Amendments to the rules concerning administrative liability for violations of currency legislation

Pepeliaev Group advises of the signing of Federal Law No. 72-FZ dated 1 April 2020 “On amending articles 15.25 and 23.1 of the Russian Code of Administrative Offences”.

The Law provides for the following adjustments, which took effect starting from 12 April 2020:

• A new type of sanction, in the form of a warning, has been introduced into parts 4, 4.1 and 5 of article 15.25 of the Russian Code of Administrative Offences (the “Administrative Code”).

Previously the rules concerning administrative liability for the non-fulfilment of repatriation provided for only a fine as a sanction. The possibility of replacing a fine with a warning was available only under the procedure in article 4.1.1 of the Administrative Code (for small and medium-sized enterprises that had committed a violation for the first time in the absence of harm or of damage to property). However, in practice, currency control authorities did not apply this rule. Moreover, they regularly stated that a warning is not applicable to violations of currency legislation since, in their view, such violations entail a threat of harm being caused to the economic security of the state.

The amendment that has been adopted is positive in the sense that finally a sanction in the form of a warning is expressly provided for in parts 4 and 5 of article 15.25 of the Administrative Code. However, taking into consideration that currency control bodies are always extremely unwilling to apply the general rules of the administrative code that allow a fine to be reduced or cancelled (non-materiality, a fine below the minimum amount, the replacement of a fine with a warning under the procedure in article 4.1.1 of the Administrative Code), there is only a low probability that they will independently apply a sanction in the form of a warning. The risks therefore remain of a confiscatory fine being imposed. To justify the possibility for a warning to be applied, proof will be required that there are the conditions for this type of sanction, as stipulated by article 3.4 of the Administrative Code. In other words, the offence should be committed for the first time, there should be no harm and no threat of harm or of damage to property, and all possible mitigating and exceptional circumstances should be proved.

• Officers will face disqualification for repeated violations under parts 1, 4, 4.1 and 5 of article 15.25 of the Administrative Code only if an officer had a fine rather than a warning imposed for a previous violation.
• Parts 4, 4.1 and 5 of article 15.25 of the Administrative Code will not be applied to violations the amount of which is more than RUB 100 million. Therefore, the amendments described above (a sanction in the form of a warning and disqualification if a fine has previously been imposed) do not apply to such violations.
• For violations the amount of which is more than RUB 100 million (for a one-time violation or violations committed more than once within a year in relation to currency transactions that are carried out, including when there is a delay in crediting funds) there is a separate body of an offence under part 5.2 of article 15.25 of the Administrative Code. A sanction in the form of a warning is not stipulated for such a violation. The fine for companies remains as before (a fine calculated based on the number of days of the delay, or a fine ranging from 75% to 100% of the amount of monetary funds. For officers, an increased fine or disqualification (with no condition that the offence must be repeated) is stipulated. Cases concerning such offences will fall within the jurisdiction of judges. In other words, it will be a court, rather than a tax or customs authority, that hands down a resolution to impose liability. At the same time, the law does not amend the rule containing the list of cases to be considered by a state commercial court (part 3 of article 23.1 of the Administrative Code). Accordingly, until amendments are made, cases will be considered by magistrates’ courts.

Meanwhile, for officers, there is a tightening of administrative liability with respect to such bodies of administrative offences. To a degree, the amendments to article 193 of the Russian Criminal Code, adopted in parallel, make up for this[1]. In view of such amendments, only a person who has previously had administrative liability imposed can be prosecuted (as long as it is not a question of a violation in a particularly large amount). In fact, the element of the offence under which subsequent criminal liability under part 1 of article 193 of the Russian Criminal Code is possible has been separated out into the new part 5.2 of article 15.25 of the Administrative Code.  For more detailed information about the issue of criminal liability, please refer to Pepeliaev Group's alert dated 6 April 2020 (https://www.pgplaw.ru/analytics-and-brochures/alerts/federal-law-correcting-criminal-liability-for-committing-tax-and-currency-crimes/).

What to think about and what to do

If a resident issues loans or enters into foreign trade contracts for an amount greater than RUB 100 million (on conditions of deferred payment for export contracts or of an advance payment for import contracts), it should be understood that, if the repatriation obligation is not performed, the company’s officers may immediately face disqualification, even if the offence is not a repeated offence. No provision is made for a sanction in the form of a warning for such bodies of offences.

With respect to loans and contracts for an amount less than RUB 100 million, it is not enough, when assessing the risk of having liability imposed, to rely on the list of sanctions containing a warning. It should be understood that practice could, as before, go down the path of applying a warning only in exceptional cases where fines are challenged in court.

We recommend assessing the measures that your company applies to reduce the risk that the repatriation obligation will not be performed, and of the company and its officers facing liability. If necessary, these should be adjusted taking account of the current administrative and judicial practice in relation to such disputes.

Help from your adviser

Pepeliaev Group's lawyers have a successful track record of representing companies and their employees before currency control bodies and in court. We are ready to provide comprehensive legal support in terms of identifying and mitigating the risks of having liability imposed for violations of currency legislation, challenging resolutions that may be handed down to impose an administrative punishment, and in relation to other matters associated with the application of currency legislation.