FATCA Compliance and Financial Operations with Foreigners in Russia: Legal Regulations and Requirements

 

October 27, 2025

BRACE Law Firm ©

 

Financial operations with foreign citizens and legal entities may be carried out through various financial market organizations. It is necessary to consider the legislative features of carrying out such operations, as well as the accounting and control over such operations by competent authorities.

Legislators have imposed an obligation on financial market organizations to identify taxpayers from foreign jurisdictions among their clients for the subsequent transfer of information about them to foreign tax authorities. Tax authorities also carry out the exchange of financial information among themselves.

In this article, we examine what is understood by financial operations with foreign citizens and legal entities, the procedure provided for their implementation, and the liability for violating legislative requirements in this field.

How Does Russian Legislation Regulate Financial Operations with Foreign Citizens and Legal Entities?

Federal Law No. 173-FZ dated June 28, 2014, On the Specifics of Carrying out Financial Operations with Foreign Citizens and Legal Entities, on Amending the Code of Administrative Offenses of the Russian Federation and Terminating Certain Provisions of Legislative Acts of the Russian Federation (the "Law on Financial Operations with Foreign Citizens and Organizations") establishes the specifics of financial market organizations carrying out financial operations on the territory of Russia with persons subject to the legislation of a foreign state on the taxation of foreign accounts.

The Law on Financial Operations with Foreign Citizens and Organizations defines financial market organizations as credit organizations; insurers carrying out activities for voluntary life insurance; professional securities market participants carrying out brokerage activities, and (or) securities management activities, and (or) depository activities; managers under a property trust management agreement; non-state pension funds; joint-stock investment funds; and clearing organizations.

The Bank of Russia indicated that the Law on Financial Operations with Foreign Citizens and Organizations was adopted to create conditions for Russian financial organizations allowing banks to interact with foreign tax authorities, primarily within the framework of the US Foreign Account Tax Compliance Act (the "FATCA"), and to create conditions for Russian financial organizations allowing them to avoid the application of sanctions provided for by the specified US law, while considering the need to minimize damage to Russian national interests. At the same time, this does not exclude interaction between credit organizations and the tax authorities of other foreign states. [1]

FATCA (Foreign Account Tax Compliance Act)

FATCA is aimed at countering tax evasion by US taxpayers who own foreign accounts. A specific feature of FATCA is its extraterritorial application, as this Law imposes an obligation on foreign financial institutions to identify the accounts of US taxpayers and provide information on them to the US Internal Revenue Service (the "IRS"). Sanctions are provided for non-performance of this obligation.

The reason for developing and adopting the Law on Financial Operations with Foreign Citizens and Organizations was the concern of Russian credit organizations regarding falling under financial sanctions from the US.[2]

According to FATCA provisions, foreign (i.e., non-American) financial organizations are called upon to transfer information available to them regarding the accounts of American taxpayers (individuals and legal entities) to the US Tax Service, as well as information on foreign legal entities in which American taxpayers have a substantial ownership interest. To this end, the US enters into relevant international agreements with countries where US citizens conduct business activities. Financial organizations of countries that do not have international agreements with the US on FATCA must enter into agreements directly with the US Tax Service. The following obligations are imposed on a financial organization:

• identification of account owners who are US taxpayers;
• submission of information to the US Tax Service on the existence of accounts of US taxpayers;
• transfer to the US Tax Service of 30% of the amount of transferred monetary funds that have the characteristics of income from sources subject to taxation in accordance with US tax legislation, or the transfer of information to American tax agents for them to carry out such transfers;
• closing the accounts of such clients, as well as other clients falling under FATCA (having characteristics of such), in the event that clients who are US taxpayers refuse to provide the necessary information or transfer monetary funds to fulfill FATCA requirements. [3]

At the time of the adoption of the Law on Financial Operations with Foreign Citizens and Organizations (as well as currently), Russia and the US have not entered into a FATCA agreement. This could have led to Russian financial organizations that did not register on the US Tax Service website falling into the list of financial organizations not participating in "FATCA", and being forced to withhold 30% of the payment amount in favor of the US Tax Service when transferring any income from US sources to their accounts, or face the closure of their accounts in American financial organizations, as well as in the financial organizations of those countries that fulfill FATCA requirements. To eliminate this risk, Russian financial organizations were required to register with the US Tax Service and further fulfill the obligations assumed under FATCA. Meanwhile, Russian laws prohibit financial organizations from disclosing information about their clients, as it is classified as a bank secret in accordance with Article 26 of Federal Law No. 395-1 dated December 2, 1990, On Banks and Banking Activity. The adoption of the Law on Financial Operations with Foreign Citizens and Organizations allowed Russian financial organizations, under certain circumstances and conditions, to transfer information about client accounts to foreign tax authorities.

