20 July 2022

Currency Repatriation in Russia: Legal Guide

July 20, 2022

BRACE Law Firm ©

Foreign currency has always been and remains a medium of exchange between parties to international transactions within the framework of foreign trade. Consequently, the state, seeking to control this sphere of activity, legislatively regulates certain requirements for organizations and other persons carrying out foreign trade transactions. One of these requirements is the repatriation (return) of foreign currency and the currency of the Russian Federation. Compliance with the requirement for the repatriation of foreign currency earnings is a mandatory condition for international trade.

Federal Law No. 173-FZ dated December 10, 2003, On Currency Regulation and Currency Control (the "Law No. 173-FZ", the "Currency Regulation Law") governs the implementation of a unified state currency policy.

Under Clause 1 of Article 1 of Law No. 173-FZ, the currency of the Russian Federation includes monetary tokens in the form of Bank of Russia banknotes and coins in circulation as a legal tender of cash payment in the territory of the Russian Federation, as well as those being withdrawn or already withdrawn from circulation but subject to exchange, as well as funds in bank accounts and bank deposits.

Foreign currency constitutes monetary tokens in the form of banknotes, treasury notes, and coins in circulation and acting as a legal tender of cash payment in the territory of the corresponding foreign state (group of foreign states), as well as those being withdrawn or already withdrawn from circulation but subject to exchange, as well as funds in bank accounts and bank deposits in the monetary units of foreign states and international monetary or settlement units.[1]

The following constitute currency operations:

A resident’s acquisition from a resident and a resident’s alienation in favor of a resident of currency values on legal grounds, as well as the use of currency values as a medium of payment;
A resident’s acquisition from a non-resident or a non-resident’s acquisition from a resident and a resident’s alienation in favor of a non-resident or a non-resident’s alienation in favor of a resident of currency values, the currency of the Russian Federation, and internal securities on legal grounds, as well as the use of currency values, the currency of the Russian Federation, and internal securities as a medium of payment;
A non-resident’s acquisition from a non-resident and a non-resident’s alienation in favor of a non-resident of currency values, the currency of the Russian Federation, and internal securities on legal grounds, as well as the use of currency values, the currency of the Russian Federation, and internal securities as a medium of payment;
The import into the Russian Federation and export from the Russian Federation of currency values, the currency of the Russian Federation, and internal securities;
The transfer of foreign currency, the currency of the Russian Federation, internal and external securities from an account opened outside the territory of the Russian Federation to an account of the same person opened in the territory of the Russian Federation, and from an account opened in the territory of the Russian Federation to an account of the same person opened outside the territory of the Russian Federation;
A non-resident’s transfer of the currency of the Russian Federation, internal and external securities from an account (account section) opened in the territory of the Russian Federation to an account (account section) of the same person opened in the territory of the Russian Federation;
The transfer of the currency of the Russian Federation from a resident's account opened outside the territory of the Russian Federation to another resident's account opened in the territory of the Russian Federation, and from a resident's account opened in the territory of the Russian Federation to another resident's account opened outside the territory of the Russian Federation;
The transfer of the currency of the Russian Federation from a resident's account opened outside the territory of the Russian Federation to another resident's account opened outside the territory of the Russian Federation;
The transfer of the currency of the Russian Federation from a resident's account opened outside the territory of the Russian Federation to the account of the same resident opened outside the territory of the Russian Federation.[2]

What is Repatriation of Foreign Currency and the Currency of the Russian Federation?

Legislation does not provide a specific legal norm establishing a clear definition of repatriation within currency circulation. Translated from Latin, repatriate means to return to the homeland. In simple terms, the repatriation of currency to the Russian Federation means returning funds to the Russian Federation from another state.

Residents receiving income in foreign currency under international transactions must repatriate those funds. Article 19 of the Currency Regulation Law lists actions with foreign currency or Russian currency that residents must perform when conducting international activities. Thus, the legislator essentially reveals the concept of repatriation.

