By John Meyer, consultant in financial affairs – Eurasia Business News, July 28, 2024. Article n°1110.
The Russian American Express Bank filed for its liquidation in July this year, and actually stopped conducting transactions for Russian clients in 2022. Prior to that, American Express left Russia almost 100 years ago, after the revolution in 1917. The company was courier, tourist, but better known in the world as financial – it was American Express that invented modern traveler’s checks and issues one of the most famous credit cards in the world. In Russia, American Express Bank did not become a leader either in tourism or in karting, but it found its niche, for which its departure was quite painful.
American Express announced on March 6, 2022, that it would suspend all operations in Russia and Belarus. This decision meant that American Express cards issued globally will no longer work within Russia, and cards issued in Russia will not function outside the country. The company had already cut ties with Russian banks affected by U.S. and international government sanctions.
In early July, American Express Bank, a subsidiary of the American Express Company, filed an application for the liquidation of the legal entity, which appeared in the SPARK system, a Russian business database. Many Russian subsidiaries of foreign banks have announced plans to leave Russia in 2022, but American Express Bank will be the first to do so under the new rules. At the end of May, the Russian President Vladimir Putin signed a decree that allowed the voluntary liquidation of American Express Bank. This permission was necessary because, according to the presidential decree of August 5, 2022, companies from unfriendly countries need to agree with the Russian state on any method of their departure from the country, including through liquidation. The presence in Russia of American Express, which began more than a century ago, and lasted without interruption for 67 years, since 1957, ended in July 2024.
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The American Express office firstly opened in Russia in 1916 and was located in St. Petersburg in a building near the Bank Bridge. But it did not last long: due to the October Revolution in 1917, the representative office was closed. The American Express office was reopened in the Moscow hotel “Intourist” (today “Metropol”) in 1957, and at the same time the state joint-stock company for foreign tourism in the USSR “Intourist” opened its office in New York. From 1957 to 1992, the Moscow office of American Express was mainly engaged in the provision of tourist services, while issuing traveler’s checks to Soviet state employees going on foreign business trips. In 1969, the American Express office organized the acceptance of payments with cards of this payment system from foreign tourists.
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By the early 1990s, the Russian office of American Express was mainly engaged in travel services, it employed ten people, of whom two were Americans, the rest were Russians. In the 1990s, permission was obtained from the Russian Central Bank to issue cash to American Express cardholders – he wrote a bank check and received cash on this check, and then the amount received was debited from his account. Since 1993, this office began to deal with traveler’s checks, and the office in Moscow was responsible for 15 countries of the former USSR, where American Express checks were sold and cashed.
At the time, American Express included Moneygram, the world’s second-largest remittance company. It did not have its own office in Russia, and the Moscow office of American Express helped Moneygram negotiate with banks to establish international money transfers. In addition, the Russian office helped the European office to establish correspondent relations with banks in the countries of the former USSR – credit institutions from the post-Soviet space established correspondent accounts with American Express Bank, which had correspondent relations with 400 banks around the world.
In 2005 a representative office of the global American Express Bank was organized in Moscow, and on December 15, 2005, American Express Bank was registered. The bank’s main product was then a corporate credit account. The American Express Business Travel Account, AmEx’s first ruble product for corporate clients in Russia, was offered in March 2010.
Before 2022, about 60% of Russian travel companies used American Express to book hotels, as well as air and train tickets. But on March 6, 2022, American Express Bank stopped conducting operations in Russia. And since its was the only one who had this product, there was a serious shock in the country’s tourism industry due to the termination of its service to Russian companies.
This exit from the Russian market is part of a broader trend of Western companies withdrawing from Russia in response to the special military operation in Ukraine, significantly impacting financial services available to Russian consumers and businesses.
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© Copyright 2024 – Eurasia Business News. Article No. 1110.
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