Criteria for Categorizing Clients as Foreign Taxpayers

Financial market organizations take reasonable and accessible measures for the identification among persons entering into (who have entered into) an agreement with the financial market organization providing for the provision of financial services, of persons subject to the legislation of a foreign state on the taxation of foreign accounts.

As a general rule, information on the following clients is not subject to collection and transfer:

• individuals who are citizens of the Russian Federation, except for individuals who simultaneously hold the citizenship of a foreign state along with Russian citizenship, excluding the citizenship of a member state of the Eurasian Economic Union, and persons holding a residence permit in a foreign state;
• Russian legal entities, more than 90 percent of the shares (interests) of the charter capital of which are directly or indirectly controlled by the Russian Federation and (or) Russian citizens, including those holding the citizenship of an EAEU member state simultaneously with Russian Federation citizenship.

The criteria for categorizing clients as foreign taxpayer clients and the methods for obtaining the necessary information from them are determined by the financial market organization based on the Foreign Account Tax Compliance Act in internal documents, which are subject to placement on its official website no later than 15 calendar days after the date of their approval. These internal documents of the financial market organization regarding the criteria for categorizing clients as foreign taxpayers and methods for obtaining the necessary information from them are subject to change by the financial market organization upon an instruction from the Bank of Russia.

For example, one financial market organization established the following criteria. Thus, a client that is a legal entity belongs to the category of a foreign taxpayer if one of the following criteria is present:

• the country of registration/incorporation of the legal entity is a state foreign to Russia, while the legal entity does not belong to the category of legal entities excluded from the application of the requirements of foreign tax legislation;
• the presence of tax residency in a state foreign to Russia;
• the presence of controlling persons (beneficiaries, substantial owners) foreign to Russia, who directly or indirectly own a block of shares (interests) in the charter capital of the legal entity that is recognized as substantial by the relevant foreign legislation, provided that additional conditions determined by foreign legislation are met.

An individual client belongs to the category of a foreign taxpayer if one of the following criteria is present:

• the individual is a citizen of a foreign state;
• the individual has a permanent residence permit (residence permit) in a foreign state (for example, the US permanent resident card, the so-called "Green Card");
• the individual meets the criteria for long-term stay in a foreign state, i.e., the individual was present on the territory of that state for at least the period established by the legislation of the foreign state for recognition as a taxpayer and tax resident of the foreign state.

As methods for obtaining information for the purposes of categorizing clients as foreign taxpayers, financial market organizations may use any methods for obtaining information that are available on legal grounds, including such as:

• completion by the client of a self-identification form developed by the financial market organization;
• completion by the client of a questionnaire for individuals in paper and (or) electronic form;
• analysis of available information on the client, including information contained in the trade registers of foreign states, mass media, commercial databases, etc.

Procedure for Transferring Information on Clients to Foreign Tax Authorities and (or) Foreign Tax Agents

Financial market organizations have the right to carry out the transfer of information to a foreign tax authority and (or) foreign tax agents authorized to withhold foreign taxes and fees only upon receiving from the client consent for the transfer of information to a foreign tax authority.

The deadline for clients to provide information identifying them as foreign taxpayers, as well as consent (refusal to provide consent) for the transfer of information to a foreign tax authority, may not be less than 15 business days from the date the relevant request is sent to the client by the financial market organization.

The consent of the client for the transfer of information to a foreign tax authority is simultaneously consent for the transfer of such information to the Bank of Russia, Rosfinmonitoring, and the FTS.

