On June 30, 2013 amendments to the Federal Law of 28.06.2013 N 134 -FZ “On amendments to certain legislative acts of the Russian Federation with regard to combating illegal financial transactions” (the Law) came into force. Amendments were made to such regulations of the Russian Federation as Criminal Code of the Russian Federation, Administrative Offences Code of the Russian Federation, Civil Code of Russia as well as in a number of important federal laws.
In this article we will consider the most relevant changes affecting business conduct.
Changes into legislation on state registration of legal entities
The legislator expects that introduction of changes in the legislation in this area will reduce number of cases registration of legal entities under stolen or lost documents “one-day firms”. In accordance with the changes introduced the registration authority have obligation to verify authenticity of information included into EGRUL (United State Registrar of Legal Entities) . The interested parties in the prescribed manner will be informed in advance about any changes into articles of association or other information contained in the register, if such changes affect their interests . The interested parties will be able to send to the registration authority written objections with respect to the upcoming changes into articles of association of legal entity or information into the United State Registrar of Legal Entities . Dispute arising under this situation will be resolved by registration authority that will resolve either to make any necessary changes or to refuse it.
The law established new grounds for refusal of registration . Now decision to refuse may also be motivated by the following reasons:
- Information on identity document of the Russian citizen , which is mentioned in application for state registration, do not correspond to the information received by registration authority from authorities, which issue replace such documents;
- Registration authority received objections of an individual regarding upcoming entry of data about him into United State Registrar of Legal Entities;
- Registration authority received judicial act or bailiff act, containing a ban on committing certain registration actions by registration authority within the period prescribed for state registration, but prior to making entry into United State Registrar of Legal Entities or taking decision to refuse state registration the;
- An individual - founder (participant) of legal entity, which is commercial organization or an individual registered as an individual entrepreneur on the basis of court judgment, which came into force is deprived of right to be engaged in entrepreneurial activities for a certain period; and such period has not expired;
- An individual who has the right to act without power of attorney on behalf of legal entity ( including on behalf of management company) is disqualified due to administrative violation act that come into force by; and the term of the given administrative punishment has not expired;
- Individual entrepreneur, who is a manager of legal entity is disqualified due to administrative violation act that come into force by; and the term of the given administrative punishment has not expired;
- Registration authority has confirmed information about unreliability of data contained in the submitted documents as of address (location) of permanent executive body of legal entity.
Designation of United State Registrar of Legal Entities has changed. This version states that a person in good faith relying on the data reflected in the registrar is entitled to assume that the data correspond to actual circumstances. At the same time legal entity may not rely on information that is not reflected in the United State Registrar of Legal Entities in relations with a person who relied on data from the registrar, as well as point at unreliability of the data contained in the registrar. An exception is provided only for cases where false information about legal entity is registered in the United State Registrar of Legal Entities as a result of illegal actions of third parties or otherwise against the will of the legal entity . In accordance with amendments legal entity will have to compensate losses caused to other members of civil turnover due to failure to submit, late submission of submission of unreliable data about it to the Unified State Register of Legal Entities. State registration of legal entity is deemed as invalid in connection with gross violations of the law made at its establishment, if these violations are of irremediable nature. Also information about legal entity included into the United State Registrar of Legal Entities may be disputed in court if they are not reliable or included into the registrar in violation of law.
Restrictions to hold positions in various legal entities
The law makes numerous changes to certain federal laws relating to restrictions to hold positions in different legal entities. Regulations were introduced to control appointments on positions in various legal entities. It should be noted that as a rule these changes are similar in nature.
The law establishes restrictions for participants (shareholders) of insurance company. Thus, an individual with unremoved or outstanding convictions for economic crimes or crimes against the state, is not entitled directly or indirectly (through controlled entities) alone or together with other persons connected with him by contracts and the subject of which is exercise of rights certified by shares of insurance company, to obtain the right to dispose more than 10 percent of votes relating to voting shares constituting the authorized capital of insurance company.
