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20 December 2017 Foreign Exchange Regulation Law and Russian Code of Administrative Offences Amended

Legal update No 621

Goltsblat BLP advises that Federal Law No. 325-FZ “On Amending Articles 19 and 23 of the Federal Law “On Foreign Exchange Regulation and Control” and the Code of Administrative Offences of the Russian Federation (the “CAO”) published on 14 November 2017 (the “Law”) will come into force on 14 May 2018.

The Law introduces new requirements on foreign currency transactions and repatriation of foreign currency proceeds and amends several provisions concerning administrative liability for violating foreign exchange laws.

The most vital provisions of the Law include the following:

1. From now on, foreign trade contracts between residents and non-residents should specify the dates on which their obligations are due.

2. Residents will have to advise authorised banks of the due dates for receiving foreign or Russian currency from non-residents in discharge of obligations under foreign trade contracts or for performance by non-residents of their obligations to deliver goods, perform works or services, transfer information or intellectual products to residents against advance payments. Currently, residents need to inform banks of the maximum expected timeframe for such deliverables.

3. Residents will now have to advise authorised banks of the deadlines for returning advance payments made to non-residents under foreign trade contracts.

4. The list of grounds for authorised banks to refuse foreign currency transactions is extended. The banks will not handle transactions if they do not meet the requirements on foreign currency transactions between residents, violate requirements related to residents’ accounts with foreign banks or violate the provisions on residents’ rights and duties specified in Articles 9, 12 and 14 of Federal Law No. 173-FZ “On Foreign Exchange Regulation and Control in the Russian Federation” dated 10 December 2013 (the “Foreign Exchange Law”).

A bank will also refuse to carry out foreign currency transactions if they do not comply with any other Russian foreign exchange legislation, the documents provided by the resident do not conform to the requirements of the Foreign Exchange Regulation Law or the documents specified in Part 4, Article 23 of the Foreign Exchange Regulation Law have not been submitted.

The banks will inform residents of the refusal to carry out foreign currency transactions in writing within one business day of the relevant decision.

5. The Law amends the definition of “official” with reference to offences set forth in CAO Parts 1, 4, 4.1 and 5, Article 15.25.

Currently, under note 1 to CAO Article 15.25, for the purpose of these Parts, officials are understood as unincorporated individuals engaged in business. This note is abolished by the Law and the general provisions on liability of officials specified in CAO Article 2.4 will apply. Consequently, not only legal entities but also their CEOs and other employees with organisational, managerial, business or administrative functions are to be held administratively liable for illegal foreign currency transactions or failure to comply with the requirements on repatriating foreign currency.

Under CAO Parts 1, 4, 4.1 and 5, Article 15.25 officials are, in all cases, punishable by a fine of RUB 20,000 to RUB 30,000.

6. Simultaneously, the Law introduces liability for offences provided for in CAO Parts 1, 4, 4.1 and 5, Article 15.25 and committed by officials previously held liable for similar administrative offences (CAO Part 5.1, Article 15.25).

In this case, the official is to be disqualified by a general jurisdiction court for six months to three years.

The Law does not define “similar offence” for the purposes of CAO Part 5.1, Article 15.25, so this might lead to legal disputes in practice.

Whether an official was previously held administratively liable is determined pursuant to CAO Article 4.6 prescribing that a person be considered to be held liable from the effective date of the administrative penalty resolution until one year from enforcement of that resolution being completed.

7. A new procedure for calculating fines is set out in CAO Parts 4 and 5, Article 12.25. Instead of the Russian Central Bank’s refinancing rate, its key rate will be used to determine a percentage coefficient applied to the base for calculating fines (i.e., to amounts not credited or returned to accounts with authorised banks on time).

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