In the event that a financial market organization has a reasoned, documented assumption that a client belongs to the category of foreign taxpayers, but at the same time the client has not provided the requested information allowing the specified assumption to be confirmed or refuted, as well as in the event of non-provision by the client within 15 business days from the date the request was sent of consent (refusal to provide consent) for the transfer of information to a foreign tax authority, the financial market organization has the right to take a decision to refuse to perform operations carried out in favor of or upon the instruction of the specified client, and (or) to unilaterally terminate the agreement providing for the provision of financial services, notifying the client of the decision taken no later than the day following the date of the decision. Taking such a decision means the termination by the financial market organization of operations under the agreement for the provision of financial services, including the termination by credit organizations of operations for crediting monetary funds to a bank account (deposit) opened for the client.

The decision taken to refuse to perform operations with monetary funds does not extend to the carrying out of payments related to claims presented to the client for the debiting of monetary funds, carried out in the following order of priority (Article 855 of the Civil Code):

• satisfaction of claims for compensation for harm caused to life or health, as well as claims for the collection of alimony;
• transfer or issuance of monetary funds for settlements for the payment of severance pay and labor remuneration with persons working or who worked under an employment contract (contract), for the payment of remuneration to authors of the results of intellectual activity;
• transfer or issuance of monetary funds for settlements for labor remuneration with persons working under an employment contract (contract), instructions from tax authorities for the debiting and transfer of arrears for the payment of taxes and fees to the budgets of the budget system of the Russian Federation, as well as instructions from bodies controlling the payment of insurance premiums for the debiting and transfer of insurance premium amounts to the budgets of state extra-budgetary funds;
• under enforcement documents providing for the satisfaction of other monetary claims;
• under other payment documents in the order of chronological priority.

Also, a decision to refuse to perform operations does not extend to transfers of monetary funds to a bank account of a foreign taxpayer client opened in another credit organization, or the issuance of monetary funds to a foreign taxpayer client.

Notifying Russian Regulators of Registration with a Foreign Tax Authority

A financial market organization is obliged to notify the FTS, Rosfinmonitoring, and the Bank of Russia of registration with a foreign tax authority, performed for the purpose of providing information provided for by the legislation of a foreign state on the taxation of foreign accounts, within a period of no later than 3 business days from the date of registration. The interaction procedure is defined by Government Resolution No. 1267 dated November 26, 2015, On Information Interaction between Financial Market Organizations and Authorized Bodies. Appendix No. 1 to the specified Resolution defines the list of information sent by a financial market organization to the FTS Russia when notifying of registration with a foreign tax authority.

It is important to note that the information that is intended to be provided by the applicant to a foreign tax authority and the information provided to the FTS must be identical.

A financial market organization must send information about itself:

• the applicant's name;
• the applicant's type;
• license number;
• license issue date;
• Taxpayer Identification Number and (or) Tax Registration Reason Code of the applicant (the applicant's "INN" and (or) "KPP");
• Primary State Registration Number of the applicant (the applicant's "OGRN");
• the unique identification code of the applicant in the SWIFT international interbank information exchange system (the "SWIFT code");
• national bank identification code;
• the applicant's email address;
• the applicant's postal address;
• the authorized representative of the applicant who has the right to an electronic signature;
• technical information.

Registration data with a foreign tax authority must also be provided:

• data of the foreign tax authority where registration was performed;
• the name of the foreign law in accordance with which registration is performed;
• the applicant's name used during registration;
• registration status with the foreign tax authority;
• the applicant's classification;
• registration number (identifier) with the foreign tax authority;
• registration date;
• date of cancellation of the registration record;
• date of change in the status of the registered organization, indicating the previous and new status;
• the applicant's contact person.

Transferring Information to a Foreign Tax Authority

First, it should be noted that information is not required to be completed and is not provided to a foreign tax authority and the FTS if it cannot be obtained by the applicant within the framework of Russian legislation.

