On 2 December 2019, the President of the Russian Federation signed Federal Law No. 398-FZ (“Law No.398-FZ”) which made the latest significant amendments to the Federal Law on Currency Regulation and Currency Control (the “Currency Regulation Law”). The amendments, that were adopted, will affect individuals who are currency residents of Russia (“Residents”) and have accounts at foreign banks.
Residents are defined as all citizens of Russia, as well as foreign nationals permanently residing in Russia. The Currency Regulation Law does relax the rules on working with foreign bank accounts for Residents who live outside of Russia more than 183 days a year.
According to Russia’s currency regulations, there are a limited number of grounds on which Residents may credit funds to their foreign bank accounts. Crediting funds on grounds not contemplated by the Currency Regulation Law results in a fine of between 75 percent and 100 percent of the amount credited. Subsequent currency transactions with the use of funds credited not in compliance with the Currency Regulation Law constitute a separate violation, which is also subject to a fine of between 75 percent and 100 percent of the amount debited.
The Currency Regulation Law was amended in August 2019 (we considered those amendments in our previous alert). Those amendments lifted, starting from 2020, the restrictions on crediting funds from currency nonresidents to accounts in FATF or OECD member state banks. Though those countries must be on the list of countries automatically exchanging financial information with Russia. The list will be published on the website of Russia’s Federal Tax Service.
Law No. 398-FZ has updated the amendments that were adopted in August 2019. Now, in order to be able to credit funds from nonresidents to foreign accounts without restriction, those accounts do not have to be opened in a FATF or OECD member state. They must be opened at a bank located in:
- EAEU member states (Armenia, Belarus, Kazakhstan, Kirghizia)
- Countries automatically exchanging financial information with Russia according to the list of countries to be published on the Federal Tax Service website
The new rules will apply to relations that arose as of 1 January 2018, to the extent they alleviate the situation of Residents and expand the list of countries. Essentially the rules for working with accounts at non-FATF or OECD member state banks will be relaxed, if those states are listed on the Federal Tax Service’s website. Cyprus is expected to be one of those countries.
At the same time, the new rules create restrictions on working with accounts at banks in countries that will not be on the list published on the Federal Tax Service’s website. In particular, it will not be possible to receive coupon yield or proceeds from the sale of securities on accounts at banks in countries not on that list. It is anticipated that the United Kingdom and United States will be among those countries. Notably, the restrictions will apply to personal accounts, not to accounts opened in the name of Residents’ foreign structures (companies, trusts).
Thus, holders of accounts at banks in OECD/FATF member states that do not exchange financial information with Russia should stop conducting previously permitted currency transactions on those accounts and consider the possibility of transferring funds and securities portfolios to a bank in a country that is on the Federal Tax Service’s list.
Dentons’ Tax practice has extensive experience advising individuals on
working with foreign accounts (deposits) in light of Russian currency regulation
and currency control restrictions and would be happy to provide you with
comprehensive legal support.
 Article 15.25(1) of the Russian Federation Administrative Offenses Code
 The transactions contemplated by Article 12(5.1) of the Federal Law on Currency Regulation and Currency Control (e.g., crediting of dividends, interest on bonds, rental income, proceeds from the sale of certain securities).