Under Part 1 of Article 19 of Law No. 173-FZ, when carrying out foreign trade activities and (или) when residents provide foreign currency or the currency of the Russian Federation to non-residents as loans, residents (unless otherwise provided for by Law No. 173-FZ) must ensure the following within the timeframes provided for by foreign trade contracts and (или) loan agreements:

Receipt from non-residents into their bank accounts at authorized banks of the foreign currency or currency of the Russian Federation due under the terms of the specified contracts for goods transferred to non-residents, work performed for them, services rendered to them, and information and results of intellectual activity transferred to them, including exclusive rights thereto;
Return to the Russian Federation of funds paid to non-residents for goods not imported into the Russian Federation (not received in the territory of the Russian Federation), work not performed, services not rendered, and information and results of intellectual activity not transferred, including exclusive rights thereto;
Receipt from non-residents into their bank accounts at authorized banks of the foreign currency or currency of the Russian Federation due under the terms of loan agreements.

Currently, the amount of currency earnings subject to mandatory sale is 0%. The Government Commission for Control over Foreign Investment in the Russian Federation unanimously decided to allow residents—participants in foreign trade activities—to carry out the mandatory sale of foreign currency in the amount of 0 percent of the foreign currency amount.[3]

Repatriation acts as a mechanism to prevent the gratuitous outflow of capital from the country. During crises, the state seeks to limit financial flows through legislation. After the situation stabilizes, the legislator introduces relaxations on the export and import of monetary capital.

When is Repatriation of Currency Earnings Mandatory?

Amendments made to the Currency Regulation Law in 2020, 2021, and 2022 gradually changed repatriation obligations. Mandatory repatriation was phased out for transactions in foreign currency and Russian currency for the following types of deals:

Transfer of goods to non-residents, except for certain "raw material" goods;
Performance of work for non-residents;
Provision of services to non-residents;
Transfer of information and results of intellectual activity to non-residents.

However, mandatory repatriation requirements remained for certain types of exported goods, such as timber, oil, and petroleum products, etc. Mandatory repatriation also remained for loan agreements between a resident and a non-resident, as well as for foreign trade transactions where an advance was paid to a non-resident.

Each successive change in currency regulation legislation modified the necessity of mandatory repatriation for foreign trade transactions. However, the latest changes to regulatory documents regarding repatriation significantly impacted this necessity. Thus, Decree of the President of the Russian Federation No. 430 dated July 5, 2022, On Repatriation by Residents — Participants in Foreign Trade Activity of Foreign Currency and the Currency of the Russian Federation (the "Decree of the President No. 430") allows Russian exporters to repatriate the amount of foreign currency necessary to fulfill obligations for the sale of currency earnings. The only exceptions are "raw material" exporters. The list of goods is determined by the Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union [4] and includes the following items: fish, salt, lime, asbestos, pearls, oil, petroleum gases, gaseous hydrocarbons, etc.

Given that as of June 10, 2022, the amount of currency earnings subject to mandatory sale is set at 0%, after the effective date of the aforementioned Presidential Decree on Repatriation, Russian exporters may choose not to transfer the received currency to Russia and leave it in foreign banks, except for "raw material" contracts.

It should also be noted that many major banks are under restrictions (sanctions) introduced by foreign partners. Conducting international trade becomes quite difficult under these conditions. At the same time, the ability to leave received currency in banks of foreign jurisdictions allows international trade participants to carry out settlements with foreign partners through the SWIFT payment system.

To Whom Does the Requirement for Repatriation of Currency Earnings Apply?

In accordance with Law No. 173-FZ, the subjects of legal relations related to repatriation are:

Non-residents.
Authorized Banks—credit organizations established in accordance with the legislation of the Russian Federation and entitled, based on licenses from the Central Bank of the Russian Federation, to carry out banking operations with funds in foreign currency. It is impossible to carry out the repatriation procedure without the direct participation of an authorized bank. This is due not only to state control over currency operations but also to the direct necessity of their participation. Sending foreign currency to a counterparty through a bank is much more convenient than cash settlements.

When concluding foreign trade transactions, participants in international trade must comply with currency regulation requirements, including repatriation requirements. The obligation to repatriate arises for residents receiving revenue in foreign currency from non-residents.

At the same time, Clause 5 of Decree No. 79 establishes that requirements for the mandatory sale of foreign currency apply to residents specified in Sub-clauses 1 and 2 of Decree of the President No. 79 who are parties to foreign trade contracts, regardless of whether such contracts are registered with authorized banks in accordance with the provisions of Bank of Russia Instruction No. 181-I dated August 16, 2017, On the Procedure for Residents and Non-residents to Submit Supporting Documents and Information to Authorized Banks When Carrying Out Currency Operations, on Unified Forms for Accounting and Reporting on Currency Operations, and the Procedure and Deadlines for Their Submission (the "Instruction No. 181-I").