In the event that persons subject to the legislation of a foreign state on the taxation of foreign accounts are identified during the period for which information must be provided to a foreign tax authority, the organization sends the following information to the Federal Tax Service from the date of receiving the consent of the foreign taxpayer client for the transfer of information about them to a foreign tax authority, and simultaneously to the authorized bodies:

• information about the financial market organization;
• information about the foreign taxpayer client (individual): last name, first name, patronymic; identity document data; date and place of birth; citizenship; social security number in the foreign state; registration (residence) address; country of tax residency; foreign taxpayer identification number and registration date; Taxpayer Identification Number ("INN"); the type and quantitative expression of property belonging to the foreign taxpayer client (individual); the grounds for identifying the individual as a foreign taxpayer; the presence of the individual's consent (refusal) for the transfer of information to a foreign tax authority and the date the consent (refusal) was received; information on the service agreement between the individual and the applicant.
• information on the accounts (deposits) of the foreign taxpayer client (individual): account number; account type; account currency; balance of monetary funds in the account (deposit); date of opening (closing) the account (deposit).
• information about the foreign taxpayer client (legal entity): name of the legal entity; address in the country of registration; jurisdiction of registration of the legal entity and registration date; country of tax residency; foreign taxpayer identification number and registration date; Taxpayer Identification Number ("INN"); Primary State Registration Number of the legal entity ("OGRN"); registration number (identifier) with the foreign tax authority; the address of the representative office on the territory of Russia; information about the head; the type and quantitative expression of property belonging to the foreign taxpayer client (legal entity); grounds for identifying the legal entity as a foreign taxpayer; presence of the legal entity's consent (refusal) for the transfer of information to a foreign tax authority and the date the consent (refusal) was received; information on the service agreement between the legal entity and the applicant.
• information on the accounts (deposits) of the foreign taxpayer client (legal entity): account number; account type; account currency; balance of monetary funds in the account (deposit); date of opening (closing) the account (deposit).
• information on foreign individuals who are founders (shareholders) of Russian organizations and account owners.

Upon receiving from a foreign tax authority a request or an additional request for the provision of information about a foreign taxpayer client, the financial market organization, no later than 2 business days following the date of receiving the specified request, sends information about its receipt, in coordination with the Bank of Russia, to the FTS and Rosfinmonitoring.

In the event that a request relates to a person who is not a person who has entered into or is entering into a financial services agreement, then when sending a response to the request to the foreign tax authority, the organization also notifies the FTS of the absence of information about such person within the volume and deadlines established by this paragraph.

In the event that a foreign tax authority's request contains a requirement to provide information in relation to several such persons, the information intended for transfer is provided to the FTS for each person separately.

We note that no later than 10 business days before the date of sending information about a foreign taxpayer client to a foreign tax authority, the financial market organization sends this information, in coordination with the Central Bank of the Russian Federation, to the authorized bodies. Based on the results of reviewing the specified information, Rosfinmonitoring has the right, within a period of no later than 10 business days from the date of receiving the specified information, to issue a decision on a prohibit on sending information to a foreign tax authority. [4]

Foreign financial market organizations located outside the territory of Russia are obliged to report details of accounts (deposits) of Russian citizens and legal entities opened with them, which are directly or indirectly controlled by Russian citizens, annually by September 30 of the year following the year during which the specified accounts (deposits) were opened, to the FTS using the form established by it. [5] In the event of non-performance of this obligation, measures provided for by the legislation of the Russian Federation are applied to foreign financial market organizations.

Administrative Liability for Non-Performance of the Requirements of the Law on Financial Operations with Foreign Citizens and Organizations

Administrative liability for non-performance of requirements for the provision of information on persons subject to the legislation of a foreign state on the taxation of foreign accounts is provided for by Article 15.27.2 of the Code of Administrative Offenses of the RF (the "CAO RF").

Failure by a financial market organization to send to authorized bodies, or sending in violation of established procedure and deadlines, information on a person subject to the legislation of a foreign state on the taxation of foreign accounts, or on the receipt by a financial market organization of a request (additional request) from a foreign tax authority and (or) a foreign tax agent authorized by a foreign tax authority to withhold foreign taxes and fees (the "foreign tax authority"), for the provision of information on a person subject to the legislation of a foreign state on the taxation of foreign accounts, entails the imposition of an administrative fine on officials in the amount of 20,000 to 30,000 rubles, and on legal entities in the amount of 300,000 to 500,000 rubles (Part 1 of Article 15.27.2 of the CAO RF).

