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Analysts say Standard Chartered Bank Zimbabwe’s plans to stop US dollar cross border transactions for selected account holders with effect from next month is a calculated move to avoid penalties associated with dealing with corporates and individuals under the US sanctions regime.

StanChart will stop facilitating cross-border transactions for account holders the bank deems high risk and linked to the ruling Zanu-PF party.

It was not clear what criteria was used to classify the account holders.

The order is being effected by way of a clearing system that requires local banks to have an account with another in foreign jurisdiction to which it must transfer funds to pay a recipient in that territory.

This will likely hit hard the bank’s corporate and individual account holders in a development that will also negatively affect the economy.

StanChart chief executive Mr Ralph Watungwa, however, said the restrictions do not have a relationship with the current US sanctions regime.

“The criteria of classifying the account holders to be affected by this new restriction have been done through the standards of our New York vendor,” he said.

Economist Mr Brains Muchemwa said the decision will not only increase the cost of doing business for StanChart customers, but also put Zimbabwe in the limelight as a risky investment destination.

“This stance borders on sabotage and financial barbarism,” he said.

“As such, it is expected to squeeze liquidity inflows into Zimbabwe as the country risk profile would be raised to unreasonable levels.”

Mr Muchemwa also said this puts regulators and issuers of banking licences under pressure from politicians, at a time the illegal sanctions imposed on Zimbabwe by Western countries remains a thorny issue.

Former investment banker Mr Terence Mukupe said it was apparent that StanChart was taking orders from its parent company and this was tantamount to imposing sanctions on the entire country.

He said under the circumstances, the Reserve Bank of Zimbabwe should simply enforce its legislative powers to compel StanChart to provide services to all its clients in line with terms of its banking licence.

“Unless StanChart were under orders from the US Federal Reserve, they have no justification for refusing to facilitate US dollar cross border transactions for targeted account holders,” he said.

He said if it was about orders from their US-based clearing vendor, there were thousands of such service providers in the US.

“Implications of these actions entail the cost associated with it because to transact, account holders have to find alternative currency, such as the euro, rand or yuan,” said Mr Mukupe.

Other analysts said all account holders with Standard Chartered Bank would be forced to transact in alternative currencies other than the green back, which would come with its fair share of additional costs.

These include exchange rate related costs and the need to convince clients to accept other currencies that are not the universally acceptable international reserve currency, the US dollar.

“This move is going to have severe implications to customers who are expected to change currencies from US dollar to other denominations which is going to be cumbersome and will attract unnecessary costs,” said a Harare economist on condition of anonymity.

The economist said Standard Chartered Bank might be trying to run away from the cost of dealing with individuals and corporates under the illegal US sanctions.

“Penalties levied against banks for processing transactions or conducting business with companies or individuals in companies under sanctions has been frustrating, so generally it maybe StanChart is trying to run away from such costs,” said the economist.

Several other analysts expressed dismay at the move by StanChart, saying that in as much as the bank is adhering to orders from its vendor in the US, it should not forget that it holds a banking licence in Zimbabwe, which has its own dictates that should be adhered to.

“Government should penalise StanChart in accordance to the banking licence that the bank holds because some exchange issues relating to this matter are going to hit hard on the side of the client,” said another economist.

“The country’s risk profile has not been good for the past few years and with this new StanChart development, it is going to have an additional dent on the risk profile.

“The impact of this move is somewhat catastrophic at a time when the country is working hard towards securing foreign direct investments.”

In March this year, German financial services firm Commerzbank was fined $1,45 billion by the New York’s Department of Financial Services after it processed thousands of transactions funnelling billions of dollars from sanctioned entities.