KYC and AML: What international banks expect from business from Russia and CIS

KYC and AML: What International Banks Expect: A Practical Guide to International Business

Mainstream

The work of an international bank with a client from Russia or the CIS today is not a matter of service. This is a compliance risk issue that the bank is continuously assessing.

The main task of the bank is not to make your payment. The main task is not to get a fine, not to lose the correspondent relationship and not to miss the transaction, which will lead to an investigation of the regulator.

Therefore, successful passage of KYC and AML depends on three things:

Do you understand what risks the bank is looking for in your structure?Can you document the legitimacy of the business, its beneficiaries and the origin of the funds?

If these three issues are not worked out in advance, the bank will not just postpone consideration - it can freeze the account, refuse payment or initiate the closure of the relationship without explaining the reasons.

When International Banks Conduct In-depth KYC/AML

The request for enhanced due diligence does not only occur when opening an account. Typical triggers:

• opening an account for a company from Russia, Belarus or CIS countries
• Changes in ownership or beneficiaries
• Entering new markets or connecting to new correspondent banks
• Payment to a jurisdiction with increased risk
• transaction that does not fit the business profile
• Receipt of funds from an atypical source
• Updating sanctions lists affecting the client’s jurisdiction
• Annual Compliance Review
• request from a correspondent bank or regulator
• suspicion of contact with a sanctioned person or circumvention of sanctions
• Using complex payment chains involving third countries

Each episode is not a technical formality, but a stress test of your compliance position.

A mistake that most customers make

Many companies think this way:

We will give the bank a standard set of constituent documents – that’s enough.

That's a misguided logic.

The bank does not check the documents “for checkmarks”. The bank is looking for risk. If you don’t explain your business, a compliance officer will do it – and almost certainly interprets the gaps to your advantage.

The correct approach is not to wait for the bank’s request, but to prepare a compliance position in advance that answers the main questions before they are asked.

Step 1. Understand the logic of the International Bank

The International Bank evaluates the client through the prism of three threats:

• Regulatory risk (fines, regulations, restrictions)
• reputational risk (related to dubious transactions)
• The risk of loss of correspondent relationships (de-risking)

Banks from the USA, EU, Switzerland, UK, Singapore and UAE are particularly sensitive to this. Even if they are willing to work with businesses from the CIS, they will demand transparency comparable to the requirements of their home regulator.

The bank expects you to show it not only documents, but also a clear, consistent business history.

Step 2. Determine who the customer is and who the beneficiary is.

The first set of questions that will ask compliance: Who are you?

It is necessary to identify absolutely precisely:

• applicant (company opening an account or conducting an operation)
• • End beneficiaries – individuals with control of 25% (in most jurisdictions, and in sanctions policies – from 10% or even below)
• Signatories and account managers
• Directors and key managers
• Trustees, if a trust or foundation is used

Mistake: to indicate the nominee shareholder and not to disclose the real controlling person; Under sanctions, the bank does not check the formal registers, but the real structure of control. If the real beneficiary is undisclosed, the bank will consider it an attempt to cheat and terminate the relationship.

Step 3. Collect corporate documents

The International Bank expects not just a copy, but a full and up-to-date package:

• certificate of incorporation
• statute
• register of shareholders/participants
• list of directors and secretary of the company
• certificate of tax residence
• licenses if the activity is licensed
• proof of legal address
• warrants
• decisions on appointment of directors and issue of shares

All documents must be translated into the language required by the bank and duly legalized or apostilled. Any inconsistency in dates, names or shares will cause additional verification.

Step 4. Disclose ownership structure and control

The bank wants to see a full chain of ownership right up to individuals.

It will require:

• corporate chart
• description of each intermediate link
• Explaining the jurisdiction of each company in the chain
• substantiation of the business purpose of intermediate structures
• Information about who makes strategic decisions

Special attention is paid to companies from offshore jurisdictions. If there are BVI, Cayman, Belize, Seychelles in the structure, the bank will want to understand why they are needed. The answer to “tax optimization” is no longer accepted. An explanation of commercial necessity is needed.

Step 5. Confirm the source of origin of funds

Source of Wealth and Source of Funds are two different questions, and the bank will ask both.

• Source of Wealth – Where Does the Beneficiary Have Capital in General: Business History
• sale
• inheritance
• investment
• dividend

• Source of Funds – the origin of specific funds credited to the account: receipts from counterparties
• credit
• transaction

The bank is awaiting documents: purchase and sale contracts, financial statements, tax returns, bank statements, confirmation of dividend payments, loan agreements. Without them, the legitimacy of capital will not be established, and the account will not be opened – or the receipt will be frozen.

