Navigating the Financial Maze: Strategies to Overcome Challenges in Transferring Funds between Russia and the United States

Transferring funds from Russia to the United States has become a complex and challenging task for many individuals, particularly those with dual citizenship in both countries. The imposition of sanctions by the Office of Foreign Assets Control (OFAC) on the Russian financial sector in February 2022 has created numerous obstacles, leaving people struggling to transfer their personal funds from Russia to the United States.

While Russia is not subject to broad sanctions like other countries such as Iran or Cuba, meaning not all activities involving Russia or persons located in Russia are prohibited, it nevertheless sometimes seems nearly impossible to transfer funds from Russia to the United States at this time. Why is it happening? In this article, we will explore the reasons behind these challenges and discuss potential solutions for those affected.

Understanding the Sanctions: 

One of the primary reasons for the difficulties in transferring funds from Russia to the United States is the designation of certain Russian financial institutions and their subsidiaries by OFAC as entities with which certain transactions are prohibited. As a result, U.S. persons are generally prohibited from engaging in transactions with these sanctioned institutions, unless specifically authorized by OFAC. It is crucial to note that an entity may come under sanctions if it is owned, directly or indirectly, by one or more sanctioned individuals, with a total ownership of 50 percent or more. However, there are still several Russian financial institutions not covered by U.S. sanctions, and individuals are not prohibited from transacting with them. Examples of such institutions include Raiffeisen Bank and UniCredit Bank as well as small regional banks having correspondent relations with financial institutions located in CIS countries such as Kazakhstan, Uzbekistan, Azerbaijan and so on.

Challenges Faced by Individuals: 

Why are people still struggling to transfer their personal funds from Russia to the United States despite the presence of non-sanctioned Russian financial institutions? We try to answer this question here. Of course, the U.S. banks may have reasonable grounds to refuse, reject, or block transactions, for example, in a case where a transaction indirectly involves an OFAC designated person or entity such as PJSC Sberbank or JSC Alfa-Bank. Besides those reasonable grounds, U.S. banks, out of fear of facing high fines for violating sanctions, have developed their own internal policies, sometimes refusing, rejecting, or even blocking transactions without providing clear reasons. We call it “self-restrictions”. This cautious approach by U.S. banks aims to avoid any potential non-compliance with OFAC regulations. However, this fear-motivated blanket refusal to transact with Russian financial institutions, even in cases where transactions are clearly authorized, leaves individuals uncertain about how to legally access their funds. This situation particularly affects U.S. citizens who have inherited funds or sold property in Russia and need access to their money in the United States for personal expenses. While their money is stuck in the country they do not live in, the U.S. citizens got deprived of their rights to their property.

It is worth to mention that a request to send funds from the United States to a non-sanctioned Russian bank account frequently results in a refusal by a U.S. bank. In fact, lots of U.S. individuals wish to transfer funds to Russia for their personal needs such as financial help to their relatives there or payment of utility bills for their real property. There may be U.S. entities willing to do legal unprohibited business with Russia where financial transactions constitute an essential part of it. Those individuals and entities can hardly find a U.S. bank which policy permits to transfer funds to a Russian non-sanctioned bank even if no prohibitions apply.

Potential Solutions:

If you find yourself facing difficulties transferring funds between Russia and the United States, several options can be explored:

 1. Find a U.S. bank willing to accept funds from a non-sanctioned Russian bank account as well as send funds to non-sanctioned Russian bank account. However, it is important to note that even if a bank initially agrees to accept the funds, there is no guarantee that they will ultimately process the transaction.

 2. Consider opening a bank account in a third country, such as Turkey, the United Arab Emirates, Kazakhstan, Armenia, or others. By transferring funds from the non-sanctioned Russian bank account to the third-country account, individuals can then attempt to transfer the funds to the United States. You may also use an intermediary financial institution in a third country to transfer funds from the United States to the non-sanctioned Russian bank account. Keep in mind that opening an account in a third country may require residency and a social security number in that specific country. Additionally, the fact that the funds originated from Russia may influence the U.S. bank’s decision regarding the transaction.

 3. If a transaction from a non-sanctioned Russian bank account to the United States was blocked by a U.S. bank due to a relevant sanction program, individuals may need to submit an application to OFAC for the release of the blocked funds. It is advisable to seek guidance from an experienced OFAC lawyer in this situation.

 4. If a U.S. bank rejects a transaction without valid grounds, individuals may consider taking legal action against the bank. However, it is crucial to consult with an experienced attorney specializing in this area before proceeding with any legal action.

 5. In cases where a transaction involves a sanctioned individual or entity, individuals must obtain a specific license from OFAC before processing the transaction. Remember that transferring funds from a sanctioned Russian bank to the United States through one or more non-sanctioned bank accounts, including those opened in third country banks, is deemed an evasion of US sanctions which is a violation of US sanctions regulations. Seeking advice from an OFAC attorney can provide valuable guidance in navigating this complex process.

6. Cryptocurrency is not a solution. Cryptocurrency usage may be deemed a way to circumvent U.S. sanctions. Especially, using mixers and tumbling services to make it difficult to determine the source of funds may ultimately result in making the crypto exchange to suspect that the transaction was made with a purpose to evade U.S. sanctions. Generally, you are not prohibited to send cryptocurrency from Russia to the United States. However, note that crypto exchanges converting cryptocurrency to USD are limited to Kraken, Coinbase, and Gemini. These crypto exchanges have their own compliance and may block a transaction, suspend, restrict, or even close your account after receiving an alert that the cryptocurrency was sent from a Russian crypto exchange or any unregulated jurisdiction. Here, the conduct of the U.S. crypto exchanges reflects the conduct of the U.S. banks. Technically, crypto exchanges are financial institutions subject to OFAC compliance, sanctions risk assessment, and AML/CFT obligations. Keep in mind that transferring cryptocurrency may be a grey zone anywhere. Under specific circumstances, you may violate either Russian or the U.S. law. For example, cryptocurrency is legal in Russia unless it is used as payment for goods and services.

Note that every case has its specific facts. It is helpful to present those facts to someone specializing in US sanctions for a deep analysis to find the solution for specific situation.

Conclusion:
Transferring funds between Russia and the United States has become a challenging endeavor due to the sanctions imposed by OFAC on the Russian financial sector. While there are non-sanctioned Russian financial institutions, the refusal of U.S. banks to process these transactions poses significant difficulties for individuals. Exploring alternative banking options, seeking legal advice, or applying for OFAC authorization are potential solutions to consider. Individuals affected by this issue should consult with professionals who specialize in OFAC regulations and international financial transactions to ensure they are aware of the available options and can navigate the process effectively.