The Russian Central Bank has introduced a procedure for maintaining a register of controlling persons for credit institutions, insurance companies and public pension funds

Pepeliaev Group advises that on 26 July 2021[1] the Russian Central Bank’s Instruction No. 5814-U dated 9 June 2021 came into legal force regarding the form, procedure and deadlines for submitting information to the Bank of Russia about controlling persons of financial institutions, and the procedure for the Bank of Russia to maintain the list of such persons.
The Instruction was adopted in furtherance of Federal Law No. 23-FZ dated 24 February 2021[2], which came into force from 1 July 2021.

Active financial institutions should originally submit information regarding their controlling persons to the Bank of Russia not later than 23 September 2021 (60 calendar days after the Instruction came into force).

comment.jpgFederal Law No. 23-FZ dated 24 February 2021 has significantly broadened the range or person who are recognised to be controlling persons; financial institutions have had new obligations imposed on them with regard to filing reports with the Bank of Russia. The Central Bank has been entitled to individually determine the persons who control financial institutions and to apply for secondary liability to be imposed and for provisional remedies to be granted.

The list of persons controlling financial institutions

The Bank of Russia maintains, for each financial institution and in electronic form, lists of the persons who control financial institutions.

comment.jpgWe remind you that the Bankruptcy Law, which is now applied for these purposes to active financial institutions[3], interprets the concept of a ‘controlling person’ more broadly, in terms of not only the corporate but any other connections of a person with the legal entity such person controls; and by doing so it extends the range of persons who have anything to do with financial institutions and who can be recognised as controlling persons for the purposes of the new procedure. Now not only in a case of bankruptcy but also during the standard activity of a financial institution, any person (including an officer who is not a member of the management board, or a person who has close family ties to a member of the management body) that is able to give binding instructions to such institution or in any other way to determine its actions, including with respect to concluding transactions and designating their terms and conditions, can be recognised as a controlling person.

The information included in the list is quite extensive: personal data of an individual, details and background information of the legal entity (code under the General Russian Classifier of World Countries[4], Principal State Registration Number and Taxpayer’s Identification Number), the legal and other grounds and dates when such grounds emerged for classifying the person as a controlling person, and other information.

According to the general rule, information about controlling persons should be published on the website of the Central Bank. In cases determined by the Russian Government, when the Bank of Russia is entitled not to post information on its website that a person has been included in the list of persons controlling the financial organisation, the latter may decide that no such information should be posted on the Central Bank’s website.

comment.jpgWe believe that implementation of the provisions of Federal Law No. 23-FZ dated 24 February 2021 and of Instruction No. 5814-U dated 9 June 2021 will increase the risks that controlling persons will be subjected to secondary or other liability. At the same time, the chances will increase for creditors of financial institutions that have gone bankrupt to have the bankruptcy estate replenished and their claims upheld.

Once a person ceases to meet the signs of a person controlling a financial organisation, the Central Bank will exclude such person from the list, but only 3 years after the signs of a controlling person cease to exist.

Documents to be filed by a financial institution

Financial institutions should forward to the Central Bank’s Department for the Allowance and Termination of the Activity of Financial Institutions:
  • an application to have information about controlling persons included (updated) in the list of persons that control a financial institution (the “List”) according to the recommended sample attaching the documents supporting such information (including concerning the grounds for excluding a person from the List or amending information about such person);
  • information about including (updating) data regarding controlling persons in the List in accordance with the form as set out in Appendix 2 to the Instruction (indicating the code of a feature for which Appendix 3 to the Instruction provides).
Features whose existence a financial institution should confirm are provided for in article 61.10, while the categories of a financial institution are set out in articles 189.23(1), 184.13(1) and 187.12(1) of the Federal Law “On insolvency (bankruptcy)”.

A financial institution may not forward supporting documents to the Bank of Russia if such documents were presented previously when information regarding controlling persons was sent or when documents were submitted for assessing compliance with the qualification criteria.

comment.jpgThe Central Bank’s maintaining the list of controlling persons of financial institutions in conformity with the Instruction does not affect the obligation of financial institutions to disclose information to the public at large regarding the persons who control or significantly influence such institutions as established by the Bank’s of Russia Instruction No. 622-P dated 26 December 2017[5].

In which cases should changes be made?