Step 6. Describe the nature of business and counterparties

It is not enough to call the sector “wholesale trade”. The bank wants to see:

• Detailed description of the business model
• basic goods or services
• geography of supply and sales
• categories of buyers and suppliers
• Key counterparties (for high-risk jurisdictions – with identification)
• Expected volumes and frequency of transactions
• sending and receiving countries of payments

If the bank sees that the client’s business is connected to jurisdictions under sanctions or dual-use goods, the requirements will increase multiples.

Step 7. Check the sanctions risks in advance

Before sending a package to the bank, you need to independently conduct a sanctions scoring:

• Whether the beneficiaries or directors are on the sanctions lists (SDN, EU, UK, Swiss, UN)
• Do they fall under the “50 percent rule” (control by a sanctioned person)?
• Is business connected to sectors under sectoral sanctions?
• Are there any products in the supply chain that are subject to export control?
• Payments are made through banks that are under restrictions.
• Whether the activity is subject to secondary sanctions

Identifying a problem during the preparation stage is an opportunity to adjust the structure or prepare a legally convincing justification. Identifying a problem by a bank is almost always a stop factor with blocking operations.

Step 8. Prepare explanations on transactions and payment geography

The Bank assesses not only the static profile of the client, but also the dynamics of its operations.

Expect the bank to ask for:

• contracting
• invoice
• transport and customs documents
• confirmation of performance
• details of counterparty beneficiaries if payment goes to sensitive jurisdiction
• justification

The following are particularly alarming:

• payments to the EAEU countries with subsequent re-export
• settlements through third countries not involved in the transaction
• splitting
• Using multiple banks for one stream
• Payments for consulting, marketing or agency services without clear evidence of their reality

The more complex the payment route, the more likely the bank is to see it as an attempt to circumvent sanctions or AML requirements.

Step 9. Respond to additional requests from the bank: keep out

Practice shows that: Delay in responding reinforces suspicions.

When responding to bank inquiries, it is important to follow three rules:

• speed – response within a couple of working days
• Accuracy – the data must be the same as previously provided information
• Documentation – each thesis is supported by a document

If the bank asks for explanations that you do not have, this is an excuse not to improvise, but to attract lawyers specializing in sanctions compliance and interaction with international banks.

Step 10. Build a long-term compliance position

A one-time KYC pass is just the beginning. The bank will review the file regularly.

The strong position is:

• timely notification of changes in the structure, directors or business of the bank
• proactively disclosing sensitive aspects before monitoring
• legally verified wording in contracts, excluding violation of sanctions clauses
• internal compliance and export control policies that can be presented to the bank
• availability of written opinions of lawyers on sanctions aspects, if the business is in the area of increased risk

The bank trusts clients who manage their risks professionally rather than trying to hide the problem.

What Different Types of International Banks Expect

The choice of a bank is part of the strategy of managing international risks, not just finding convenient service.

How to strengthen your position before starting a bank relationship

The best KYC does not begin at the time of the request, but at the stage of structuring the business.

Recommendations:

• Exclude nominee shareholders and directors from the structure unless it has a clear commercial purpose.
• Provide a transparent chain of ownership where each link performs a real function.
• Create and store the Source of Wealth / Source of Funds file up to date
• Develop and implement internal sanctions policy
• conducting sanction screening of counterparties before concluding transactions
• have ready-made legal memorandums on compliance of applicable transactions with the sanctions legislation
• not to use schemes with artificial complication of payment routes
• include in contracts sanctions clauses entitling suspension without breach of obligations

A professionally prepared compliance dossier is often the deciding factor when a bank is hesitating between “keep the customer” and “get out of the relationship.”

Common mistakes in preparation for KYC/AML

1. The Bank will still reveal discrepancies through indirect signs, and the consequences will be more severe than with voluntary disclosure.
2. Without documentary evidence of the origin of funds, the bank will not accept capital, no matter how transparent it may be.
3. The hope that the bank will “not notice” the connection with the sanctioned jurisdiction is a direct path to blocking the account and informing the regulator.
4. Discrepancy in dates, titles or shares causes an avalanche of additional requests and puts the client’s integrity in question.
5. Silence is perceived as an inability to give a clear answer and often leads to a final decision to close the account.
6. Self-response without legal reconciliations often contains dangerous language that the bank may interpret as a sign of infringement.

