Major Israeli banks have begun limit operations on securities accounts of Russians, even if they have an Israeli passport. The founder of the international financial company SmartGen Ltd, Mark Oigman, was the first to draw attention to this.

The demand to begin segregating (isolating) accounts with credit institutions was put forward by one of the largest clearing systems in the world, Euroclear. The Belgian depositary has been using this practice internally for some time now. European Union and beyond. Luxembourg’s Clearstream, the second major clearing system in Europe, may also join the restrictions.

Israeli banks began to block accounts of Russians

Starting on November 13, when the Euroclear ban came into force, Israeli banks began to massively block brokerage accounts of Russians. Segregation applies to securities held in accounts of Russian citizens or Russian tax residents in a European depository. After “segregation,” the assets are transferred to a separate account from which, in the worst case scenario, the securities cannot be sold. It is also not possible to withdraw funds from such accounts, but coupons can be withdrawn if the volume of transactions does not exceed 100 thousand euros per year per account, shared with RBC lawyer Eli Gerwitz.

Managing partner of the Israeli law office “Kovalenko and Partners” Alexey Kovalenko told Forbes that credit institutions notified clients about the possibility of limiting the use of accounts back in July, but all this time negotiations were ongoing about how exactly this would be done and who would be subject to the restrictions.

Who may be affected by the restrictions?

Russians are subject to restrictions, including those who have a second citizenship Israel, if they do not have citizenship or at least a residence permit (residence permit) of one of the European Union countries, explained Igor Kuznets, partner of the ITSWM multi-family office. Oigman notes that not any European citizenship or residence permit will serve as a basis for avoiding blocking of accounts. As a result, the bank will make a decision on a case-by-case basis.

Lawyer Alexey Kovlenko adds that the Israeli side insists that clients with an Israeli passport are in fact Israelis, so they should not be subject to the restrictions that should affect Russians, even despite having a second Russian passport. “As you know, renouncing Russian citizenship is associated with great difficulties, the procedure takes a lot of time, so often people simply leave their Russian passport due to the impossibility of formalizing the renunciation,” he said.

Countries around the world are restricting transactions for Russians

Similar operations with Russian accounts started V Kazakhstan at the end of last year and the first half of this year. In May 2023, local depositories AIX CSD and CSD began to take active action. Requirements for Kazakh systems were also put forward by Euroclear and Clearstream.

In April, the assets of Russians will also be segregated began one of the largest banks UAE — Emirates NBD. The directive also came from the European Union. However, some Russian investors still managed to withdraw some of their assets from blocked accounts to investment ones.

In Israel, according to information Forbes, at the moment, only one bank has begun separating Russian assets in practice – Discount (one of the three largest in the country). The remaining banks are waiting for the end of negotiations with Euroclear.