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Russian Front Companies Use Chinese Correspondent Bank to Sidestep U.S. Sanctions
By Drooid · · How we work
Sanction Evasion Through a Chinese Correspondent Bank
A Bank of America account ending in 0252 held funds that did not belong to any single person or business. The money was a pooled collection of deposits from countless customers of Zhejiang Chouzhou Commercial Bank, a regional lender in Yiwu, eastern China. Among those customers were Russian front companies that have inserted themselves into the global financial system to evade Western sanctions, according to a New York Times analysis of thousands of financial documents and bank transactions.
How the System Works
Zhejiang Chouzhou provides correspondent services, allowing local banks to offer international currency services without maintaining foreign branches. Smaller banks often contract with institutions like Chouzhou to obtain correspondent accounts at large Wall Street firms, creating a “nesting-doll” structure that can conceal the ultimate origin of funds. In this case, the pooled deposits were routed through Chouzhou’s correspondent relationship with Bank of America, masking the Russian entities behind a seemingly ordinary U.S. account.
Context of Russian Sanctions
Since Russia’s invasion of Ukraine four years ago, Western governments have imposed extensive economic restrictions aimed at cutting off financing for the Russian war effort. The analysis notes that exploiting weak links in the correspondent banking network has become a key tactic for Russia to sidestep those restrictions.
Implications for U.S. Financial Oversight
The finding highlights a vulnerability in the U.S. banking system: large banks may unwittingly process funds originating from sanctioned actors when those funds are funneled through foreign correspondent banks. Regulators may need to tighten due-diligence requirements for correspondent relationships and improve information sharing with foreign partners to prevent similar sanction-evasion schemes.
*The New York Times analysis* underscores how a seemingly innocuous pooling arrangement can enable sanctioned entities to access the U.S. financial system, raising concerns about the effectiveness of current anti-sanctions safeguards.