Failure by a financial market organization to send to authorized bodies, or sending in violation of established procedure and deadlines, information on the registration of such a financial market organization with a foreign tax authority, performed for the purpose of providing information on persons subject to the legislation of a foreign state on the taxation of foreign accounts, entails the imposition of an administrative fine on officials in the amount of 30,000 to 40,000 rubles, and on legal entities in the amount of 500,000 to 700,000 rubles (Part 2 of Article 15.27.2 of the CAO RF).

Sending information to a foreign tax authority on a person subject to the legislation of a foreign state on the taxation of foreign accounts, in the presence of a decision to prohibit the sending of such information or in other cases where the provision of such information is prohibited by federal law, entails the imposition of an administrative fine on officials in the amount of 40,000 to 50,000 rubles, and on legal entities in the amount of 700,000 to 1 million rubles (Part 3 of Article 15.27.2 of the CAO RF).

Exchange of Financial Information

Chapter 20.1 of the Tax Code of the RF (the "Tax Code") regulates the exchange of financial information with foreign states (territories), i.e., the provision to the competent authorities of foreign states (territories) and the receipt from the competent authorities of foreign states (territories) of information on an automatic basis in accordance with the international treaties of the Russian Federation on taxation matters.

The automatic exchange of financial information with foreign states is based on the Convention on Mutual Administrative Assistance in Tax Matters (Concluded in Strasbourg on January 25, 1988)[6], the Common Reporting Standard developed by the Organisation for Economic Co-operation and Development (OECD), the purpose of which is to ensure cross-border tax transparency and prevent tax evasion, and the Multilateral Competent Authority Agreement, to which Russia has been a party since May 12, 2016. The goal of automatic exchange is to increase tax transparency and prevent tax evasion through the annual transfer of standardized information on the accounts of tax residents between participating countries. Information is transferred between tax authorities and may include data on the account owner, the bank, account number, balance, and income.

The automatic exchange of information by Russia is carried out with 61 countries and 12 territories, specified in FTS Order No. ED-7-17/916@ dated October 30, 2024 (entered into force on December 31, 2024).[7]

Financial information within the meaning of the Tax Code means the following information about clients or beneficiaries (Article 142.1 of the Tax Code):

• on operations, accounts, and deposits;
• the amount of obligations of an insurer that has entered into a voluntary life insurance agreement;
• the amount of monetary funds and the value of property at the disposal of a financial market organization in accordance with a brokerage service agreement or a trust management agreement;
• the value of property accounted for by a financial market organization carrying out depository activities;
• pension accounts;
• obligations of central counterparties;
• on payments and operations for accounts and deposits, voluntary life insurance agreements, property trust management agreements (including those certified by the issuance of an investment unit), brokerage service agreements, depository agreements, pension agreements, agreements with a central counterparty, and other agreements within the framework of which a financial market organization accepts monetary funds or other financial assets from clients for storage, management, investment, and (or) carrying out other transactions in the interests of the client or directly or indirectly at the client's expense.

Under a financial market organization, the Tax Code understands credit organizations; insurers carrying out activities for voluntary life insurance; professional securities market participants carrying out brokerage activities, and (or) securities management activities, and (or) depository activities; managers under a property trust management agreement; non-state pension funds; joint-stock investment funds; management companies of an investment fund, mutual investment fund, or non-state pension fund; central counterparties; managing partners of an investment partnership; and other organizations or structures without the status of a legal entity which, within the framework of their activities, accept monetary funds or other financial assets from clients for storage, management, investment, and (or) carrying out other transactions in the interests of the client or directly or indirectly at the client's expense.

Obligations of a Financial Market Organization to Submit Information

Financial market organizations are obliged to submit financial information to the FTS regarding clients, beneficiaries, and (or) persons directly or indirectly controlling them, in relation to whom it has been identified that they are tax residents of foreign states (territories), as well as other information relating to the agreement entered into between the client and the financial market organization providing for the provision of financial services (Article 142.2 of the Tax Code).

The submission of such information to the FTS by a financial market organization is not a violation of bank secrecy and does not require obtaining the consent of clients, beneficiaries, and persons directly or indirectly controlling them.

