Russian banks are increasingly identifying transactions related to cryptocurrency by citizens. At the same time, players in the cryptocurrency market and lawyers note that clients complain about sanctions from banks. The most common scenario in this case is the blocking of cards and accounts and the unilateral termination of the banking service agreement. How do banks recognize operations related to cryptocurrency, on what basis are agreements terminated, and is there a chance to keep the account and card?
Attention to crypto operations
Russian banks have become more frequent and effective in identifying transactions related to the buying and selling of cryptocurrency, replenishing crypto wallets, and withdrawing funds from them, reported the Central Bank. In the Financial Stability Review for the II-III quarters of 2023, it assessed the volume of identified transactions that banks are recommended to closely monitor (including those related to the purchase of crypto assets) at 81.5 billion rubles. This is 53.9% more than in the same period last year. The figures have increased due to enhanced supervisory work and improved methodology for identifying such transactions, the Bank of Russia explained.
According to Rosfinmonitoring, the number of cryptocurrency transactions has increased several times over the year: in the nine months of 2023, it exceeded 185,000 compared to 60,000 in the same period last year, while the volume of transactions nearly doubled.
Bankers are extremely reluctant to talk about the increase in the detection of transactions related to cryptocurrency. "VTB has already developed practices for identifying and stopping illegal crypto operations. Therefore, it is not entirely correct to assert that our detection of such transactions has significantly increased recently — we believe it has been at a sufficiently deep level for a long time," the bank's press service reported. Other top 30 banks by the volume of attracted public funds had not responded to Forbes' request by the time of the text's publication.
Participants in the cryptocurrency market and lawyers dealing with compliance and blockchain issues confirmed to Forbes that in 2023, they began receiving more requests for consultations and legal assistance from individuals and legal entities with pre-trial claims related to disputing account blockages due to cryptocurrency operations. "Since the fall of this year, the number of cases identified by banks as suspicious transactions has significantly increased. The suspension of banking operations, including with cryptocurrency, has equally affected both private traders and professional merchants," says Alexander Kazus, partner at the law firm "Sonichev, Kazus and Partners." The trend of increased appeals from crypto traders facing problems with banking services is also confirmed by lawyer Vladislav Egiyaan from the Moscow Bar Association "Bondyakov and Partners."
Complaints have indeed increased, but they mainly come from merchants dealing with a large volume of transactions. Retail users generally do not face transfer blocks, unless it involves large sums that do not correspond to their usual transaction patterns," emphasizes Anton Toropcev, regional director of Commex for development in Russia and the CIS.
Why are banks cautious about cryptocurrency?
Russian law prohibits paying with cryptocurrencies for goods and services, but does not prohibit trading them. However, the very nature of cryptocurrency does not allow tracking its "purity," Forbes' interlocutors remind. "Due to the anonymity of the issuance of virtual currencies and their use for conducting operations, individuals and legal entities can be, including unintentionally, involved in illegal activities, including money laundering of criminal proceeds," explains the logic of banks Alexander Kazus. Additionally, when transactions become systematic, from the bank's perspective, they turn into entrepreneurial activity, notes Yuri Brisov, partner of Digital & Analogue Partners. This requires registration as an individual entrepreneur (IE) or legal entity, and paying taxes, he continues. "In practice, a legal entity or IE in Russia will not be able to open an account in cryptocurrency anywhere, as the type of activity of a crypto broker is simply not represented among the OKVED codes, and the Federal Tax Service is likely to refuse registration," adds Brisov.
For banks, the main document on cryptocurrency operations is the law "On Counteracting the Legalization (Laundering) of Income Gained from Criminal Activities and Financing Terrorism" (115-FZ). It obliges banks to comply with "anti-money laundering" legislation and gives them the right to block accounts if a transaction seems suspicious.
The Central Bank, in its resolution, lists signs of transactions that should alert banks. These include a convoluted or unusual nature of the operation without obvious economic sense and purpose, the return of money to the sender within a short interval, operations related to the circulation of digital rights for large sums and digital currency, regular deposits of funds to the client from third parties followed by cashing them out, atypical increases in funds in the account, etc. This list is open, meaning banks can supplement it with any other criteria for suspicion.