Similar changes were also made to other federal laws:
- Federal Law of April 22, 1996 N 39-FZ “On the Securities Market”;
- Federal Law of 29.11.2001 N 156 -FZ “On Investment Funds”;
- Federal Law of 02.07.2010 N 151-FZ “On microfinance activity and microfinance institutions”.
Federal Law of 29.10.1998 N 164-FZ “On financial rent (leasing )” has been amended in accordance with which a person has unremoved or outstanding convictions for economic crimes or crimes against the state, can not be:
- head (person performing functions of the sole executive body ) of leasing company;
- member of the board of directors (the supervisory board) of leasing company;
- member of the collegial executive body of leasing company;
- chief accountant of leasing company .
It should be noted that such restrictions were introduced into the Russian legislation for the first time.
Changes in administrative legislation
The legislator toughens sanctions under article 15.25, 16.4 of the Administrative Code of Russia. Now repeated failure to provide information within one year regarding cash flows in foreign accounts, violation of procedure for submission of supporting documents and information in currency transactions, violation of registration of transaction certificates or violation of storage of records on foreign currency transactions, supporting documents and information in performing currency transactions or transactions certificates will entail administrative penalty in the form: for officials - up to 40 thousand rubles, for legal entities up to 600 thousand rubles . Illegal movement of cash or monetary instruments will entail administrative penalty of a fine of up single or double amount of the undeclared currency (value of monetary instruments) or confiscation of subject of administrative offense.
Changes in the criminal legislation
Legislator expanded a list of crimes. The Criminal Code of the Russian Federation introduced new articles.
Article 193.1 of the Criminal Code establishes liability for currency transaction on transfer of monetary funds in foreign currency or currency of the Russian Federation on non-resident accounts using fake documents. Liability for the crime is in the form of a fine of 200 thousand to 500 thousand rubles or in the amount of salary or other income of the convicted person for a period of one year to three years or compulsory works for a term up to three years or imprisonment for a term up to three years. Article 200.1 of the Criminal Code of the Russian Federation on smuggling of cash and (or) cash instruments involves liability for illegal movement across the customs border of the Customs Union within the EurAsEC of cash and (or) cash instruments, committed on large scale in the form of a fine of three times up to ten times of the amount of illegal movement of cash and (or) the cost of wrongfully removed or monetary instruments in the amount of salary or other income of the person convicted for a period up to two years or restriction of liberty for a term up to two years or mandatory works for a term up to two years.
Article 193 of the Criminal Code of Russia has been amended, which detailed ways of evading performing duties on repatriation of monetary funds in foreign currency or in the Russian currency. Also the limit of a large amount provided for that offense has been reduced. Previously, it was 30 million rubles, now – 6 million rubles. If the amount of unpaid or unreturned monetary funds in foreign currency or currency of the Russian Federation on one-time or many-time currency transactions for a period of one year exceeds 30 million rubles, then such a crime would be classified as a large scale. It provides for stiffer criminal liability: imprisonment for up to five years along with a fine of up to one million rubles or in the amount of salary or other income for a period of up to five years or without it.
Also articles 174, 174.1 of the Criminal Code of the Russia have been amended in terms of tightening sanctions for legalization (laundering) of money or other property acquired through committing crimes.
Amendment to article 104.1 of the Criminal Code of Russia stipulates that confiscation became applicable to persons who committed crimes under articles 174, 174.1 of the Criminal Code of Russia.
Changes in law enforcement legislation
In accordance with the Law tax authorities are added into the list of authorities eligible to receive results of operational and investigative activities . Now results of operational and investigative activities may be sent to tax authorities to use:
- at performing powers of control and supervision of compliance with tax legislation;
- to ensure representation of state interests in bankruptcy cases;
- at performing powers in the field of state registration of legal entities .