The Government of Russia, in coordination with the Bank of Russia, has the right to establish a list of financial market organizations and (or) types of agreements providing for the provision of financial services, in relation to which the provisions of Chapter 20.1 of the Tax Code are not applied by virtue of the low risk of performing actions (omissions) aimed at tax (fee) evasion with the use of such financial market organizations and (or) such agreements providing for the provision of financial services.[8]

Such financial market organizations include the Bank of Russia, the Pension Fund, the Mandatory Medical Insurance Fund, the Social Insurance Fund, the International Finance Corporation, the International Bank for Reconstruction and Development, the Eurasian Development Bank, the International Development Association, the European Bank for Reconstruction and Development, the Interstate Bank, the International Investment Bank, the International Bank for Economic Co-operation, the Multilateral Investment Guarantee Agency, the Black Sea Trade and Development Bank, the European Investment Bank, the Nordic Investment Bank, and the International Monetary Fund.

Agreements for the provision of financial services include the following types of agreements:

• mandatory pension insurance agreements;
• bank deposit agreements opened to receive compensation payments for deposits active as of June 20, 1991;
• life insurance agreements in the event of death;
• disability insurance agreements and other insurance agreements providing for the payment of insurance sums to cover the adverse economic consequences of an insured event;
• term life insurance agreements, the duration of which expires before the insured person reaches the age of 90;
• escrow account agreements opened in accordance with a court decision or in connection with carrying out a property sale, exchange, or lease transaction, on the condition that the amount of monetary funds in the account corresponds to the amount of the relevant obligation, and the account is opened exclusively for accounting and blocking monetary funds received by the bank from the account owner (depositor) for the purpose of their transfer to another person (beneficiary) as the purchase price of the property or compensation for losses under a sale or lease agreement, upon the occurrence of grounds provided for by the agreement between the bank, depositor, and beneficiary, while such grounds must be related to the sale or exchange of property or termination of a lease agreement, and the account must not be used for margin transactions;
• bank account agreements entered into with a head contractor or contractor for carrying out settlements under a state defense order;
• bank account agreements opened for accounting for maternity capital funds;
• bank account agreements entered into for accounting for monetary funds allocated from the federal budget to the Central Election Commission and other commissions for the preparation and holding of elections to federal bodies of state power, referendums, the operation and development of automation means, the training of election organizers and voters, and the support of activities of election commissions.

In relation to loan agreements, bank cell or safe lease agreements, and bank guarantee agreements, the submission of financial information is not required.[9]

In the opinion of FTS Russia, an escrow account agreement opened for settlements under shared construction participation agreements must be considered as an agreement providing for the provision of a financial service and analyzed for the purposes of performing the norms of Chapter 20.1 of the Tax Code. [10]

Procedure for Carrying out the Exchange of Financial Information

The FTS receives from the financial market organization information on clients, beneficiaries, and (or) persons directly or indirectly controlling them, as well as other information, and transfers such information to the competent authorities of foreign states (territories) that are included in the list of states (territories) with which automatic exchange of financial information is carried out and of which the clients, beneficiaries, and (or) persons directly or indirectly controlling them are tax residents.

The automatic exchange of information is carried out through the use of an autonomous workstation that does not have a connection to Russian state information systems. The autonomous workstation must be equipped with certified means of protection against unauthorized access, antivirus protection, and means of protection against the destructive influence of malicious computer programs (viruses).

Processed information is transferred between the autonomous workstation and the automated workstation of the Federal Tax Service with the use of removable (external) media intended for processing information with restricted access. The tax secrecy regime (Article 102 of the Tax Code) and confidentiality provisions extend to all information received within the framework of automatic information exchange.

For the purpose of performing the obligations established by Chapter 20.1 of the Tax Code, a financial market organization requests, processes, including documenting, and analyzes the received information, and also takes, including documenting, measures that are reasonable and accessible in the prevailing circumstances to establish the tax residency of clients, beneficiaries, and persons directly or indirectly controlling them, including verifying the authenticity and completeness of the information provided by the client.

Clients are obliged to submit information in relation to themselves, beneficiaries, and (or) persons directly or indirectly controlling them, as requested by the financial market organization in accordance with this Chapter. Actions (omissions) aimed at creating conditions under which the performance of obligations established by this Article will not be required are not permitted.

