Russian entities have exploited vulnerabilities in the global correspondent banking system to circumvent Western sanctions, according to an analysis of financial documents and transactions. Central to this operation is Zhejiang Chouzhou Commercial Bank, a regional Chinese lender based in Yiwu, which has served as a conduit for Russian front companies seeking access to U.S. dollar-denominated financial services.

Chouzhou Bank provides correspondent banking services, a common financial arrangement enabling smaller banks to offer international payment capabilities through accounts maintained at major global banks. This setup allows regional institutions to facilitate cross-border transactions without maintaining their own foreign branches. However, it also creates multiple layers of intermediaries, which can obscure the origins and recipients of funds.

Since Russia’s invasion of Ukraine in 2022, entities connected to the country have increasingly utilized these weak points in the financial system to evade sanctions imposed by the United States and its allies. Internal records from A7, a Moscow-based financial services firm whose database was compromised by hackers, reveal that over 50 companies providing restricted goods—including advanced electronics and industrial chemicals essential for military equipment—held accounts at Chouzhou.

For example, in January 2025, documents show a Russian firm purchased $73,000 worth of components for electronic warfare systems via a Hong Kong distributor known for dealing with Russian buyers. The transaction was arranged by First Abu Dhabi Bank, an Emirati institution, which routed payments through Chouzhou’s correspondent account at Bank of America. As is typical, Bank of America processed the payment without detailed insight into the nature of the goods or end users, due to the layers of banking intermediaries involved.

Bank of America abruptly terminated its relationship with Chouzhou’s U.S. correspondent account in June 2025, but the Chinese bank continues to access the dollar system through accounts at Citibank, JPMorgan Chase, and Standard Chartered. These relationships enable dozens of banks—many from countries with close economic links to Russia and which lack direct access to U.S. financial services—to maintain dollar banking capabilities.

Representatives from the involved banks emphasized their compliance with regulatory standards and cooperation with law enforcement to identify and prevent illicit activity, underscoring the complexity of monitoring correspondent networks. JPMorgan declined to comment.

The correspondent banking framework is a longstanding but opaque element of international finance, underpinning the dominance of the U.S. dollar in global trade. It works by allowing local banks to conduct foreign transactions through intermediary accounts held at major international banks. While this facilitates global commerce, it also distances primary banks from the end users of transactions, complicating efforts to enforce sanctions.

Efforts to tighten oversight intensified after the 9/11 attacks, leading some banks to reduce correspondent ties with high-risk jurisdictions. Yet, regulators have sought to balance anti-money laundering measures with the need to keep dollar transactions accessible worldwide. In 2016, the U.S. Treasury relaxed requirements for banks to vet their correspondent clients’ customers, inadvertently allowing some illicit activity to slip through the system.

Chouzhou, founded in 1987 and deeply embedded in Yiwu's robust manufacturing and trading environment, has expanded its role as a correspondent bank significantly. It offers dollar account access to nearly 70 other banks, a substantial network compared to global giants like HSBC and the Industrial and Commercial Bank of China. In 2024, Chouzhou processed over $200 billion in international transactions, far surpassing its total assets. At a recent Miami financial conference, the bank advertised connections to more than 1,000 banks and the capacity to handle payments in 27 currencies.

Although Chouzhou ceased direct dealings with Russian and Belarusian banks early in 2024 amid mounting scrutiny, it has maintained correspondent relationships with financial institutions in countries identified as potential hubs for Russian sanctions evasion, including Kyrgyzstan, Georgia, and Uzbekistan.

This intricate web underscores ongoing challenges in enforcing sanctions in a globally interconnected financial system, where correspondent banking’s layered structure can be exploited to obscure illicit transactions while enabling legitimate international commerce.