Russian Legislation Update: January – February 2018

by White & Case LLP
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Welcome to the most recent issue of our Russian Legislation Update, covering the period of January – February 2018.

In this issue:

  • Banking
  • Currency Control
  • Anti-Money Laundering
  • Disclosure of Information
  • Special Investment Contracts
  • Procurement

Banking

On 6 December 2017 the Central Bank issued Directive No. 4635-U amending Instruction No. 180-I "On Mandatory Economic Ratios."

The Directive was registered with the Ministry of Justice on 10 January 2018.

According to the Directive, the Instruction sets out economic ratios only for banks with a "universal" license.

For the purpose of implementing the Basel III standards, a new mandatory ratio is established for banks with a "universal" license: a non-risk-based capital adequacy ratio (leverage ratio, N1.4).

The leverage ratio is the ratio of the bank's core capital to its balance sheet exposures; contingent credit liability exposures; derivative exposures and securities financing transaction exposures.

The minimum requirement for the leverage ratio is set at 3%.

The Directive entered into force on 27 January 2018.

On 6 December 2017 the Central Bank issued Directive No. 4637-U amending Directive No. 4212-U on banks' reporting forms.

The Directive was registered with the Ministry of Justice on 25 December 2017.

The Directive introduces new reporting forms (including the calculation of the net stable funding ratio by systemically important banks, report on changes in a bank's capital (in a published form)) and amends the procedure for preparing and/or submitting a number of reporting forms (including forms for the loans granted to legal entities and for mandatory economic ratios).

The amendments entered into force on 31 December 2017, save for certain provisions that will enter into force later.

Currency Control

On 28 December 2018 the President signed Federal Law No. 427-FZ amending the Currency Control Law.

The amendments relate to resident individuals. Now, all Russian citizens are considered as residents. However, Russian citizens who spend more than 183 days per year in another country are no longer subject to the Law on opening overseas accounts, carrying out transactions through such accounts and reporting on such accounts. Moreover, those individuals are allowed to make currency operations between themselves while they are abroad.

Further, resident individuals, who transfer funds to their overseas bank accounts for the first time, are no longer required to present a bank with the tax authorities’ notification of opening such accounts. In addition, funds held in such accounts can now be used without limitations, save for prohibited currency operations between residents (previously the restriction applied to currency operations related to the transfer of assets or rendering services in Russia).

The amendments also expand a list of the allowed crediting operations with respect to overseas bank accounts of resident individuals. Accounts opened with banks in the OECD or the FATF-member states can now be credited with: 1) proceeds from the sale of a vehicle located abroad to a non-resident; and 2) proceeds from the sale of the immovable property located abroad to a non-resident (provided the property is located in the OECD or the FATF-member state, this state is a party to an agreement on automatic exchange of financial information with Russia and the account is opened at a bank located in such state).

The Law entered into force on 1 January 2018.

On 30 August 2017 the Central Bank issued Directive No. 4512-U "On the Scope and Procedures for Providing Information by Banks Authorized to Act as Currency Control Agents to Currency Control Authorities."

The Directive was registered with the Ministry of Justice on 8 December 2017.

Pursuant to the Directive, banks are required to inform currency control authorities in an electronic form about the registered contracts, changes in the data on such contracts and removal of the registration of contracts. Information about foreign trade contracts must be provided to the Federal Tax Service of Russia and the Federal Customs Service of Russia; the Federal Tax Service of Russia must be also provided with information about loan agreements. Information is provided through the Central Bank. It includes information about contracts/agreements as well as copies of contracts/agreements.

The relevant rules for preparing and submitting information in an electronic form are available on the Central Bank's website www.cbr.ru.

The Directive (as amended by Directive No. 4659-U of 21 December 2017) entered into force on 1 March 2018 and abolished Regulations Nos. 364-P и 402-P on similar matters.

On 16 August 2017 the Central Bank issued Directive No. 4498-U regarding the procedures for banks for providing information about violations of currency regulations to currency control authorities.

The Directive was registered with the Ministry of Justice on 18 January 2018.

Pursuant to the Directive, banks must provide the Central Bank with information in an electronic form about detected violations of currency regulations which subsequently will be provided to currency control authorities. The reporting period will amount to 10 days (previously it was one month).

The relevant rules for preparing and submitting information in an electronic form are available on the Central Bank's website www.cbr.ru.