Checklist: 15 Questions to Prepare for the International Bank’s Request

Before submitting documents to the bank, answer the following questions:

Who are the ultimate beneficiaries – individuals with control of 10%? Are there public officials or related persons?Does the chain of ownership in the register coincide with real control?Can you document the Source of Wealth of each beneficiary?Can you document the package of documents confirming the Source of Funds on key transactions?Is the business structure transparent and explainable?Is there any dual-use or sanctioned sectors in the supply chain?Is there an independent sanction screening of all beneficiaries, directors and contractors?Is there are in the geography of payments? Are all corporate documents translated, legalized and up to date?Do you have an internal compliance policy and documents to confirm compliance?Does the profile of expected transactions correspond to the declared nature of the business?Did you draft an explanatory note describing the business model and structure?Did you discuss your situation with lawyers specializing in sanctions compliance and banking regulation?

A positive answer to each of these questions does not guarantee an account opening, but dramatically reduces the risk of rejection, blocking, and subsequent compliance investigation.

What a strong compliance readiness strategy looks like

A strong strategy includes five levels:

1. Structured transparency: Assessment and, if necessary, restructuring of ownership prior to the bank interaction, exclusion of nominal elements without economic sense.
2. Documentary dossier Formation of the set: Corporate documents, SOF/SOW, business description, sanctions opinions, contracts with key partners.
3. Screening of all elements of business for intersections with sanctions regimes, assessment of risks of secondary sanctions.
4. Preparation of competent explanations, legal memorandums and business presentations for the bank, demonstrating the manageability of risks.
5. Regular update of the dossier, monitoring of changes in legislation and sanctions lists, training of employees, readiness for repeated requests.

Without the fifth level, the bank will perceive the client as a carrier of permanent, rather than one-time risk, and sooner or later initiate a de-risking procedure.

FAQ

Yes, in most jurisdictions, the bank has the right not to disclose the reasons for the refusal, especially if they are related to internal compliance assessment and sanctions risks.

Under the US and EU sanctions regimes, if a sanctioned person owns directly or indirectly 50% or more of a company, such a company is considered blocked, even if it is not listed. Banks apply this rule aggressively, sometimes lowering the threshold below.

What documents confirm Source of Funds best?Sales contracts, bank statements, financial statements, tax returns, audit reports, confirmation of dividend payments.

What to do if the bank freezes payment?Immediately provide full explanations and documents at the request of the bank. At the same time, lawyers specializing in sanctions and bank compliance should be involved in preparing a legal position and communicating with the bank.

Yes, diversification of banking relationships is a sensible strategy, but each bank will conduct its own KYC and AML, and the problem in one bank may affect the rest when exchanging information.

The Bank analyzes not only the jurisdiction of registration, but also the place of business, the citizenship of the beneficiaries, the currency of operations, correspondent chains and the nature of counterparties. Any stable connection with Russia or Belarus automatically places the client in the high risk category.

De-risking is a practice whereby a bank completely terminates its relationships with customers from certain jurisdictions or sectors to avoid regulatory risks without going into individual analysis.

Yes, almost all banking service contracts contain the client’s obligation to immediately inform the bank of significant changes in the ownership structure, directors and nature of the business.

Related services

• Sanctions, export controls and international compliance
• International regulatory risks and strategic advice
• Corporate and Regulatory Investigations, Business Integrity
• International trade, distribution and cross-border transactions
• Commercial contracts
• International Arbitration, Commercial Disputes and Cross-Border Litigation

Related material

• How international banks check clients from Russia and CIS
• Sanctions Compliance for Business: practical guide
• Source of Funds: How to confirm the origin of funds for an international bank
• The 50% rule and the control of sanctioned persons: What the beneficiary should know
• How to build a transparent ownership structure for international business De-risking and Account Closing: How to Protect Access to the Financial System
• KYC for complex corporate structures: best practices
• Sanctions clauses in international contracts
• Dual-use goods and export control in the EAEUDue diligence of a foreign counterparty: How to Avoid Sanctions and Reputational Risks

Conclusion

The expectations of international banks in the KYC and AML sector are not a bureaucratic barrier, but a reflection of the global compliance landscape in which the bank protects itself and its license.

For businesses from Russia and the CIS, successful completion of inspections means not just providing documents, but creating a transparent, legally convincing and documented compliance position.

The winner is not the one who tries to bypass the demands or hide the difficult moments. The winner is the one who builds the structure in advance and prepares the dossier so that the bank sees it as an understandable, predictable and professionally managed client.