UAE revokes licence of Russia’s MTS Bank

Creative Commons/Epifantsev

• MTS must wind down operations in six months
• Action follows US sanctions on MTS issued in February

The UAE central bank on Friday revoked the Abu Dhabi licence of Russia’s MTS Bank, five weeks after the United States and the UK placed the Moscow-based lender under sanctions.

MTS must close its UAE operations, including shutting its Abu Dhabi branch, within six months, according to a statement issued by UAE state news agency WAM.

During this winding-down period, the branch cannot open new accounts or conduct transactions aside from completing prior obligations, the statement said.

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MTS was one of 83 Russian entities and 22 individuals upon which the US imposed sanctions on February 24. The treasury said the aim was to isolate Russia from the global economy and hinder its ability to “obtain the capital, materials, technology, and support that sustain its war against Ukraine”.

Earlier sanctions already covered around 80 percent of Russian banking sector assets, according to the US.

MTS Bank was founded in 1993 and has around 12 million clients, according to its website. It received a licence from the UAE central bank in 2022.

Parent firm Mobile TeleSystems claims to be Russia’s top mobile operator, with around 88 million subscribers. Its largest shareholder is Vladimir Evtushenkov, whom Britain placed under sanctions in April 2022.

Russian exports to the UAE totalled $4.62 billion in 2021, mostly refined petroleum, diamonds and asphalt, the Observatory of Economic Complexity estimates.

‘Open for business’

The UAE has remained neutral in the Ukraine conflict, and Russian tourists, real estate investors and business owners have been flocking to the Gulf state.

As of 2019, around 100,000 Russian speakers including 40,000 Russian nationals lived in the UAE, according to the Russian embassy.

The UAE has seen a surge in the number of Russian individuals and companies looking to set up businesses in the Gulf state, industry experts told AGBI earlier this year.

Dubai-based CBD Corporate Services, which helps companies to set up in the UAE, said the Emirates “remains open for business with Russian individuals and organisations,” but added that it operated “a thorough due-diligence regime”.

The firm said it had recorded a 34 percent increase in foreign direct investment by Russian companies into the UAE in 2022, mainly in the general trading and consulting sectors. Most of the new entrants were classed as sole proprietorships and startups. 

“Despite the EU sanctions against Russia remaining in place, we still expect foreign direct investment and new market entrants to continue an upward trajectory, anticipating Russian businesses to have an additional market share in the UAE of over 20 percent by the end of 2023,” a spokesperson said.

The US last year warned UAE banks that they faced sanctions if they were found to be processing financial payments for those close to the Kremlin government.

At a round-table of the United Arab Emirates Banks Federation during a two-day visit to the country in June, deputy secretary of the US Treasury Wally Adeyemo warned that “failing to do the sufficient due diligence needed to know your customers is not a defence”. 

He also pointed out that non-US entities may themselves be subject to sanctions from the US Office of Foreign Assets Control if they provide assistance or support to Russian clients attempting to circumvent the sanctions in place since the start of the Ukraine war.