In the event of non-provision of the requested information by a person entering into an agreement for the provision of financial services with a financial market organization, the financial market organization has the right to refuse to enter into such an agreement with this person.

In the event of non-provision of information by a client, the financial market organization has the right to refuse to perform operations carried out in favor of or upon the instruction of the client and (or) to unilaterally terminate the agreement for the provision of financial services, notifying the client of this no later than 1 business day following the date the decision was taken.

Refusal to perform operations means the termination of operations under the agreement for operations carried out for the purposes provided for by Clause 2 of Article 855 of the Civil Code, as well as operations for the transfer of monetary funds to a bank account of the client opened in another credit organization, or for the issuance of monetary funds to the client.

In the event of the receipt of monetary funds for crediting to a client's account (deposit) in a bank after a decision to refuse to perform operations has been taken, the specified monetary funds are not subject to crediting and are returned to the accounts of the payers in the sending banks.

In the event of non-provision of the requested information by the client within 15 days from the date of the refusal to perform operations, the financial market organization has the right to unilaterally terminate the agreement for the provision of financial services entered into with them.

In the event of the provision of the requested information by the client after the refusal to perform operations until the moment the agreement is considered terminated, the financial market organization has the right to cancel the previously taken decision to terminate the agreement.

If a financial market organization identifies the inauthenticity or incompleteness of information provided by the client, or comes to a conclusion on the contradiction between information provided by the client and information at the disposal of the financial market organization, including that obtained from other publicly available sources of information, the financial market organization has the right to refuse to enter into an agreement for the provision of financial services, or to unilaterally terminate an entered into agreement.

An agreement for the provision of financial services is considered terminated upon the expiration of 1 month from the date the financial market organization sends the client a notification of termination, unless another period is established by the agreement.

Tax Liability of Financial Market Organizations

In accordance with the Tax Code, the liability of financial market organizations is established by Articles 129.7, 129.7-1, and 129.8 of the Tax Code:

• Failure by a financial market organization to submit information within the established period on clients in relation to whom it has been identified that they are tax residents of foreign states (territories), entails the imposition of a fine in the amount of 300,000 rubles (Clause 1 of Article 129.7 of the Tax Code).
• Non-inclusion by a financial market organization of the specified information in relation to an individual client in the composition of information submitted to the FTS, entails the imposition of a fine in the amount of 50,000 rubles for each fact of such violation (Clause 2 of Article 129.7 of the Tax Code).
• Submission of incomplete or inauthentic information by a financial market organization, entails the collection of a fine in the amount of 25,000 rubles for each fact of such violation (Clause 3 of Article 129.7 of the Tax Code). An act provided for by Clause 2 or 3, committed intentionally, entails the collection of a fine in the amount of 100,000 rubles for each fact of such violation (Clause 4 of Article 129.7 of the Tax Code). A financial market organization is released from liability provided for by Clauses 2 and 3 if its commission of a tax offense is due to the commission of an act provided for by Article 129.7-1 of this Tax Code by the financial market organization's client (Clause 5 of Article 129.7 of the Tax Code).
• Submission by a client of a financial market organization of incomplete or inauthentic information in relation to themselves, a beneficiary, and (or) persons directly or indirectly controlling them, as requested by the financial market organization in accordance with Article 142.4 of the Tax Code, entails the collection of a fine from a client who is an individual in the amount of 10,000 rubles, and from a client who is a legal entity in the amount of 25,000 rubles for each fact of such violation in relation to each entered into agreement on the provision of financial services (Clause 1 of Article 129.7-1 of the Tax Code). The specified act, committed intentionally, entails the collection of a fine from a client who is an individual in the amount of 20,000 rubles, and from a client who is a legal entity in the amount of 50,000 rubles for each fact of such violation in relation to each entered into agreement on the provision of financial services.
• Violation by a financial market organization of the procedure for establishing the tax residency of clients, beneficiaries, and persons directly or indirectly controlling them, entails the collection of a fine in the amount of 50,000 rubles for the failure to take measures in relation to each client, beneficiary, or person directly or indirectly controlling them (Article 129.8 of the Tax Code).