The Instruction contains a list of cases when changes should be made to a list of controlling persons that has already been formed previously. Such cases, for instance, include the following, among others:
  • excluding a person from the list and including another person,
  • the Bank of Russia recognising a person as a controlling person (excluding such person from the list),
  • liquidating a legal entity included in the list of controlling persons,
  • a court judgment entering into force that satisfies claims for having a person excluded from the list of controlling persons.

Deadlines for submitting documents

The deadlines for submitting documents depend on the ground for entering information about controlling persons. In some cases, documents should be submitted together with information reported to the Central Bank. In other cases, the deadline ranges from one to 10 business days from the date when a financial institution became aware of relevant circumstances (for instance, it has obtained a licence, a person was included in the List at the initiative of the Central Bank and other cases for which clause 1.7 of the Instructions provides).

The procedure for sending information

Documents should be submitted electronically via a personal account in accordance with the procedure for interactions between the Central Bank and financial institutions. 

comment.jpgAccording to the clarifications posted on the Central Bank’s website on 25 July 2021, forms for submitting documents regarding the persons who control financial institutions will be available in the personal account of a party to information exchange in the section “Reporting / Access Procedures / 3030 Information on the List of Controlling Persons of the Financial Institution”.

Documents should be signed by an enhanced qualified electronic signature of an authorised person.

comment.jpgPlease note that administrative liability is stipulated for the failure to submit or to timely submit information to the Central Bank. In this regard, to mitigate the risks of liability we recommend that features of controlling persons be determined from the perspective of current legislation and court practice as applicable to the type of activities of your financial institution, corporate procedures and regulations be supplemented with the algorithms allowing for such features to be established in a timely manner and actions be undertaken that are necessary for a person to be included in the List. 

If any errors are identified during the filling in of the documents, the Central Bank will notify the applicant within 3 business days after the information is received. The applicant will have 3 business days to again send an application containing the relevant information and the documents.

What to think about and what to do

In connection with the significant changes in the approach to defining the concept of persons controlling financial institutions in terms of information submitted to the Central Bank, a set of measures should be carried out before 23 September 2021 which are aimed at:
  • identifying all persons who fall within the definition of controlling persons, including from the perspective of the Federal Law “On insolvency (bankruptcy)”;
  • preparing and submitting to the regulator information and documents in accordance with the Instruction;
  • adjusting corporate documents and procedures to ensure systemic control that information is updated with additional and clarifying information being timely submitted to the Central Bank, and also to identify all categories of controlling persons;
  • assessing the risks of liability for controlling persons at a stage when the business structure is determined, business decisions are made and transactions are closed.
If a person has been recognised by the Central Bank as a controlling person by mistake, the person’s inclusion in the list should be challenged in a timely manner. If a controlling person has ceased to have this status, we recommend that a timely notification should be filed with the Central Bank to mitigate the risks of liability.

For persons who have the status of a controlling person we recommend regularly assessing planned actions and decisions from the standpoint of potential liability.

Help from your adviser

Pepeliaev Group’s specialists have vast experience of providing services in the sphere of the regulation of financial institutions, anti-bankruptcy compliance, providing support during financial institutions’ day-to-day operations and procedures of voluntary liquidation and bankruptcy. 

 We are ready to offer integrated legal support with a view to effectively safeguarding the interests of financial institutions and their controlling persons.

[1] Instruction No. 5814-U of the Russian Central Bank (the “Central Bank”) dated 9 June 2021 “On the form, procedure and deadlines for credit institutions, insurance companies and private pension funds to submit information to the Bank of Russia about their controlling persons, and the procedure for the Bank of Russia to maintain the list of persons that control credit institutions, insurance companies and private pension funds“ (the “Instruction”).
[2] Federal Law No. 23-FZ “On amending certain items of Russian legislation to secure the liability of persons who control a financial institution’’ dated 24 February 2021.
[3] The provisions of article 61.10 of, and, hence, the categories of a financial institution from articles 189.23(1), 184.13(1) and 187.12(1), of the Federal Law “On insolvency (bankruptcy)”.
[4] The General Russian Classifier of World Countries.
[5] The Bank of Russia's Instruction No. 622-P dated 26 December 2017 “On the procedure for disclosing information on persons controlling or exerting a material influence on banks participating in the system of compulsory insurance of individuals’ deposits in Russian banks, and on the procedure for disclosing and submitting to the Bank of Russia information on the structure and composition of the shareholders (members) of private pension funds, insurance companies, management companies, microfinance companies, including persons controlling or exerting a material influence on such funds and companies”.

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