How did Citibank’s freeze block Severstal’s March 16 test payment?

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Citibank's Freeze Prevented Severstal's Test Payment from Reaching the Issuer

Citibank, acting as the US correspondent bank for the issuer, froze a test payment sent by Russian steel giant Severstal on March 16. This action prevented the US$12.6 million interest payment from reaching the issuer's account, thus hindering Severstal's ability to meet its eurobond obligations on time. The freeze was reportedly implemented due to ongoing regulatory investigations.
Payment Intercepted by US Correspondent Bank

Severstal initiated a "test payment" on March 16 with the intention of fulfilling its debt obligations. However, this payment was intercepted by Citibank, the US correspondent bank for the Luxembourg-based issuer. The payment did not proceed to the intended recipient's account, creating an immediate obstacle for the Russian company.
Regulatory Investigations Cited as Reason for Freeze

The freezing of Severstal's payment was attributed to "regulatory investigations." While the specific nature of these investigations was not detailed, such actions by correspondent banks typically occur when there are concerns about compliance with sanctions or other financial regulations related to the parties involved in the transaction.
Severstal Seeks Licences to Process Payment

In response to the blocked payment, Severstal indicated its intention to seek licences from relevant authorities. This suggests the company is exploring avenues to gain official permission to process the transaction, acknowledging the need to navigate the complexities arising from the regulatory freeze. Severstal stated it maintains a stable financial position and possesses the necessary resources to meet its obligations.

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How did Citibank’s freeze block Severstal’s March 16 test payment?

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