In Case No. A40-142959/2022, the tax inspection identified the fact of a bank's violation of the procedure for establishing a client's tax residency due to the failure to take measures provided for by Article 142.4 of the Tax Code, as well as the non-inclusion of information on them in a report with financial information, on which an act on the discovery of facts testifying to tax offenses was drawn up. The courts came to a conclusion on the presence in the bank's actions of the event of the imputed offense, the bank's guilt, and the absence of violations of the procedure for bringing to liability by the tax authority. The courts proceeded from the fact that the financial market organization "sufficiently possessed documents for the purposes of establishing the tax residency of a foreign citizen, and was obliged to perform requirements for the provision of financial information". [11]

In a case reviewed by the Second Cassation Court of General Jurisdiction, an individual was brought to liability for non-submission of documents (information) necessary for the carrying out of tax control and for non-payment (incomplete payment) of personal income tax. The grounds for bringing to liability for the commission of a tax offense were information received by the tax authority within the procedure of international automatic exchange of financial information that in 2019 and 2020, income in US dollars from sources abroad was received into the account of this individual, which had not been declared. It was indicated by the courts that "since the obligation for declaring income received in 2019-2020 from foreign sources was not performed, the tax authority properly calculated the personal income tax from the amount of income confirmed by information received from the competent authority of a foreign state, formalized in accordance with the procedure". [12]

In an analogous case, the courts, "having analyzed the financial information received by the inspection within the framework of international automatic exchange and the results of a conducted desk audit, established the fact of receiving income from a source outside Russia and the illegal non-performance of the obligation for declaration and payment of tax. During the audit, the tax authority sent requirements for the provision of documents for the verification of information available to the tax authority; thus, the taxpayer's rights were not violated when conducting the audit". [13]

Financial market organizations must take measures for the identification among persons entering into an agreement for the provision of financial services of persons subject to the legislation of a foreign state on the taxation of foreign accounts, and report this to the tax authorities of foreign states, as well as to FTS Russia, which carries out the exchange of financial information with the tax authorities of foreign states.

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References

1. Letters of the Bank of Russia No. 41-2-3-3/1625 dated September 5, 2014, and No. 41-2-3-7/1537 dated August 26, 2014.
2. Smirnov E.I. Russian Banks Now Have the Ability to Perform FATCA Requirements. Journal "International Banking Operations", 2014, No. 3.
3. Ibid. 
4. Government Resolution of Russia No. 742 dated July 23, 2015, On Approval of the Rules for Sending a Decision by the Federal Financial Monitoring Service to a Financial Market Organization on a Prohibit on Sending Information to a Foreign Tax Authority and the Form of a Decision on a Prohibit on Sending Information to a Foreign Tax Authority.
5. FTS Order of Russia No. MMV-7-14/501@ dated November 9, 2015, On Approval of Forms of Reports by Foreign Financial Market Organizations Located Outside the Territory of the Russian Federation on Details of Accounts (Deposits) of Citizens of the Russian Federation and Legal Entities which are Directly or Indirectly Controlled by Citizens of the Russian Federation.
6. Federal Law No. 325-FZ dated November 4, 2014, On Ratification of the Convention on Mutual Administrative Assistance in Tax Matters.
7. FTS Order of Russia No. ED-7-17/916@ dated October 30, 2024, On Approval of the List of States (Territories) with which Automatic Exchange of Financial Information is Carried out.
8. Government Resolution of Russia No. 693 dated June 16, 2018, On Implementation of International Automatic Exchange of Financial Information with Competent Authorities of Foreign States (Territories).
9. Frequently Asked Questions on the Application of the Provisions of Chapter 20.1 of the Tax Code of the Russian Federation and Government Resolution of the Russian Federation No. 693 dated June 16, 2018. URL https://340fzreport.nalog.ru.
10.  Ibid.
11. Resolution of the Arbitration Court of the Moscow District dated April 12, 2023, in Case No. A40-142959/2022.
12. Cassation Ruling of the Second Cassation Court of General Jurisdiction dated August 27, 2025, No. 88a-21409/2025 (UID 77RS0001-02-2023-017736-71).
13. Cassation Ruling of the Second Cassation Court of General Jurisdiction dated October 10, 2024, No. 88a-25310/2024 (UID 77RS0024-02-2023-019330-84).