Parents of International Students Worry Over Russian Financial Sanctions... Risky Proxy Remittances Rampant

'SWIFT Exclusion' and Other Russian Financial Sanctions Become Reality
Remittances May Be Blocked... Parents of International Students Worry
Easy Remittance Companies Already Announce "No Remittances to Russia"
Growing Anxiety Leads Some to Recruit Proxy Remittance Agents

An employee is organizing Russian currency, the ruble, at the Counterfeit Response Center of the Hana Bank headquarters in Euljiro, Jung-gu, Seoul.
[Image source=Yonhap News]

Mr. Kim Sun-hyung (56, pseudonym), who is married to a Russian woman, sends 500,000 KRW every month to his wife and daughter living there. He has mainly used convenient remittance services with low fees, but from this day onward, remittances to Russia have become impossible. When he asked the company for the reason, he was told, "Due to the risk of Russian sanctions, and we do not know when the service will resume." Mr. Kim said, "For now, I can use other bank platforms, but I am very worried about how to send money if sanctions are tightened," adding, "Although I feel uneasy, I might have to entrust proxy remittance even for small amounts."

As Russia has been excluded from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), known as the 'financial nuclear bomb,' those who have relatives or business partners there are facing an emergency. As sending money to Russia becomes increasingly difficult, risky 'tricky remittance methods' are also spreading.

According to the financial sector and related communities on the 2nd, a so-called 'proxy remittance' method is secretly becoming popular among those who have students, relatives, or business partners in Russia.

Proxy remittance usually starts by finding people living in Russia who have both Russian and Korean bank accounts. After sending a certain amount including fees to their Korean account, the sender simply sends the local account and recipient information via messenger. The resident in Russia then deposits the money (in rubles) into the local account at the agreed exchange rate, completing the proxy remittance.

Korean businessmen and workers residing in Russia also appear to be recruiting for proxy remittance. Although remittances to Korea are not completely blocked, the ruble’s value has plummeted, causing huge exchange losses when converting to dollars before sending money. By receiving Korean won in the Korean account at a self-determined exchange rate and delivering rubles to the Russian account, they can effectively avoid exchange losses.

Despite High Fraud Risks, Proxy Remittance Recruitment is Unavoidable

The problem is that proxy remittance carries a very high risk of fraud and there is no way to guarantee safety, making it extremely dangerous. Although photos verifying business registration certificates or Russian accounts are posted in communities, there is no way to recover money if the person absconds after taking the funds. Fees are also relatively high. Based on the exchange rate on this day, 1 ruble is traded at 10.95 KRW. Proxy remittance usually costs 16 to 20 KRW per 1 ruble including fees, which is similar to the rate before the ruble’s sharp decline.

Nevertheless, proxy remittance has spread since the Russian SWIFT exclusion measure became visible on the 28th of last month. SWIFT exclusion has the effect of blocking international financial transactions. Over 200 countries and more than 11,000 banks use SWIFT’s network when exchanging foreign currency. Normal remittances, investments, and refinancing become difficult, earning it the nickname 'financial nuclear weapon.' South Korea plans to fully suspend financial transactions with Sberbank and six major banks (VEB, PSB, VTB, Otkritie, Sovcom, Novikm) as part of its participation in financial sanctions.

Accordingly, major convenient remittance companies have begun to suspend remittance services to Russia. The remittance service provider 'Hanpass' has indefinitely suspended remittance services to Russia. Although the list of banks sanctioned by SWIFT has not been disclosed, they took preemptive action due to increasing risks. The overseas remittance application (app) Centbee, downloaded by over 500,000 users, has also become unable to send money to Russia.

The government plans to support the opening of alternative accounts once the SWIFT-excluded banks are decided. Last year, major commercial banks sent about 6.25 million USD (7.5 billion KRW) to Russian students and expatriates. The trade volume reaches 27.3 billion USD (32.6 trillion KRW).

This content was produced with the assistance of AI translation services.