The Directive entered into force on 1 March 2018 and abolished Regulation No. 308-P on similar matters.

Anti-Money Laundering

On 29 December 2017 the President signed Federal Law No. 470-FZ amending the Anti-Money Laundering Law and a number of other laws.

The amendments aim to create a mechanism for the rehabilitation of clients if a financial organization refused to carry out a transaction or open a bank account for them.

Taking into account the grounds for the decision of a financial organization, the client will be able to provide it with information or documents showing the lack of grounds for such a decision. In case of a negative response, the client will be able to apply to an interdepartmental commission within the Central Bank.

If the grounds for the decision are eliminated or an interdepartmental commission concludes that there are no grounds for the decision, a financial organization is obliged to inform Rosfinmonitoring (an anti-money laundering authority) accordingly.

The described amendments will enter into force on 30 March 2018.

On 31 December 2017 the President signed Federal law No. 482-FZ amending the Anti-Money Laundering Law and a number of other laws.

Following the identification of an individual client while he/she is present and subject to his/her consent, banks are obliged to enter and update information about that individual in: 1) a unified identification and authentication system; and 2) a unified biometrical system. Based on the information entered in those systems, banks will be able to identify those individuals remotely and then open and maintain their bank accounts (deposits), provide loans to them and make transfers through their bank accounts without their personal attendance.

The above opportunities are available only to banks that meet certain criteria (e.g. banks that participate in a deposit insurance system). A list of eligible banks will be published on the Central Bank's website (www.cbr.ru) on a monthly basis.

Moreover, it will be possible to conduct transactions after a remote identification is done only if certain conditions are met (e.g. if a bank does not suspect that a transaction is carried out for money laundering purposes).

The Central Bank can provide restrictions on the total number of bank accounts (deposits), total value of loans and transfers following the remote identification. In case a limit to the number of bank accounts is set, a bank will need to inform the Central Bank about all the accounts opened following such identification.

Moreover, information about individuals contained in the unified identification and authentication system will be provided to Rosfinmonitoring (an anti-money laundering authority) and the Central Bank.

Apart from the matters relating to the remote identification, the amendments also relate to the disclosure issues. The Government was vested with the authority to restrict the disclosure of information by credit and other financial organizations.

The amendments regarding the disclosure of information entered into force on 31 December 2017, other amendments will enter into force on 30 June 2018.

Disclosure of Information

On 31 December 2017 the President signed Federal Law No. 481-FZ amending the Basic Principles of Notary Activities, the JSC and LLC Laws, Law on the State Registration of Legal Entities and a number of other laws.

The Law vests the Government with the authority to restrict the disclosure of information. The Government is authorized to set restrictions when:

  • information about a pledgeholder recorded in the register of notices of pledges of movable property will not be published on the Internet;
  • information (as provided for in the Law) recorded in the Unified Federal Register of Data on Certain Facts of Activities of Legal Entities will not be published on the Internet;
  • information about major transactions and interested party transactions will not be disclosed.

The Government is also authorized to restrict the disclosure of information by the securities' issuers, the submission of information to credit history bureaus, the provision of information to auditors, publishing information about suppliers based on Federal Law No. 223-FZ and the disclosure of consolidated financial statements.

The Law entered into force on 31 December 2017.

On 25 January 2018 the Government adopted Resolution No. 65 "On Restrictions on Publishing Information about Pledgeholders of Movable Property on the Internet."

Pursuant to the Resolution, a notice of pledge can contain a refusal to publish information about a pledgeholder on the Internet (www.reestr-zalogov.ru), if the disclosure of such information leads or may lead to imposition of international/foreign sanctions on the pledgeholder.

The Resolution entered into force on 6 February 2018.

On 12 January 2018 the Government adopted Resolution No. 5 specifying cases in which certain information recorded in the Unified Federal Register of Data on Certain Facts of Activities of Legal Entities will not be published on the Internet.

Pursuant to the Resolution, if a company or an entrepreneur is subject to international/foreign sanctions, certain information "with respect to such persons" recorded in the Unified Federal Register of Data on Certain Facts of Activities of Legal Entities should not be published on the Internet (www.fedresurs.ru). Restrictions apply to the following information:

  • pledge of movable property (other than information on a company-pledgor, which must be available on the Internet);
  • issuance of an independent guarantee;
  • entering into a factoring agreement by a client;
  • financial (accounting) statements if they are subject to disclosure in mass media;
  • information which must be recorded in the specified register pursuant to laws other than the Law on the State Registration of Legal Entities (on entering into a leasing agreement by a lessor; on levying execution on certain assets of a debtor in enforcement proceedings etc.).

