Currency control: key points, liability and recommendations

By Elena Rybnikova, Head of Quality Control and Methodology Department

Elena Rybnikova
Head of Quality Control and Methodology Department
The main purpose of currency control is to ensure compliance with currency rules upon conclusion of currency transactions.

When companies conclude a transaction exceeding USD 50,000, they must report this transaction to currency control agents and bodies. The following must be submitted to banks which act as currency control agents:

  • Transaction report form;
  • Application for reissuance of transaction report form;
  • Application for closure of transaction report form;
  • Currency transaction statement;
  • Certificate of supporting documents;
  • Bank control record.

The Central Bank of Russia (Presidential Decree No. 41 dated February 02, 2016) as well as federal agencies authorized by the Government of Russia (Federal Customs Service and Federal Tax Service) act as currency control agencies.

Important note: currency control agents report any violation of currency laws to currency control agencies, and banks pass on the details of transaction report forms to tax authorities and the Bank of Russia.

Liability

Based on Article 23.60(1) of the Russian Code of Administrative Offenses, currency control agencies may bring to administrative liability provided for under Article 15.25 of the Russian Code of Administrative Offenses. Fines for failure to meet the deadlines for submission of reporting documentation for currency transactions can reach up to:

  • RUB 50,000 (for company heads);
  • RUB 1 million (for companies).

The Federal Tax Service applies penalties on each single offense, and repeating a similar violation within a year may result in the disqualification of the offending company officer for a period of 1 to 2 years (Russian Code of Administrative Offenses Article 19.7.1).

The main problem with the deadlines for reporting currency transactions to banks is that supporting documentation (for example, statements of services rendered signed by both parties) is also required from partners who do not always submit it in good time.

The risk of failing to meet those deadlines is high because supporting documentation must be submitted within 15 calendar days of the end of the month in which supporting documents were issued, and the option of filing zero reporting in time with subsequent submission of “revised” reporting is not available for currency control purposes.

So, to minimize the risk of claims from currency control agencies, the deadlines for document flow between partners should be observed, as well as the deadlines for submission of reports to banks and, if requested, to the Federal Tax Service.

The following could be introduced in contracts to ensure compliance with currency control reporting deadlines:

  • Introduce a clause in a new contract or sign an additional agreement to an existing contract providing that “if the partner (customer) does not return to the Contractor a signed (duly executed) statement within 5 days and submits no objection regarding the statement, the services shall be deemed accepted by the customer”;
  • A statement signed unilaterally shall be submitted to the bank as supporting document;
  • A note is introduced in the certificate of supporting documents stating the statement has been unilaterally signed in accordance with the clause providing for such event in the contract.
OR
  • Invoices serve as supporting documents.
For example, to minimize the risk of violation of currency rules, we have provided in our service agreements with several foreign counterparties that:
  • Invoices and detailed tax invoices serve as closing documents for services rendered;
  • The invoice form is approved and provided in an appendix to the contract;
  • All the services provided to the customer over the reporting month (with price and/or cost of each service) are listed in invoices. This is a unilateral document, i.e. with only the seal and signature of the contractor;
  • Detailed tax invoices are also unilateral documents with neither the seal nor the signature of the customer;
  • The note in the certificate of supporting documents specifies that no statement of services rendered is provided as stipulated in the contract. Invoices serve as supporting documents.

We recommend:

  • Company heads to assess already upon conclusion of contracts the likelihood of non-compliance by partners with the deadlines for submission of documentation and minimize this risk. Together with a lawyer (sales specialist) company heads should also develop guidelines for cooperation with partners for documentation exchange intended to minimize as much as possible the risk of delays in document flow;
  • Informing partners of the importance of timely signing/processing of statements and timely submission of their copies to banks;
  • Introducing appropriate amendments to existing contracts, and recommending partners to include relevant provisions in contracts when entering into new service agreements.