Federal Law of 07.02.2011 № 3 FZ “On police” excluded provision that at detection and suppression of tax crimes police has a right to request and receive from credit institutions information on transactions and accounts of legal entities and individual entrepreneurs. At the same time Federal law of 02.12.1990 N 395-1 “On banks and banking activity” excluded provisions that information constituting bank secrecy may be disclosed only with identifying, preventing and combating tax crimes. That is, law enforcement authorities may now request information not only in connection with investigation of tax crimes. Information on transactions and accounts of legal entities, individuals and individual entrepreneurs as well as on deposits of individuals can now be issued by credit institution pursuant to a court judgment to officials of the authorities, which are authorized to carry out operational and investigative activities in performing their functions to detect, prevent and combat crimes at their request, sent to court in case there is information about signs of being prepared, committed or committed crimes, as well as individuals, who are preparing, committing or have committed, if there is insufficient evidence to decide on the initiating criminal proceedings.
Changes into anti-money laundering legislation
The legislator amended Federal Law of August 7, 2001 N 115-FZ “On combating legalization (laundering) of incomes from crime and financing terrorist”. The legislator introduces a concept of “beneficial owner” – an individual who ultimately directly and indirectly ( through third parties) owns (has predominant shareholding of more than 25 % in the capital ) is a client - legal entity or has possibility to control actions of the client . Companies engaged in transactions with monetary funds or other assets are obliged to take reasonable and available under the circumstances measures to identify beneficial owners. Identification of beneficial owners is not held in the event of servicing clients, which are:
- state authorities, other public authorities, local authorities, institutions with state non-budgetary funds, state corporations or companies where the Russian Federation, subjects of the Russian Federation or municipalities have more than 50 percent of shares in the capital;
- international organizations, foreign states or administrative-territorial units of foreign states having independent legal capacity;
- issuers of securities admitted to trading, which disclose information in accordance with legislation of the Russian Federation on securities.
If as a result of adoption of measures of identification of beneficial owners stipulated under the Federal Law beneficial owner is not identified, the sole executive body of the client may be considered as beneficial owner. The Law introduced amendments according to which credit institutions are entitled to:
- refuse to enter into a bank account (deposit) contract with individual or legal entity in accordance with rules of internal control of credit institution in case of suspicions that the purpose of concluding the contract is effecting transactions in order to legalize (launder) of incomes received from crime or financing of terrorist;
- terminate the bank account (deposit) contract with client in the event of taking two or more decisions to refuse execute instructions of client to perform transactions within a calendar year due to failure to present necessary documents by client or grounds to believe the operation suspicious .
In accordance with amendments Federal Law of August 7, 2001 N 115-FZ “On combating legalization (laundering) of incomes from crime and financing terrorist” includes possibility to block monetary funds and other assets of companies or individuals, as well as rules allowing to suspend transactions with monetary funds or other assets for two business days, if one of the parties is a person whose monetary funds are frozen (blocked).
Changes into customs legislation
Amendments were introduced into Federal Law of November 27, 2010 N 311-FZ “On customs regulation in the Russian Federation” according to which special simplifications are not provided in the following cases:
- if an authorized economic operator imports goods into the Russian Federation, seller or sender of which is a legal entity registered on the territory that is included into the list of countries and territories granting preferential taxation treatment and (or) which do not provide disclosure and provision of information on financial transactions (hereinafter - offshore areas) approved by federal executive authority in the field of finance,
- if payment of goods imported by authorized economic operator into Russia is carried out by conducting financial transactions through offshore areas .
The risk management system should now be directed at prevention of violations related to financial transactions with residents that are incorporated in offshore areas.
Such tightening of legal regulation seems only one of the intermediate steps to achieve objective of maximum control over conduct of business by the Russian residents. There is a growing trend of bringing the Russian legislation into conformity with international standards. Disclosure of beneficiaries is an advantageous objective to amend the legislation; it is expected that these measures will drastically reduce level of illegal cash outflows from the country. At the moment it seems that the amendments made into the Russian legislation in a certain way complicate procedure of registration actions, procedures to cooperate with contractors and the Russian businessmen and entrepreneurs will have to get used to such complexities. We will be able to judge application of practice of amendments to the legislation in the field of combating illegal financial transactions after some time, after establishing relevant case law.