Regarding the application of Decree of the President No. 430 concerning syndicated credits (loans), the Bank of Russia provided an official clarification. [5] It states that a Russian legal entity that concluded an agreement with a foreign person — a participant in a syndicate of creditors under a syndicated credit — providing for the transfer of funds after receiving performance under the syndicated credit (loan) agreement, and which is considered an external participant, is recognized as a resident creditor provided that such an agreement was concluded on or before February 28, 2022. Clarifications were also provided that Russian legal entities — debtors under syndicated credit (loan) agreements — fulfill obligations to a non-resident creditor by bypassing payment agents authorized to receive funds from Russian legal entities — debtors — as well as non-resident creditors, provided that funds and information or documents confirming the amount of the non-resident creditor's actual debt to the external participant under such an agreement are transferred.

Cases Where Repatriation is Not Required

Meanwhile, residents are entitled not to credit foreign currency or the currency of the Russian Federation to their bank accounts in authorized banks in the following cases:

When crediting foreign currency or the currency of the Russian Federation for the purpose of fulfilling obligations under credit agreements and loan agreements.
When customers pay or reimburse the local expenses of residents in connection with the construction, reconstruction, or modernization of facilities by residents outside the territory of the Russian Federation—for the period of construction, reconstruction, or modernization, at the end of which the remaining funds must be transferred to the residents' accounts opened in authorized banks.
When using foreign currency received by residents from holding exhibitions, sporting, cultural, and other similar events outside the territory of the Russian Federation to cover the costs of their holding — for the period of these events.
When conducting a set-off of mutual claims for obligations between residents and non-residents:

Engaged in fishing;
Providing services under agency agreements (contracts);
Between transport organizations if settlements between them are carried out through specialized settlement organizations.

When conducting a set-off of mutual claims under reinsurance contracts or contracts for the provision of services related to the conclusion and execution of reinsurance contracts between a non-resident and a resident that are insurance organizations or insurance brokers.
When crediting foreign currency or the currency of the Russian Federation to the accounts of transport organizations for the purpose of paying expenses related to the payment of air navigation, airport, port fees, and other mandatory fees in the territories of foreign states, as well as expenses related to the maintenance of aircraft, river, and sea vessels and other transport vehicles of such transport organizations and their passengers located outside the territory of the Russian Federation.
When conducting a set-off of mutual claims between residents exporting natural gas in a gaseous state and non-residents under contracts providing for the purchase and sale of natural gas in a gaseous state and contracts providing for non-residents' obligations to specified residents in connection with the transit of natural gas in a gaseous state through the territories of foreign states.
When a resident provides a non-resident with foreign currency or the currency of the Russian Federation under a loan agreement related to the financing of geological study, exploration, and (или) extraction of minerals if the return of the provided funds depends on the fact and volume of mineral extraction and the amount of revenue from their sale, and upon the occurrence of conditions specified in the loan agreement, the non-return of funds occurs.
When conducting a set-off of mutual homogeneous claims under loan agreements concluded between a resident and a non-resident, provided that the non-resident's mutual claim arose as a result of providing a loan to the resident by crediting funds to the resident's account opened in an authorized bank.
When a resident provides a non-resident with foreign currency or the currency of the Russian Federation under a loan agreement related to the financing of investment and (или) innovation activities, provided the resident meets one of the following conditions:

Is a legal entity included in the list of legal entities providing state support for innovation activities;
Is a business entity in which at least fifty percent of the shares are owned by the legal entities specified in the previous point;
Is a managing partner of an investment partnership in which the share in the right of ownership of the common property of the partners is at least fifty percent;
Is a management company of an investment fund in which at least fifty percent of the shares (investment units) belong to the specified legal entities.

When conducting a set-off of mutual claims for obligations arising from contracts for the provision of international telecommunications services, including international roaming services.
When crediting foreign currency or the currency of the Russian Federation to accounts opened in banks under education agreements with non-resident individuals providing for the rendering of educational services outside the territory of the Russian Federation.
When conducting a set-off of mutual claims for obligations arising from foreign trade contracts (agreements) concluded between residents and non-residents, the terms of which provide for the provision of services to non-residents included in the list of services approved by the Government of the Russian Federation in coordination with the Central Bank of the Russian Federation.

