On 26 April 2022, the European Central Bank (ECB) issued FAQs on the Russia-Ukraine war and ECB Banking Supervision.

The FAQs cover a number of issues including:

• The ECB’s role in the financial sanctions adopted by Russia and particular aspects it is looking at.
• What a bank should do if it is unsure about what is prohibited under the sanctions.
• What happens if banks do not comply with financial sanctions.
• The extent of European banks’ exposures in Russia and Ukraine.
• What he ECB is doing to ensure banks are equipped to handle possible cyberattacks.

In terms of what the ECB is particularly focussing on in light of the sanctions, the FAQs state that the ECB is looking at banks’ governance and internal control systems as they play a critical role in steering a bank’s compliance with the sanctions. In practice, this means checking that the bank is well equipped to comply with the sanctions in the first place. This includes having strong oversight from the board and senior management on the impact of the sanctions regimes for the whole group. It is also crucial that the bank has strong internal control functions in place, for instance a proactive compliance department to monitor developments under the different sanctions regimes and assess their impact on the bank, as well as risk management arrangements for the approval of transactions and engagement with clients. Overall, banks need to ensure that their processes can mitigate legal and reputational risks.