International transfer between banks involving newly sanctioned countries may get interrupted or stuck. The United Nations, European Union, and the UnitedStatescame out with new and updated sanctions on the banking industries of targeted countries.
International transfers play an important role in trading. Lately, some trading companies in China have failed to receive payments from their overseas clients because the funds are being sent from sanctioned countries. In this article, we will give solutions and suggestions to help lower this risk.
Countries involved in sanction name-list doesn't mean all international transfers have been interrupted or stopped.
A trading company in China failed to receive deposits from its client in Russia, that was using the Bank of Moscow to make the transaction. So far, there are 94 banks in Russia, including one of the country's biggest banks the Bank of Moscow, are on the sanction name-list of the United States.
Apart from these 94 banks, the rest may be ok.How to tell banks in sanction/sensitive countries can still do international transfers?
Solutions & Suggestions:
Do a test transfer:before the client makes a transaction of deposit or payment, you can make a small test transfer to make sure there is no obstacle between the overseas bank and the Chinese domestic bank. You should especially do this with new customers, without any transaction record with you.
Inform the bank in China:give early notice to the bank, which your client is going to make the transfer to China. Check any sanction information about the bank and balance your risk.
Clearly sanctioned countries are no-go:If it isn’t necessary, do not transfer with countries which are CLEARLY on the sanction name-list.
Use banks you have used before with a client:If your clients are in some sensitive countries and the previous international transaction went well, it would be better to use the same bank for the following transactions. And don't forget to check the bank regularly.
Documents against Payment(DP) is risky for exporters:for instance, the cargo arrives at the destination port, yet the overseasimportermay not get B/L from the bank due to things like financial problems or the international transfer is stuck between banks. In such a situation, the exporter may have no idea how to deal with the cargo. Generally, most exporters require 30% prepayment from clients before shipping under DP.
Buy insurance and don’t gamble:accidents on international transfer are included in the catalog of certain insurance companies. It may help you mitigate financial loss. Add this expense to any dealings with sensitive countries. If the added insurance costs make the deals not profitable, it is better to let the deals go, then risk losing whole shipments.
Name-list of countries for high risk of international banking transfer issues.
Sanction name-list can be checked here:
https://www.un.org/sc/suborg/en/sanctions/un-sc-consolidated-list
http://sanctionssearch.ofac.treas.gov
https://eeas.europa.eu/topics/common-foreign-security-policy-cfsp_en
Countries like Iran, Sudan, North Korea, Syria, and Cuba are clearly on the sanction name-list. Most Chinese domestic banks will refuse to work on the international transaction with these countries. Some regional branches of the same bank will have their own policies and may allow these transfers.
Most of the domestic banks are not willing to be involved in any troubles or even the hint of an issue. Standards to deal with transactions of USD among some sensitive countries are unclear. Especially since July when CRS was launched in China to fight against money laundering and tax evasion. Domestic banks now manage international transactions much more carefully.
The infographic below is the latest unconfirmed name-list of countries for high risk of international banking transfer issues. This list is unconfirmed by officials, and it is released by people working in international trading.
Using MoneyGram/Western Union are recommended to make international transfers to countries above. If transferred by the bank, you may be required to provide some documents to prove you are a legal business.
Required documents depend on the policies of different banks, most of the case include
1. Against Money Laundering Questionnaire
2. Risk Commitment Letter
3. Explanation Letter: the business relationship between exporter, importer, including the third party if participating in this trading activity.
One point should be specified:The cargo should not stop by the port of Iran and the company must take the responsibility of any resulting economic disputes and their consequences. It has nothing to do with the bank.
If you have good ideas on international transfer, please free feel to leave a comment below and share with us, let's make business easy.
Reference: Sina Sohu, 浙江外贸，贸易金融观察