Despite this extensive list of exemptions, a resident's failure to fulfill the obligation to return foreign currency to Russia entails liability in accordance with the administrative and criminal legislation of the Russian Federation.

As an example, consider a case in which an LLC appealed to an arbitration court, challenging an administrative violation report. During the hearing, an analysis of documents and information from the Bank of Russia revealed that the LLC failed to return foreign currency due under a loan agreement to its bank accounts at authorized banks. Reviewing the case, the court agreed with the tax authority that the LLC, having provided foreign currency to a non-resident under a loan agreement and failing to ensure the timely receipt of the due foreign currency into its bank accounts, violated Clause 3 of Part 1 of Article 19 of Federal Law No. 173-FZ. The court denied the LLC's claims.[6]

Timeframes for Carrying Out Repatriation

The legislator stipulated that for the purpose of fulfilling the requirement for the repatriation of foreign currency and the currency of the Russian Federation, contracts concluded between residents and non-residents for international trade or loans must specify the timeframes for the parties to fulfill their obligations under the contracts.

Essentially, a resident must receive foreign currency or Russian currency in a bank account for goods transferred to non-residents or receive currency due under the terms of a loan agreement from a non-resident into their bank account at an authorized bank.

When carrying out foreign trade activities and (или) providing loans to non-residents, residents must provide authorized banks with information regarding:

The timeframes for receiving foreign currency and (или) the currency of the Russian Federation from non-residents into their accounts at authorized banks for fulfilling obligations under foreign trade contracts through the transfer of goods, performance of work, rendering of services, or transfer of information and results of intellectual activity (including exclusive rights thereto), or the timeframes for other performance or termination of obligations under foreign trade contracts in cases and ways permitted by the legislation of the Russian Federation;
The timeframes for non-residents to fulfill obligations under foreign trade contracts by transferring goods, performing work, rendering services, or transferring information and results of intellectual activity (including exclusive rights thereto) to residents against advance payments made by residents, and the timeframes for the return of such advance payments;
The timeframes for non-residents to fulfill obligations to return loans provided to them by residents in accordance with the terms of the loan agreements.

The procedure for residents to submit information to authorized banks and its subsequent reflection in bank control statements is established by Instruction No. 181-I.

Appendix No. 3 to Instruction No. 181-I regulates the timeframes for the repatriation of foreign currency and the currency of the Russian Federation:

Expected repatriation dates are determined by the resident independently based on the terms of the contract registered by the authorized bank, or by a resident individual independently based on the terms of the loan agreement as follows: 1.1. When a resident makes advance payments to a non-resident under an import contract:

The time necessary for the import of goods, performance of work, rendering of services, or transfer of information and results of intellectual activity (including exclusive rights thereto) is added when determining the expected repatriation timeframe;
The timeframe for the return to the Russian Federation of funds paid to non-residents for goods not imported (not received in Russia), work not performed, services not rendered, or information/intellectual activity results not transferred is also specified. 1.2. When a resident transfers goods, performs work, renders services, or transfers information/intellectual activity results to a non-resident on deferred payment terms under an export contract, the time necessary for exporting the goods from Russia, and (или) the time for processing documents confirming the resident's performance, and (или) the time for credit organizations to transfer the funds is added to the term provided for by the contract. 1.3. When a resident or resident individual provides a loan to a non-resident, the time for credit organizations to transfer the funds is added when determining the expected repatriation timeframe.

The expected repatriation timeframe cannot exceed the completion date for the fulfillment of obligations under the contract as specified in the bank control statement.

Situations may arise where parties violate repatriation deadlines. This can happen for various reasons, including those beyond the parties' control. In accordance with Clause 1 of Article 450 of the Civil Code, amendment and termination of a contract are possible by agreement of the parties unless otherwise provided by the Civil Code, other laws, or the contract. Law No. 173-FZ does not prohibit changing the payment deadline for an international transaction. Furthermore, Article 19 of Law No. 173-FZ states that parties are entitled to extend the deadlines for fulfilling obligations under foreign trade contracts. By changing the performance deadlines, the parties modify the terms of the foreign trade contract as well as the deadlines for carrying out mandatory currency repatriation.