The Resolution entered into force on 25 January 2018.

On 15 January 2018 the Government adopted Resolution No. 10 specifying cases in which joint stock companies and limited liability companies are not obliged to disclose and (or) provide information relating to major transactions and interested party transactions.

Pursuant to the Resolution, when entering into a major transaction or an interested party transaction with a Russian company or an individual which/who is subject to international/foreign sanctions, JSCs and LLCs are entitled not to disclose/not to provide information relating to such deal or "with respect" to such counterparties.

The Resolution entered into force on 25 January 2018.

On 21 December 2017 the Government adopted Resolution No. 1604 regarding submission of information relating to the manufacturing and industry sector.

Entities engaged in the production sector are required to regularly provide certain data regarding the manufactured products to the Ministry of Industry and Trade (the scope of information and the frequency of its submission are specified in the Resolution). Some information must be also provided by the state and municipal authorities (e.g. policies for supporting industrial development). Information will be used for maintaining the state information system for the manufacturing and industry sector.

The Resolution will enter into force on 23 June 2018.

Special Investment Contracts

On 16 December 2017 the Government adopted Resolution No. 1564 amending Resolution No. 708 on special investment contracts.

The amendments aim to improve regulation of special investment contracts. In particular, the amendments: (i) set out criteria to be met by an investor (e.g. it should not be an offshore company/ controlled by an offshore company); (ii) specify requirements for the documents provided by the investor (a set of documents must include, among other things, a project timeline and an investment timeline (by year) and a flowchart showing participants in the project; a business plan and a financial model must meet the specified requirements); (iii) set out additional criteria for making a decision on whether it is possible (impossible) to execute a contract; (iv) detail the procedures for amending and terminating a contract; and (v) change a template of the contract.

The described amendments will enter into force on 16 June 2018.

Procurement

On 31 December 2017 the President signed Federal Law No. 505-FZ amending Law on Procurement of Goods, Works and Services by Certain Types of Legal Entities No. 223-FZ.

As of 31 December 2017, the amendments: (i) expand a list of cases to which Law No. 223-FZ does not apply by adding, among other things, the procurement from interdependent persons; (ii) envisage a possibility of having single procurement policies applying to holding companies (subsidiaries are allowed to apply a procurement policy of a parent company); (iii) expand the scope of data which does not need to be published in a unified procurement system – e.g. the data on procurement of services with respect to placing deposits, receipt of loans, issuance of bank guarantees and suretyships, opening letters of credit; and (iv) set out the requirements for interaction between the corporate information system and the unified procurement system.

In addition, as of 1 July 2018, the amendments provide a number of requirements applicable to the competitive procurement process (including non-public competitive procurement) and set out specifications of carrying out such procurement in an electronic form. With respect to a single-source procurement (i.e. non-competitive procurement) the amendments provide that: (i) the procedure for such procurement and an exhaustive list of circumstances under which it is carried out must be specified in a procurement regulation; and (ii) information about such procurement can be recorded in a unified procurement system if such publication is envisaged by the procurement regulation (i.e. the recording of such information is not required).

Internal procurement regulations must be brought in compliance with new requirements by 1 January 2019.

The amendments entered into force on 31 December 2017 (save for certain provisions which will enter in force on 1 July 2018, as noted above).

On 31 December 2017 the President signed Federal Law No. 496-FZ amending Law on Procurement of Goods, Works and Services by Certain Types of Legal Entities No. 223-FZ.

Law No. 223-FZ provides specifications of procuring certain mechanical engineering products by companies (including private entities) which implement investment projects with state support. The amendments will apply to investment projects worth more than RUB 500 million (the regulation currently applies to projects worth not less than RUB 10 billion). In addition, procurement specifications will also apply to the procurement of works, services and leases with respect to the specified products.

The amendments also provide specifications of procuring products to be identified by the Government and related works, services and leases by companies which are controlled by the state (without limiting these specifications to investment projects or mechanical engineering products).

The amendments will enter into force on 30 June 2018.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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