Cypriot banks complying with sanctions see a decline in risky business transactions involving Russian and Ukrainian entities.

NICOSIA, Cyprus — On Friday, Cyprus banking officials announced a significant reduction in their dealings with potentially high-risk Russian and Ukrainian enterprises, reporting a decrease of over 13,000 clients and 35,000 accounts, totaling approximately €2 billion ($2.17 billion). This alteration follows the sanctions imposed by the United Nations, the European Union, the United States, and Britain in response to Russia’s invasion of Ukraine in 2022.

As per the latest statistics, the proportion of Russian clients in Cypriot banks has nearly halved, dropping to 0.35%. Concurrently, deposits held by Russian individuals decreased from 2.21% to 1.53%. This transformation illustrates the banks’ commitment to ongoing reforms aimed at enhancing their supervisory practices and distancing themselves from dubious depositors, particularly wealthy Russian oligarchs. Local officials insist that establishing a more transparent financial system will attract credible international investors.

The shift began after Cyprus faced a financial crisis in 2013 that nearly led the country into bankruptcy. Between 2014 and 2023, the number of Russian clients in Cypriot banks was reduced by 90%, while the figure for Ukrainian clients fell by 61%, with corresponding declines in deposits of 83% and 71%, respectively.

In total, Cypriot banks have severed ties with over 72,000 clients and closed nearly 161,000 accounts in the last decade, amounting to around €42 billion ($45.5 billion). Marios Skandalis, representing the Association of Cypriot Banks, and also the chief compliance officer of the Bank of Cyprus—one of the largest banks on the island—highlighted that Cypriot banking institutions are among the few globally that strictly apply embargoes on items that can be used for both civilian and military purposes.

According to Skandalis, there are numerous Russia-friendly nations that could potentially assist in circumventing these sanctions. Following the restrictions concerning “dual-use” goods, transactions with such countries plummeted from €16.5 billion ($17.9 billion) in 2014 to merely €3.8 billion ($4.1 billion) in 2023.

Banking officials in Cyprus assert that all customer interactions, in addition to payments and deposits, are now meticulously vetted against sanctions lists from the U.S., U.K., EU, and UN on a daily basis. Furthermore, any business relationships with sanctioned individuals or their close family members are terminated promptly to maintain compliance and uphold the integrity of the banking system.