Notably, there are cases where parties to an international transaction did not agree on repatriation terms — for example, they concluded a framework agreement and the performance deadlines were agreed upon through email correspondence. In such cases, according to the FAS Russia, the following should apply. Under Part 1 of Article 429.1 of the Civil Code, a framework agreement (a contract with open terms) is an agreement defining the general terms of the parties' obligatory relationship, which can be specified and refined by the parties through separate contracts, orders, or otherwise based on or in fulfillment of the framework agreement. Additionally, Part 1 of Article 432 of the Civil Code establishes that a contract is considered concluded if the parties have reached an agreement on all material terms in the required form. Under Part 2 of Article 434 of the Civil Code, a written contract may be concluded by drawing up a single document signed by the parties, as well as by exchanging letters, telegrams, telexes, faxes, and other documents, including electronic documents transmitted via communication channels that allow for the reliable establishment that the document originates from a party to the contract. Thus, if a framework agreement between a resident and a non-resident provides that the coordination of performance deadlines is carried out by authorized persons via email, such a framework agreement, together with a properly certified printout of the correspondence containing the material terms, satisfies the requirements of Part 1.1 of Article 19 of Law No. 173-FZ. [7]

The Bank of Russia supports this position, agreeing that such an arrangement satisfies the law's requirements. [8]

While a framework agreement might not contain specific deadlines in its text, there is an expected repatriation timeframe. If necessary, the resident determines this timeframe independently, provided it does not exceed the contract's overall completion date.

Mandatory Sale of Currency Earnings

To stabilize the economic situation, the President issued Decree No. 79, which obligated residents to carry out the mandatory sale of foreign currency in the amount of 80% of the foreign currency amount. However, as the regulatory environment is dynamic, Decree of the President of the Russian Federation No. 360 dated June 9, 2022, amended Decree No. 79 and Decree No. 126. Currently, the amount of mandatory currency sale is determined by the Government Commission for Control over Foreign Investment in the Russian Federation.

As of today, the amount of currency earnings subject to mandatory sale is 0%. The Commission unanimously decided to allow international trade participants to carry out the mandatory sale of foreign currency at a rate of 0 percent.[9]

Repatriation remains a method to prevent the gratuitous outflow of capital. During crises, the state uses legislation to restrict financial flows, introducing relaxations once the situation stabilizes.

Crediting Funds to Accounts Opened in Banks Other Than the Authorized Bank

Article 14 of Law No. 173-FZ establishes that residents are entitled to open bank accounts (bank deposits) in foreign currency in authorized banks without restrictions, unless otherwise established by the Currency Regulation Law. Under Instruction No. 181-I, a resident party to an export/import contract or credit agreement must register it with an authorized bank and conduct settlements through accounts at the bank that registered the contract (or the bank servicing it), except for specified cases.

The Bank of Russia, in its letter, [10] outlined the following position: if a foreign state introduces measures against a bank — such as anti-Russian sanctions — that restrict a resident's operations, the resident may conduct operations (both crediting and debiting) through accounts in a different bank without transferring the contract's registration to that bank, provided they follow this procedure:

If the resident transfers funds received from a non-resident counterparty from an account in a different bank to the account in the registration bank, they must provide the registration bank with an account statement or document confirming receipt of funds and identify the funds with the appropriate operation type code. The registration bank then reflects this in Section II (Payment Information) of the bank control statement.
If the resident chooses not to transfer funds received in a different bank to the registration bank, they must provide the registration bank with an account statement and a certificate of supporting documents using code 13_3 to reflect the currency and amount.
When debiting funds in favor of a non-resident counterparty from a different bank, the resident must provide the registration bank with an account statement for reflection in Section II of the bank control statement.

However, this letter applies only to residents whose contracts are serviced by banks subject to anti-Russian sanctions.

The Bank of Russia also provided an official clarification [11] stating that:

