Russian Companies Complying with Western Sanctions Could Be Penalized at Home

Russian companies and organizations that comply with possible western sanctions against the country’s banking system would be effectively forced out of the Russian market if newly proposed legislation is approved in the country’s parliament, Vedomosti reported.

Amendments to Russian legislation proposed by Vladislav Reznik, a member of the ruling United Russia party, propose new rules which stipulate that, if a company is found to be in breach of a contract due to compliance with external sanctions, the Bank of Russia would put it and its beneficiaries and shareholders on a registry of “unreliable service providers.”

Reznik’s amendments will also have an impact on existing legal relations. An affected Russian bank or any of its cardholders will be entitled to file lawsuits against offending companies. The Prosecutor General Office will also be able to initiate cases.

The new rules are a move prompted by sanctions that the U.S. Treasury Department imposed on Russian bank Evrofinance Mosnarbank. Visa and Mastercard suspended the bank’s membership, which led to its cards being blocked internationally, even in Russia. The cards cannot even be used in the bank’s own ATMs, despite the fact that the Bank of Russia’s National Payment Cards System was meant to prevent such a scenario.

The reason the cards do not work at all is that they are supported by the Russian payment processing center Kartstandart. When Visa and Mastercard stopped working with Evrofinance, Kartstandart stopped servicing its cards, retaining support for only the domestic “Mir” cards.

Kartstandart facilitates the operations of roughly 100 Russian banks.