Another major headache is a 2017 law that allows the U.S. to penalize foreign entities that trade with sanctioned companies, countries and individuals. For any bank that wants to be able to transact in dollars, the consequences could be drastic.

“Chinese financial institutions are taking these sanctions seriously and being very careful about understanding what the risks are,” said Chen Zhu, a Hong Kong-based partner at Morrison & Foerster LLP. Due to the broad Western actions, “there’s now less room for Chinese companies and financial institutions to be doing business with Russian counterparts,” he said.

These secondary sanctions have hindered Chinese banks in the past. After the U.S. sanctioned Hong Kong Chief Executive Carrie Lam in 2020, she said she lost access to banking services and had to collect her salary in cash. Neither mainland Chinese nor Hong Kong banks could step in.