The mandatory sale of a portion of currency earnings applies to all foreign trade contracts involving the transfer of goods, performance of work, rendering of services, or transfer of intellectual activity results, regardless of whether the contract is registered under Instruction No. 181-I. All types of foreign currencies are subject to mandatory sale.
Decree No. 79 implies that all export currency earnings must be credited to accounts in authorized banks for subsequent mandatory sale. Thus, obligations under export contracts may be fulfilled by crediting funds from non-residents to authorized bank accounts or without such crediting.
The obligation of residents to sell a portion of currency earnings and the ban on residents crediting foreign currency to their accounts outside Russia (Decree No. 79, Sub-clause 3b) apply to all export contracts and contain no exceptions for contracts where the repatriation requirement was abolished as of July 1, 2021.
Export revenue under contracts for the sale of goods includes only revenue received from a non-resident for contracts involving the export of goods from the Russian Federation.
The requirement for mandatory sale applies to residents who are individual entrepreneurs or persons in private practice if they receive currency revenue from foreign trade.
Residents may choose any legal method for the mandatory sale of a portion of currency earnings. This sale can be made to the servicing bank, another authorized bank, or on organized trades.
Authorized banks, as currency control agents, monitor compliance with mandatory sale requirements. They report suspected violations to currency control authorities.
The State Development Corporation VEB.RF ("VEB.RF") is entitled to carry out certain banking operations, and the provisions of Decree No. 95 applicable to Russian credit organizations also apply to VEB.RF.
Fulfilling obligations as regulated by Decree No. 95 cannot be considered improper and, therefore, cannot be recognized as an event of default. Foreign creditors' recognition of such performance as a default cannot be used by Russian creditors as grounds for applying cross-default conditions.

Possibility of Assignment of Rights Considering Repatriation Requirements

In difficult economic situations, the assignment of rights of claim is a potential solution for entrepreneurs. Russian legislation does not prohibit Russian residents from concluding agreements for the assignment of rights under foreign trade transactions. This is possible under the following conditions:

The assignment agreement is concluded before the deadline for the delivery of goods to Russia expires;
The assignment agreement is concluded before the expiration of the supply contract.

The Supreme Court of the Russian Federation addressed this in its review,[12] clarifying that assigning rights under foreign trade contracts is permissible based on the following norms. Under Clause 1 of Article 382 of the Civil Code, a right (claim) belonging to a creditor may be transferred to another person via a transaction (assignment of claim) or by operation of law.

Article 383 of the Civil Code prohibits the transfer of rights inextricably linked to the creditor's personality, such as alimony or compensation for harm to life or health.

As stated in Clause 1 of Article 388 of the Civil Code, the assignment of a claim by a creditor (assignor) to another person (assignee) is permitted if it does not contradict the law.

Article 14 of the Currency Regulation Law does not prohibit residents from assigning rights under foreign trade transactions. Consequently, the Supreme Court concluded that such assignments are permissible. In the event of an assignment, the subject of currency control responsible for fulfilling the requirements of Part 1 of Article 19 of Law No. 173-FZ will be the assignee (the person to whom the right of claim was transferred).

Liability for Violation of Currency Legislation on Repatriation

Russian legislation establishes administrative and criminal liability for the failure to repatriate currency.

Administrative liability arises for a resident's failure to timely receive foreign currency or Russian currency in their bank accounts for goods, work, services, or intellectual activity results (except for cases provided for by Part 4.2 of Article 15.25 of the CAO RF). This entails a warning or an administrative fine:

For citizens, individual entrepreneurs, and legal entities: in the amount of 1/150 of the Central Bank's key rate for each day of delay, and (или) in the amount of 3% to 10% of the uncredited amount if the contract is in rubles and provides for ruble payment, and (или) in the amount of 5% to 30% of the uncredited amount if the contract provides for payment in foreign currency or if it is a loan agreement;
For officials: from 20,000 to 30,000 rubles.[13]

Several cases illustrate the application of administrative liability.

In one instance, an individual entrepreneur was found to have paid salaries to non-residents in cash, bypassing authorized bank accounts. The authority qualified this under Part 1 of Article 15.25 of the CAO RF. The entrepreneur challenged this, but the court found that paying salaries in cash to non-resident employees is not among the permitted operations under Part 2 of Article 14 of Law No. 173-FZ. The court denied the entrepreneur's claim.[14]

An LLC was similarly held liable for paying salaries to foreign workers in cash. The court found that the company performed an unauthorized currency operation by paying non-residents from the cash register, thereby violating Part 1 of Article 15.25 of the CAO RF.[15]

However, a warning is considered a milder measure than a fine. This measure was introduced into the CAO RF by Federal Law No. 72-FZ dated April 1, 2020.

Mitigating circumstances in repatriation cases may include:

Committing the violation for the first time;
Parties taking all possible measures to prevent the violation.

Given the complexities of currency regulation, these circumstances allow entrepreneurs to receive a warning rather than a strict fine.

