EU institutions are now facing enhanced oversight of outgoing transactions linked to Russian ownership.
According to Moody’s, as of July 2024, EU credit and financial institutions have been mandated by the European Commission to comply with new reporting requirements for Russian-owned transactions. Under Article 5r of Council Regulation (EU) No. 833/2014, any “funds” transferred from an EU entity to a non-EU country must be reported if the transactions exceed €100,000 and originate from a Russian-owned entity.
“Funds” in this context cover a broad range of financial assets. This includes cash, cheques, claims on money, drafts, money orders, and other payment instruments. Deposits held with financial institutions or other entities, balances on accounts, and debts also fall under this definition. The comprehensive nature of the definition means that even subtle financial instruments are under scrutiny, ensuring that all significant transfers are visible to regulatory authorities.
Further specific guidance was issued in 2022 to address the prohibition on accepting deposits from Russian nationals or natural persons residing in Russia that exceed €100,000. This measure was introduced as part of a wider EU strategy, following its 12th package of sanctions against Russia related to the ongoing war with Ukraine. The aim is to enhance the assessment of potential breaches of sanctions and to map out Russia’s sources of revenue. EU Member States are now responsible for reviewing the information submitted by obligated entities to identify potential circumventions of the sanctions.
A significant challenge for banks and other financial institutions has been tracing the flow of indirect financial transfers and determining the true extent of Russian ownership. While direct transfers are typically easy to track, identifying indirect transfers and calculating aggregated ownership percentages have historically proven problematic. To address this, Moody’s has developed a solution using a custom dataset with curated entity data designed to meet these EU regulatory reporting requirements.
Using this dataset, Moody’s revealed as of January 2025 that there are 46,004 companies established in Europe that meet the 40% Russian-owned nexus criteria. Moreover, the analysis identified the top six countries where these companies are based: the Czech Republic (11,715), Bulgaria (11,584), Germany (3,390), Latvia (3,133), Cyprus (2,928) and Italy (2,467). The Czech Republic and Bulgaria are particularly notable for their high exposure, followed by other Eastern European countries sharing close geographical and economic ties with Russia. Even Western European economies, such as Germany and Italy, display significant numbers of companies with a Russian nexus.
Banks, credit institutions, and other obligated entities across the EU must now ensure that they carefully report these outgoing transactions. The €100,000 threshold applies to both asset transfers and cumulative transactions conducted within a six-month period, with no minimum limit imposed on individual transfers. Additionally, the definition of Russian ownership encompasses any entity that is more than 40% owned – whether directly, indirectly, or through aggregated ownership – by a Russian person or entity, including those with dual citizenship.
Moody’s service provides valuable insights by offering comprehensive entity data, beneficial ownership information, and corporate structure details. This facilitates transparency in identifying direct and indirect Russian ownership, including complex structures such as circular ownership. Furthermore, Moody’s also offers robust sanctions screening for entities that are directly or indirectly sanctioned, thereby aiding institutions in ensuring compliance.
The new reporting measures, which also apply to non-EU branches of EU financial institutions, give national competent authorities (NCAs) in the European Union improved visibility over the movement of funds associated with Russian nexus.
With the first reporting period having ended on 30 June 2024 and subsequent periods scheduled every six months – the latest being 15 January 2025 – adherence to these requirements is essential. This transparency-enhancing approach is designed to help EU institutions prevent potential violations of sanctions and ensure that all outgoing transactions linked to Russian ownership are appropriately monitored.
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