The Bank of Russia temporarily eases individual currency control requirements owing to the spread of COVID-19

Information Letter No. IN-014-12/71 of the Bank of Russia dated 17 April 2020 “On the application of individual provisions of the Bank of Russia’s regulations relating to currency control during the period between 30 March 2020 and 1 July 2020” has been published.

In this letter the Bank of Russia informs as follows:

• the timeframe for the residents to provide certificates relating to supporting documentation as well as documents relating to the performance of currency transactions[1] does not include the period between 30 March 2020 and 1 July 2020 (inclusive);
• if the residents do not provide the above certificates and documents or provide them with a delay after the period between 30 March 2020 and 1 July 2020 (inclusive) ends, the authorised banks will report the violation to the currency control authorities in the event that the residents do not provide such documents before 22 July 2020 (inclusive).

22 July is the date when 15 business days expire following the period between 30 March 2020 and 1 July 2020. This is the specific procedure for calculating the timeframes that is set out in the Bank of Russia’s additional newsletter relating to this issue (clause 4.3 of the Bank of Russia’s Information dated 17 April 2020 “The Bank of Russia has approved additional measures to protect the interests of citizens, to support the issuing of business loans and to temporarily ease the measures aimed at combating the legalisation (laundering) of the proceeds of crime and financing of terrorism as well as currency control”[2]). 15 business days is the usual timeframe for submitting documents and information under Instruction No. 181-I.

At the same time, the Bank of Russia emphasises in its letter that the following requirements should be met: the procedure and the relevant timeframes for the resident to perform the currency operation to withdraw money from its settlement account, and the requirements for registering the import contract with the authorised bank.

Also, the Bank of Russia clarifies that authorised banks should report violations of the repatriation obligations under export foreign trade contracts within the usual timeframes.

The letter points out that the specified approach has been agreed with the Russian Federal Customs Service (the “Federal Customs Service”) and with the Russian Federal Tax Service (the “Federal Tax Service”).

Please note that the timeframes set out in the letter have been established at the level of the Bank of Russia's Instruction (No. 181-I dated 16 August 2017). Changes to the instructions relating to currency control issues have always been made by Directions of the Bank of Russia. The wording of the disposition of the elements of the violation under article 15.25 of the Russian Code of Administrative Offences is as follows: non-compliance with (a violation of) the established procedure (timeframes). The answer to the question of whether the Bank of Russia’s information letter can be treated as an item of legislation setting the timeframes (even if such timeframes are temporary) should be: no, it cannot. The Bank of Russia adopts items of legislation in the form of directions, regulations and instructions, and items of legislation regarding currency control are subject to registration with the Russian Ministry of Justice[3]. Currently, measures do need to be taken promptly, and in any case this letter is guidance for banks. However, specifically the tax and customs authorities, not the banks, impose fines for non-compliance with the timeframes. In formal legal terms, the Bank of Russia’s letter does not change the timeframes for submitting documents set out in the Instruction, but only provides for measures aimed at preventing the currency control authorities from identifying the relevant violations, since banks will not report information concerning such violations. However, the tax authority may (again, in formal legal terms) identify violations of such timeframes independently during a tax audit and subsequently schedule an audit of compliance with currency legislation (clause 18 of the Guidelines adopted by order No. MMV-7-17/418s of the Federal Tax Service dated 26 August 2019). The only ground for assuming that the Federal Customs Service and the Federal Tax Service do not intend to impose fines on residents for the relevant violations is that the Bank of Russia’s letter points out that the described approach has been agreed with the specified federal services. The following wording of the Bank of Russia’s newsletter also begs the question (clause 4.3 of the Bank of Russia’s Information dated 17 April 2020): “The Bank of Russia grants a right to credit institutions not to take into account the period between 30 March 2020 and 1 July 2020 (inclusive) when calculating the timeframes for the residents to provide certificates relating to supporting documentation as well as documents relating to currency transactions...”. If it is a right that is meant here, credit institutions are also entitled not to use it. However, the above wording is likely to mean that the banks have the right not to perform their obligation to keep records of violations in this respect because another letter (letter No. IN-014-12/73 dated 17 April 2020) and the same Information of the Bank of Russia explain that the Bank of Russia will not apply to credit institutions any measures for violations committed by authorised banks with regard to the timeframes for reporting information to currency control authorities in the period between 30 March 2020 and 1 July 2020.

What to think about and what to do

In the existing situation, the temporary easing of the requirements for residents to submit certificates regarding the supporting documentation and the documents relating to currency transactions, should definitely be welcomed. At the same time, hopefully the submission by residents of documents in violation of the usual timeframe, but before 22 July 2020, will not be subject to administrative liability for the two subsequent years (the limitation period) with a reference to the Bank of Russia’s letter lacking sufficient legal force and to the resident failing to do its best to avoid the violation.

With a view to mitigating such risks we recommend exercising due care and avoiding a delay in the filing of documents and information with the banks if it is actually technically possible to file such documents.

Also, in the existing situation we recommend analysing once more whether the currency transactions being carried out and the agreements concluded with non-residents entail any risks of a violation of currency legislation which may arise when states are applying restrictions and when the economic environment is changing.

Help from your adviser

Pepeliaev Group’s specialists are ready to provide comprehensive legal support in identifying and mitigating the risks of liability being imposed for violations of currency legislation, including to check the agreements and transactions for currency risks, to assess whether an offset of counter claims under an agreement is lawful and to represent an entity and its employees before the currency control authorities and in court.