutiny covers big and small Chinese banks alike and has affected Chinese traders at least in Jiangsu, Hunan, Shanghai, and Beijing. Almost all major banks in China are state-run.

The Yicai report coincides with a report by Russia's Izvestia news outlet on Wednesday, which says three out of China's Big Four state banks have halted payments from sanctioned Russian financial institutions.

Below is a full translation of the Yicai report.

银行加强涉俄业务审核，外贸企业跨境收付受影响

Banks heighten reviews over Russia-related payments, affecting trading companies’ cross-border transfers.

Amid the ongoing Russia-Ukraine conflict, trading enterprises have been impacted in their cross-border payments and receipts. The Yicai reporter learned recently that, since February this year, domestic banks have tightened the review process for receiving remittances related to Russia, where receipts of payments have been impossible in many foreign trade-related transactions because they have failed in compliance with the receiving or intermediary banks' requirements, involving banks such as large state-owned banks, joint-stock banks, and local small and medium-sized banks.

"Whether payments can be received mainly depends on the documents of the transactions, and many different situations have to be considered. Cross-border RMB payments have always had corresponding review requirements, which are becoming increasingly strict," said a staff member from the International Business Department of the Suzhou branch of the Industrial and Commercial Bank of China (ICBC), adding that the review of remittances related to Russia has become stricter since February this year. The key to receiving now depends on the traded goods and the final recipient, requiring strict due diligence, said the source.

"If all sensitive factors are excluded, funds can be received, but it takes a longer time. Customers need to provide sufficiently comprehensive additional proof, mainly to verify the business background and recipient information," the staff member added. Due diligence abroad takes a long time, "but it also cannot guarantee the final result, as policies may change."

A corporate-facing staff member at a certain large, state-owned bank in Zhaoqing said that the bank had urgently notified foreign trade customers before the Spring Festival that it would no longer handle foreign trade payment services involving Russia. "Because most of the payments cannot come in." This staff member said that due to concerns for risks, Russia-related foreign trade transactions had basically switched to RMB settlement. The latest notice indicates a temporary suspension of account entries, including RMB. The source recommends consulting other banks for advice.

An employee from the Agricultural Bank of China in Changzhou also said, "Many payments cannot be sent out from abroad. Whether payments can be received depends on whether the other side can send them, with many Russian banks affected by sanctions." A staff member from the Shanghai Pudong Development Bank in Hangzhou also mentioned that remittances related to Russia are basically unreceivable, "Even if wired (to our bank), it (the receiving) must be approved by the head office, and the likelihood of final receipt is quite low."

The Yicai reporter contacted several branches of large banks and received similar responses. In fact, since last year, some banks have already strengthened the review of RMB funds related to Russia.

According to reports from overseas media, since the third quarter of last year, banks including Hang Seng Bank and HSBC sent letters to customers, stating that due to an increasingly complex regulatory environment, they would stop providing remittance services to and from Russia and Belarus for their corporate clients.

Other traders reported that after state-owned large banks generally tightened their dealings with Russia, Zhejiang Chouzhou Commercial Bank, which previously could receive payments, also gradually "closed the channel." A staff member from the Nanjing branch of the Zhejiang Chouzhou Commercial Bank mentioned that the receipt of remittances related to Russia has indeed been further tightened recently. Attempts by reporters to contact the bank's international settlement department for further information were unsuccessful as of the time of publication.

Zhejiang Chouzhou Commercial Bank’s official website information shows that for cross-border RMB remittances where the bank acts as the receiving bank, the intermediary banks include the Bank of Communications Zhejiang Branch, ICBC Zhejiang Branch, and Shanghai Pudong Development Bank Hangzhou Branch. Additionally, traders reported that recently, the Bank of China, handling a larger volume of international business as an intermediary bank, also failed to successfully receive remittances related to Russia.

Regarding the claim that some banks are completely refusing to accept such transactions, a person in charge of international business at a large state-owned bank in central China explained that the policy is mainly to tighten reviews, not to outright refuse all transactions, with strict controls on key industries. "But for complex projects, we simply choose not to proceed. Different banks have different procedures," he stated.

From what the reporter has learned, traders who have received relevant notifications or have already been affected are located in various places including Jiangsu, Hunan, Shanghai, Beijing, and more.

Regarding the review of remittances related to Russia, a staff member from the ICBC Zhaoqing branch mentioned that the latest notification was issued by the international business department at the branch level before the Spring Festival. Another branch's international business department stated that the review of remittances related to Russia would initially depend on verifying the company's background, registration information, and scope of business.

The person in charge of international business at the aforementioned state-owned large bank in the Central China region told the reporter that manual reviews mainly focus on the business background, whether it involves sanctioned projects and clients, with the time required varying by case. Due to differences in the volume of business related to Russia, the impact on banks in different regions varies.

Regarding remittances for foreign trade orders from countries other than Russia, several bank staff members said that specific problems require specific analysis. Customer service personnel at several state-owned large banks mentioned that they have not seen any special restrictions on trade remittances from any region, and remittances from Russia in various currencies can be reviewed and disbursed normally according to previous policy requirements, but it is advised to consult the banks for details.