Russia’s sanctions prompted American Express to cut back on Ukraine’s financial lifeline

Oleg Nayandin’s international flower shop hit a chin after Russia invaded Ukraine. American Express Co.

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wire service he had used for years to pay sellers in Ukraine had suddenly stopped working.

He contacted AmEx for an explanation. A representative told him the company had suspended service in the country. “I understand Russia, but why Ukraine?” Mr. Nayandin, who is based in Fairfax County, Va., Said he told the AmEx representative.

Like many U.S. companies, AmEx suspended operations in Russia and Belarus after Western governments curtailed sanctions on the two countries. But AmEx went even further and stopped a service in war-torn Ukraine that companies use to make cross-border payments.

“In light of the war in Ukraine and the evolving sanctioning environment that has made it challenging to deliver a reliable customer experience, we suspended a bank transfer service, FXIP, used by a small number of companies to make supplier payments to recipients in Ukraine,” a spokesman said. for AmEx in a statement.

AmEx’s better known card business remains fully operational in Ukraine, the spokesman said.

Extensive sanctions aimed at paralyzing Russia’s financial system sometimes stumble people and companies out of their reach, even in Ukraine, the country they were designed to help.

Financial companies often have an overzealous approach to interpreting sanctions due to the high penalties for violations. The potential extension of sanctions to new targets can also make companies wary of who they trade with.

“From the company’s point of view, if the size of the transaction is small, why run the risk?” said Robert Clifton Burns, senior adviser at law firm Crowell & Moring LLP.

AmEx’s decision stemmed in part from concerns that payments could end up in the hands of sanctioned individuals and companies in Ukraine’s Russian-backed breakaway regions, said a person familiar with the matter.

In February, President Biden ordered broad sanctions blocking transactions with the breakaway regions known as the Donetsk and Luhansk People’s Republics. But the regions do not have clearly defined boundaries, making it difficult for companies to ensure they do not face sanctions, said Mr. Burns.

AmEx did not block card payments in Ukraine because it has more details about the parties to these transactions, making it easier to ensure compliance, the person said.

Global money transfer services such as MoneyGram,

Western Union and Wise continue to allow payments to Ukraine, even though the war has forced branch closures and other disruptions. Many of the major money transmitters have either given up or lowered fees on transfers to Ukraine, where remittances have risen sharply.

FXIP accounts for less than 1% of AmEx’s total revenue, the AmEx spokesman said. Ukraine is a small market for FXIP, accounting for only 0.1% of the platform’s volume over the past 12 months, said a person familiar with the matter.

Mr. Nayandin, from the florist, has used other services, including Western Union, after FXIP stopped working.

The consequences of severe economic sanctions against Russia are already being felt across the globe. WSJ’s Greg Ip joins other experts to explain the significance of what has happened so far and how the conflict could change the global economy. Photo illustration: Alexander Hotz

Eugene Gordiyenko was also annoyed to hear that AmEx had suspended FXIP in Ukraine.

Mr. Gordiyenko runs a small design, communications and IT consulting firm in Vienna, Va., And used FXIP to pay its eight Ukraine-based employees. In March, he discovered that the templates with his employees’ stored account information no longer existed.

He thought it was a mistake – until an AmEx representative told him otherwise. The representative put him in touch with a vice president of AmEx’s currency department.

“Do you understand that this country needs money?” Mr. Gordiyenko remembered telling her. The vice president expressed sympathy for Ukraine, Mr Gordiyenko said, but told him the decision came from higher up and was based on an internal risk analysis.

Morgan Williams, president of the US-Ukraine Business Council, blew up AmEx’s decision. “We do not believe that Ukraine deserves this kind of treatment by American Express,” he said.

AmEx has committed $ 1 million to support humanitarian efforts in Ukraine, the company spokesman said.

In 2014, some US banks cut services to Ukraine after the US sanctioned Russia over its annexation of Ukraine’s Crimean peninsula, recalled Mr. Williams. His trading group contacted the banks to explain that they misinterpreted the Crimean sanctions to target the wrong country, and they solved the problem, said Mr. Williams.

“The ignorance of that part of the world in American financial institutions has amazed us,” he said.

Write to Alexander Osipovich at and AnnaMaria Andriotis at

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