In 2021, the Central Bank developed methodological recommendations for banks, detailing how to handle suspicious transactions of individuals, including "conducting operations in cryptocurrency exchanges." In the document, the regulator recommends that banks pay attention to a large number of the client's counterparties (for example, more than ten a day, more than 50 a month), a large number of operations (for example, 30 a day), significant volumes of operations (more than 100,000 rubles a day, 1 million rubles a month), a too short interval between deposits and withdrawals (less than 1 minute). A situation should also raise suspicions if, during a week, the average balance in the client's account does not exceed 10% of their average daily transaction volume, and there are no payments for utilities, communication, etc.
In the logic of the bank, p2p exchange of cryptocurrency for fiat often appears as systematic receipt of funds from an unlimited number of individuals. "From the perspective of banking compliance, the same pattern is characteristic, for example, in drug dealing. Moreover, sometimes crypto brokers open accounts using front individuals — drops. Then the bank sees the following picture: a pensioner from Perm arrives in Moscow, opens an account, and immediately begins to receive hundreds of thousands of rubles," says Yuri Brisov.
Arbitration involving speculation on the rates of crypto and fiat currencies, in the logic of banks, resembles unregulated entrepreneurial activity, which cannot be legalized de facto. "From a compliance perspective, there is a significant difference between episodic operations in the account of a private investor and daily operations for replenishing crypto wallets, receiving payments from third parties, from which the bank may assume that illegal entrepreneurial activity or the activity of a professional participant is being conducted through the personal account," concludes BKHK law firm partner Roman Khaminsky.
What scenarios do banks offer?
In its methodological recommendations, the Central Bank advises banks to exercise their right to refuse to conduct a transaction if necessary and, if there are two or more such refusals, to terminate the banking service agreement. In response to Forbes, the Central Bank emphasized that the decision on the level of risk concerning a particular transaction is made by banks independently.
The most common scenario that banks implement with clients whose transactions have raised suspicions is the suspension of operations, blocking of accounts or cards, and disconnecting the client from remote service channels. At this stage, the bank usually requests confirming documents. "It is fundamentally necessary to be ready to provide documents on the entire path of the asset's movement, on the sources of funds, on the payment of taxes from the sale of cryptocurrency," says Roman Khaminsky. Often, banks require notarized screenshots from the buyer's and seller's personal account, as well as confirmation of ownership of the crypto wallet. For example, such a requirement exists at "Tinkoff."
However, this scenario rarely ends positively for the client, lament Forbes' interlocutors. "Banks are simply afraid to get involved with services and products that carry more risks than returns," notes Yuri Brisov.
The same is reported by bank clients on specialized websites. "I am currently in Thailand. My account movements are related to cryptocurrency. I buy crypto on the Huobi platform for personal purposes — for myself, for relatives, and friends. Since Russia is under sanctions, cards do not work, etc. Buying cryptocurrency is my only source of obtaining the means to live: paying for housing, utilities, transport rentals, purchasing food, paying for medical care, and other services. I have also received money from individuals as a debt repayment," wrote User-318315839093 from the Voronezh region in November 2023. According to him, after providing the requested documents, Sberbank decided not to restore the operation of cards and Sberbank Online.
A similar comment was made in April of this year by Anatoly from the Sakhalin region, who is professionally engaged in crypto investments, regarding the blocking by VTB: "I am perplexed, how is this possible, I am not doing anything illegal — I buy and sell cryptocurrency on exchanges with mandatory identity verification, and all transactions are transparent <...> In response to my inquiry to the bank, stating that I can provide all statements for all transfers and all receipts, the bank employees told me that all of this is pointless and it is easier for you to take your money." VTB explained to the client in its response that the blocking occurred in accordance with current legislation. Such precedents have occurred at Alfa-Bank, "Tinkoff," etc.
