As soon as Western countries began deploying sanctions against Russia over its invasion of Ukraine, many Russians turned to Kazakhstan for relief.
And so, as official figures show, Russian citizens in 2022 opened around 500,000 bank accounts in Kazakhstan as a way to circumvent restrictions on international banking operations in their own country.
Now, Kazakh banks seemingly spooked by the prospect of being slapped with secondary sanctions are tightening their rules for working with Russian clients and peer lenders. Or at least they are making a show of doing so.
Fresh attention has been drawn to this situation by news stories circulating last month about how Moscow-based Tinkoff Bank, which has also been slapped with sanctions, was offering its customers a way to bypass restrictions through a link-up with Kazakhstan’s Freedom Bank.
In March, media in Russia reported that Tinkoff Bank was pledging to assist premium clients obtain Freedom Bank-issued MasterCard credit cards. The idea was that holders of these cards could conduct transactions in any country where MasterCard is accepted.
Freedom Bank acted quickly to quash these reports, insisting that it did not remotely issue cards to foreign nationals. Russian nationals armed with a Kazakh government-issued tax number could, however, easily obtain the cards by traveling to the country and visiting Freedom Bank branches in person.
Earlier this week, on May 30, Tinkoff Bank offered another tempting service: instantaneous ruble transfers through a Russian payment system and dollar transfers through the international SWIFT payment system to Freedom Bank accounts.
After that news filtered out, a finance-focused Telegram account, MarketOverview, reported that Freedom Bank was, from May 30, temporarily suspending the issuance of debit cards to customers.
The bank has made no public statements about any of this, but it looks at first glance as though it is trying to dispel impressions that it is profiting by easing the burden of sanctions on Russian savers.
As a writer for business newspaper Kursiv argued in an article last month, Kazakhstan’s finance sector, not to say the economy as a whole, has certainly benefited from the geopolitical turbulence. While Russia’s economy shrunk by 2.1 percent in 2022, Kazakhstan’s grew by 3.2 percent. One bank, ForteBank, announced record profits of 98 billion tenge ($220 million).
"Goods that could not be supplied directly to Russia flowed through Kazakhstan, and the economy received an influx of capital from migrants fleeing Russia,”
Murat Kastaev, chief executive of the Damu Capital Management investment company, told Kursiv. “Business needed credit, and ForteBank was able to take advantage of that.”
The official data about 500,000 bank accounts opened by Russian nationals may well be an undercount. As Kursiv pointed out, the number of Kazakhstan-issued bank cards in circulation increased by 8 million in the space of one year alone. Of that total, 4.5 million were international payment system cards.
In recent days, there has been chatter around another Kazakh bank: CenterCredit. On May 31, messages began appearing on an online forum in which members share tips on how to send money from Russia to Kazakhstan about how CenterCredit is poised to stop accepting transfers from Tinkoff Bank as of June 5.
CenterCredit has furthermore cut off dealings with two other Russian banks subject to sanctions: Sberbank and VTB.
Anxiety in Kazakhstan about the possible threat of secondary sanctions was heightened in late April, following a visit from Elizabeth Rosenberg, the assistant secretary for Terrorist Financing and Financial Crimes at the U.S. Treasury Department. Speaking at a roundtable in Astana, Rosenberg warned that the risk to Kazakh companies from secondary sanctions related to Russia was increasing and that loopholes needed to be addressed.
When quizzed on this matter, Madina Abylkassymova, the chairwoman of the government’s financial market regulator, insisted that all second-tier banks and financial services companies in Kazakhstan had significantly strengthened compliance procedures.
“All requirements are being upheld. The main issue is that when trading operations are being effected, the banking system should not be exploited to circumvent sanctions,” Abylkassymova said.
The data do attest to a reduction in the volume of money gushing in from Russia to Kazakhstan.
The National Bank has reported that the equivalent of around $23 million was transferred from Russia to Kazakhstan in April, which is 44 percent less than in the same month in 2022. Over the same month, Russia remained the leading country in terms of incoming money transfers to Kazakhstan, accounting for 39 percent of the total amount received, significantly ahead of the second-place country, South Korea, with its share of 10 percent.