We are publishing a report on the assets of private, non-sanctioned individuals that have been frozen in the European Union.
The report answers the question of why around 3.5 million clients of the Russian financial system have effectively come under sanctions. It also contains data from one of the largest Russian brokerage firms, provided on condition of anonymity.
In partnership with the Social Foresight Group led by Anna Kuleshova, sociologist, a quantitative survey and a series of interviews with affected individuals and experts were conducted.
A total of 851 respondents participated in the survey. The broker’s data and our own survey results make it possible to form a comprehensive portrait of the Russian investor in foreign securities.
Key Findings of the Study — Questions and Answers:
Why did so many people become holders of foreign securities?
There are several reasons.
First, the technological revolution in financial services: securities could be purchased in just a few clicks — within the same mobile applications used for everyday payments.
Second, the crisis of confidence in the Russian pension system, which led many people to start building up savings independently. Moreover, in 2015, Individual Investment Accounts (IIAs) were introduced in Russia, offering tax incentives to investors.
Finally, a powerful marketing campaign for investing in foreign securities was launched by the largest Russian brokers and banks.
Among those affected are hundreds of thousands of Russians who have left the country, as well as citizens of other countries who used the Russian financial system. Many of them belong to the middle class or lower.
Why were their securities blocked in the European depositories Euroclear and Clearstream?
Foreign securities are held in European depositories, but these institutions do not see the ultimate beneficial owners, since private individuals cannot be their direct clients.
As a result, the depositories only see that the securities are held either on the balance sheets of the Russian central depository (NSD), of banks (if they had a direct connection, for example, with Euroclear), or of the settlement depository of the SPB Exchange.
All these elements of the Russian financial infrastructure are subject to Western sanctions.
What is the volume of frozen private assets belonging to individuals?
There are no precise figures due to the lack of transparency on the part of European depositories and the Ministries of Finance of Belgium and Luxembourg, as well as the Russian regulator.
The estimated amount is USD 14 billion.
Is there a mechanism for unfreezing assets belonging to non-sanctioned individuals?
Yes, but it is costly and time-consuming.
Over the past three and a half years, slightly more than 50 individual licenses for unfreezing have been issued.
Key Figures from the Broker
— 233,475 clients with frozen assets; fewer than 1% are legal entities
— 81.6% have less than RUB 100,000 frozen
— 15.1% have between RUB 100,000 and 1 million
— 2.7% have between RUB 1 million and 6 million
Indicators from Our Research
— 40.5% of respondents do not live in Russia
— 37% work in the IT and information technology sector
— The median amount of frozen assets is USD 60,000, a typical sum for the long-term savings of the middle class