In current economic conditions, a warning is a civilized solution for both authorities and entrepreneurs under external sanctions pressure. Residents may present evidence of taking all measures to comply with currency laws despite foreign sanctions. For example, a resident may provide the customs authority with evidence of the impossibility of performance, the use of alternative performance methods, or the crediting of funds to non-sanctioned banks.

Under Article 26.2 of the CAO RF, evidence includes any factual data based on which a judge or official establishes the event, guilt, and other relevant circumstances.

Under Law No. 173-FZ, a resident is deemed to have fulfilled the obligation to receive funds if they are subject to restrictive measures by a foreign state and are included in the list approved by the FAS Russia in coordination with the Ministry of Finance and the Bank of Russia.

Thus, when holding a resident liable, their guilt must be assessed, taking the economic situation into account.

The Ministry of Finance also considers that a non-resident's failure to perform due to force majeure caused by foreign governments' measures—such as those related to COVID-19 — may indicate a lack of guilt on the part of the resident under Parts 4 and 5 of Article 15.25 of the CAO RF.

Criminal liability is governed by Article 193 of the Criminal Code of the Russian Federation, Evasion of the Obligation to Repatriate Funds in Foreign Currency or the Currency of the Russian Federation. Violating currency legislation regarding the crediting of funds is punishable by a fine of 200,000 to 500,000 rubles (or income for 1 to 3 years), or forced labor for up to 3 years, or imprisonment for up to 3 years.

Violations are punishable by up to 5 years' imprisonment and a fine of up to 1 million rubles if committed:

On a particularly large scale;
By a group of persons by prior conspiracy or an organized group;
Using a knowingly forged document;
Using a legal entity created for committing financial crimes.

Acts are considered to be on a large scale if the uncredited amount exceeds 100 million rubles within one year, and on a particularly large scale if it exceeds 150 million rubles.

In one criminal case, a defendant was charged under Part 1 of Article 193 of the Criminal Code. Since it was a first-time offense of minor or medium severity, the court could release him from liability with a judicial fine if he redressed the harm. The court noted that the defendant provided material assistance to seriously ill children via the Podari Zhizn charity fund (25,000 rubles). Consequently, the court assigned a judicial fine of 200,000 rubles.[16]

In conclusion, legislation regarding the repatriation of foreign currency and Russian currency is dynamic and changes frequently. Therefore, applicable law in this area must be monitored to ensure only current regulations are applied. Repatriation is often tied to the domestic and global economic situation. The President and the Government of the Russian Federation continuously adopt new regulations to manage the economic position.

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References

Article 1(1)(2) of Law No. 173-FZ.
Article 1(1)(9) of Law No. 173-FZ.
Extract from the Protocol of the meeting of the Subcommittee of the Government Commission on Monitoring Foreign Investment in the Russian Federation dated June 9, 2022, No. 61.
Decision of the Council of the Eurasian Economic Commission dated September 14, 2021, No. 80, On Approval of the Unified Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union and the Common Customs Tariff...
Official Clarification of the Bank of Russia dated July 8, 2022, No. 8-OR.
Decision of the Arbitration Court of the Krasnoyarsk Territory in Case No. A33-28361/2021 dated December 28, 2021.
Letter of the FTS of Russia dated June 7, 2018, No. SD-4-3/11054.
Letter of the Bank of Russia dated May 16, 2018, No. 12-3-4/3564.
Extract from the Protocol of the meeting of the Subcommittee of the Government Commission on Monitoring Foreign Investment in the Russian Federation dated June 9, 2022, No. 61.
Letter of the Bank of Russia dated February 28, 2022, No. 019-12-4/1210, On the Procedure for Applying the Norms of Currency Legislation.
Official Clarification of the Bank of Russia dated April 4, 2022, No. 3-OR, On the Application of the Provisions of Presidential Decree No. 79... and Presidential Decree No. 95...
Review of Judicial Practice of the Supreme Court of the Russian Federation No. 3 (2015), approved by the Presidium of the Supreme Court on November 25, 2015.
Article 15.25(4) of the CAO RF.
Decision of the Arbitration Court of the Volgograd Region dated December 27, 2021, in Case No. A12-31834/2021.
Decision of the Arbitration Court of Moscow dated December 24, 2021, in Case No. A40-168993/2021.
Ruling of the Taishet City Court (Irkutsk Region) No. 1-519/2019, 1-98/2020 dated February 10, 2020, in Case No. 1-519/2019.