The Central Bank will tighten control over foreign exchange transactions of citizens

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The Bank of Russia has published for public comment the draft guidelines aimed at tightening control over foreign exchange operations of Russian businesses and individuals. According to the document, the threshold value of the amount of obligations under foreign trade contracts and loan agreements, which the company needs to issue a transaction passport, cut in half — to $25 thousand

The transaction passport is issued on the contract between the resident and non-resident and the calculations on it are done through the account of a resident opened in the Bank — Russian or foreign. Transaction passport is a mandatory document to undergo operation which applies exchange controls. The passport of the transaction, among other things, must contain information about the Russian resident and its foreign counterparty, as well as General information the transaction (in particular, the value of the sum). Banks, which issued such passports of transactions, and transmit them to the bodies and agents of currency control, the law says. The number of currency control agents — customs and tax authorities, to the law.

The right to demand registration of the passport of the transaction the Bank in 2011, the law on currency control. However, the Central Bank imposed this requirement only for legal entities, individual entrepreneurs and those engaged in private practice. Now the regulator, according to the draft document proposes to extend these rules of currency control and Their individuals. the Central Bank also proposes to oblige to report on loans to non-residents and to arrange for such transactions passport.

Introducing requirements for resident individuals, the Bank refers to article 20 of the law on currency control. This article allows the regulator to require the residents to prepare in authorised banks of the passport of transactions in currency transactions with nonresidents, but this rule is General, it is not konkretisiert who is required to report companies or individuals. The requirement of execution of transaction passport aims to “ensure accounting and reporting on currency operations and currency control”, the law says.

The new regulation of the Bank of Russia will apply to residents making foreign exchange transactions, designated banks, stated in the explanatory note to the draft guidance. Planned date of entry into force of the Guidance provided after 60 days after the date of its official publication. Comments and suggestions on the Draft are accepted from 28 June until 12 July 2016.

The reduction thresholds of the contractual obligations can be explained by the reaction of the Central Bank for the devaluation of the ruble, says senior lawyer at international law firm Goltsblat BLP LLP Artem Toropov. Changes should be evaluated in a negative way, because they are contrary to the request of a law-abiding business on liberalization of currency regulation and do not contribute to the inflow of capital to Russia, in practice such regulation will complicate the work with Russian accounts, he said.

“The regulator is trying to tighten control over questionable transactions carried out through individuals and prevent cases of capital outflow, executed through the issuance of irrevocable loans to non-residents”, – says the lawyer. Partner Paragon Advice Group Alexander Zakharov believes that the project can be associated with the “existence of an aggressive practice of using individuals loans for the uncontrolled withdrawal of currency abroad”. He believes that the good faith of the Russians submission of documents and registration of the transaction passport will not be a difficulty.

This is not the first attempt of the authorities to strengthen control over movement of currency means and to stop the outflow of capital from the country. In late January the state Duma in the first reading has approved the bill obliging Russian companies to return to Russia the loans previously issued by foreign companies and individuals. The author of the bill – the Chairman of the Duma Committee on economic policy Anatoly Aksakov said that the scheme of lending to non-residents, followed by no return being used for an illegal conclusion of money abroad. For violation of terms of return to Russia on loan to the foreign money in the bill provides for administrative liability: a penalty in the amount of 1/150 of the refinancing rate of the Central Bank of the amount returned by the deadline (for each day of delay). And for the payment of money, — withdrawal from 3/4 to the full amount of the loan.

In addition, this year the Russians have to provide FNS a report on the movement of funds on accounts and deposits in foreign financial institutions.