As the situation in Ukraine deteriorates, governments around the world have begun wheeling out sanctions. With the sanctions announced on February 22 likely to be but the first of multiple escalating rounds, staying up to date will take considerable effort. As a result, compliance officers at the many offshore wealth managers that run Russian desks will be putting in plenty of late nights.
HNW Russians are a major source of customers for the offshore wealth management industry in a number of booking centres, meaning many competitors have Russian customers on their books. A number of major brands such as J.P. Morgan, Julius Baer, and UBS had been courting more Russian HNW investors since 2020, while most offshore wealth managers will have Russia desks in a variety of booking centres ranging from Singapore to London and all points in between.
HNW Russians had been encouraged by their government’s extended tax amnesty announced in 2018 to onshore their wealth. Yet with local political instability the second most important reason they seek out offshore wealth management, it is likely many have kept assets abroad. Business interests abroad – the most common driver for Russian HNWs to offshore money at 15% – only narrowly trumped local political instability at 14%, according to GlobalData’s 2020 Global Wealth Managers Survey.
It is unlikely that the government officials and billionaire oligarchs targeted in the first round of sanctions by the UK, the US, and the EU on February 22, 2022 are on the books of any of the world’s major private banks. However, it is also unlikely that this is the last round of sanctions. Other sanctions and restrictions in Ukraine are expected to be announced by more countries, with additional escalating rounds likely as the crisis worsens.
Optimistically, offshore wealth managers had taken the opportunity since 2014 and the end of the Crimean Crisis to invest in regtech to improve the efficiency of Know Your Customer and anti-money laundering processes. Specialists like London-based ComplyAdvantage, among many others, have been developing software to help banks and wealth managers better understand their HNW clients. This will be in hot demand over the next few months as the sanction environment evolves, and wealth managers need to ensure they are properly compliant. If not, offshore wealth managers risk suffering the same fate as Credit Suisse, which is currently being raked over the coals in the media for keeping accounts open for a range of high-risk clients.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData