Changes in Currency Regulation: Mitigation of Liability for Offenses

25 August 2022
Polina Vodogreeva
Associate
Anzhelika Kalashyan
Legal Trainee

On July 13, 2022, the President of Russia has signed the Federal Law No. 235-FZ “On Amendments to Article 15.25 of the Code of Administrative Offences of the Russian Federation” (“Law”), which introduced significant changes in the application of administrative liability measures for violation of currency legislation.

1. Reduction of administrative fines

The Law reduced the amount of fines for carrying out illegal currency transactions and certain currency transactions and money transfers without opening a bank account that are not provided for by Russian laws1. Previously, these acts could entail the imposition of an administrative fine on citizens, sole proprietors and legal entities in the amount from 75% to 100% of the amount of an illegal currency transaction or the amount of funds transferred without opening a bank account. By adoption of the Law, the specified amount was reduced to the limits from 20% to 40%.

The extent of liability for non-fulfillment of a resident’s obligation to repatriate foreign and Russian currency was also reduced2: if the amount of obligations under a foreign trade agreement is determined in Russian currency and its terms provide for payment in Russian currency, an administrative fine from 3% to 10% of the amount of funds not credited within the prescribed period to accounts in authorized banks was applied to citizens, sole proprietors and legal entities. In the new version of the Article the amount of liability is set from 3% to 5% of this amount of funds, except for certain types of foreign trade contracts3.

The easing also affected administrative fines for officials: previously, for some currency offences, the amount of fines ranged from RUB 20,000 to RUB 30,000. The Law established the following exemptions:

  • for carrying out illegal currency transactions and certain currency transactions and money transfers without opening a bank account that are not provided for by Russian laws4 – an administrative fine in the amount from 20% to 40% of the above amounts, but not more than RUB 30,000;
  • for non–fulfillment of the obligation to repatriate foreign and Russian currency by residents5 – an administrative fine in the following amount, that in any case cannot exceed RUB 30,000:
    • 1/150 of the key rate of the Russian Central Bank of the amount of funds credited to accounts in authorized banks in violation of the deadline for each day of delay; and (or)
    • from 3% to 5% of the amount of funds not credited to accounts in authorized banks within the prescribed period, if a foreign trade contract has been concluded with a non-resident; and (or)
    • from 5% to 30% of the amount of funds not credited in due time to accounts in authorized banks, if a loan agreement has been concluded with a non-resident.
  • for non–fulfillment within the prescribed period by a resident of its obligation to perform or terminate obligations under a foreign trade contract between a resident and a non-resident6 – an administrative fine in the amount from 3% to 5% of the amount of funds owed to a resident by a non-resident, but not more than RUB 30,000;
  • for non–fulfillment by a resident within the prescribed period of the obligation to return to the Russian Federation funds paid to non-residents for goods not imported into the Russian Federation (not received in the Russian Federation), work not performed, services not rendered, or for non-transmitted information or results of intellectual activity7 – an administrative fine in the following amount, which in in any case cannot exceed RUB 30,000:
    • 1/150 of the key rate of the Russian Central Bank of the amount of funds returned to the Russian Federation in violation of the established deadline, for each day of delay; and (or)
    • from 3% to 10% of the amount of funds in Russian currency not returned within the prescribed period in the Russian Federation, paid to a non-resident under the terms of a foreign trade contract, the amount of obligations under which is determined in Russian currency and the terms of which provide for payment in Russian currency; and (or)
    • from 5% to 30% of the amount of funds not returned within the prescribed period in the Russian Federation, paid to a non-resident under the terms of a foreign trade contract in foreign currency.

Thus, the previously established lower limit of RUB 20,000 no longer applies to administrative fines for officials for the above-mentioned offenses8, and fines can total any amount up to RUB 30,000.

2. Increase in the number of cases of non-application of administrative responsibility for currency offenses

In the earlier version of the Administrative Code, a special case of non-application of administrative liability measures for offenses provided for in Clauses 1 and 4 of Article 15.25 of the Administrative Code was established9, if all the following conditions were met:

  1. settlements were made under foreign trade contracts, bypassing accounts in authorized banks, when these actions are not directly permitted by law;
  2. the resident transferred funds to his account in a bank outside Russia within the established time limits and subsequently debited them from this account in full and transferred them to his account in a Russian bank;
  3. the above-mentioned transfer of funds was carried out no later than 45 days from the date of their transfer to an account opened in a bank outside Russia.

If the funds were not transferred in full, but in part, administrative liability was not subject to application with respect to the amount of such partially credited funds.

The novelties make it possible to extend cases of non-application of administrative liability measures not only to transactions related to foreign trade contracts, but to any currency transactions, liability for which is provided for in Clauses 1 and 4 of Article 15.25 of the Administrative Code. As indicated by the Federal Tax Service of Russia, tax authorities for such types of violations must in all cases establish the presence/absence of the fact of transfer of funds by residents from foreign accounts to accounts in authorized banks within 45 days10.

The Law also introduced a new note 10 to this Article, according to which if a resident committed an administrative offense provided for in Clauses 1, 4, 4.1, 4.3 and 5 of Article 15.25 of the Administrative Code, however, this action was caused by the use of restrictive measures against Russian citizens or legal entities by foreign states (territories), state associations and/or unions and/or their state (interstate) institutions that commit unfriendly actions against Russia, then such residents are not subject to administrative liability for designated currency offenses.

It is important that this note applies to currency offenses committed within February 23 up to December 31, 2022. Thus, the initiated cases for already committed administrative offenses are subject to termination. The execution of unfulfilled resolutions on the appointment of an appropriate administrative penalty is also subject to termination.

3. The retroactive force of the Law

According to the provisions of clause 2 of article 1.7 of the Administrative Code, a law that mitigates or cancels administrative liability for an administrative offense or otherwise improves the situation of a person who committed an administrative offense is retroactive, that is, it also applies to a person who committed an administrative offense before the entry into force of such a law and in respect of which the decision on the imposition of administrative punishment not executed.

Thus, the above-mentioned exemptions in terms of reducing the amount of liability for currency offenses, as well as the expansion of the cases of application of note 7 to article 15.25 of the Administrative Code, are retroactive and apply to persons who committed administrative offenses before the Law came into force (i.e. before July 24, 2022), and in respect of which there was no decree on the imposition of administrative punishment.

1 Cl. 1 of Article 15.25 of the Administrative code
2 Cl. 4 of Article 15.25 of the Administrative code
3 If the foreign trade agreement provides for the transfer by residents to non-residents of goods included in the Unified Customs Code of the EAEU under the codes 4401 - 4403 99 000 9 and 4407, and the amount of obligations under the contract is determined in the currency of the Russian Federation, and the terms of the contract provide for payment in the currency of the Russian Federation, then an administrative fine is imposed ranging from 3% to 10% of the amount of money funds not credited in due time to accounts in authorized banks
4 Cl. 1 of Article 15.25 of the Administrative code
5 Cl. 4 of Article 15.25 of the Administrative code
6 Cl. 4.3 of Article 15.25 of the Administrative code
7 Cl. 5 of Article 15.25 of the Administrative code
8 Letter of the FTS of Russia No. SHYU-4-17/10279@ dated August 08, 2022 “On Federal Law No. 235-FZ dated 13.07.2022 “On Amendments to Article 15.25 of the Code of Administrative Offences of the Russian Federation”
9 Note 7 to Article 15.25 of the Administrative code
10 Letter of the FTS of Russia dated August 08, 2022 No. SHYU-4-17/10279@ “On Federal Law No. 235-FZ dated 13.07.2022 “On Amendments to Article 15.25 of the Code of Administrative Offences of the Russian Federation”