Currency regulation and exchange control represent one of the most dynamic and high-risk legal areas for businesses. Any settlements with foreign counterparties, cross-border transfers, the use of foreign accounts, and capital movements are subject to strict requirements under Russian legislation, and since 2022, to the regime of special economic measures, which is regularly amended by decisions of the President, the Government, and the Bank of Russia.

BRACE Law Firm advises companies on the full spectrum of currency law matters, from structuring settlements under foreign economic contracts to defending clients during audits by currency control authorities and agents. We assist Russian and foreign businesses in structuring payment chains that comply with the law while remaining functional under current conditions.

This focus area, within our International Trade, Customs, and Currency Law practice, is closely integrated with our Compliance and Sanctions practice. We analyze currency, sanctions, and customs requirements comprehensively.

The Scope of Russian Currency Law

The foundation of currency regulation is Federal Law No. 173-FZ “On Currency Regulation and Currency Control” dated December 10, 2003. It defines key concepts (residents and non-residents, currency operations, authorized banks), establishes the rights and obligations of participants in currency operations, and outlines the system of currency control authorities and agents.

The regulatory framework operates on several levels:

1. Currency regulation authorities – the Central Bank of the Russian Federation (Bank of Russia) and the Government of the Russian Federation, which issue mandatory acts regarding currency operations for both residents and non-residents.
2. Currency control authorities – the Bank of Russia and federal executive bodies authorized by the Government, namely the Federal Tax Service (FTS) and the Federal Customs Service (FCS).
3. Currency control agents – authorized banks, professional securities market participants that are not authorized banks, and the state development corporation VEB.RF. They process currency operations and verify their legality.

Since 2022, a regime of special economic measures introduced by decrees of the President of the Russian Federation and detailed by acts of the Government and the Bank of Russia has been superimposed on this system. This regime affects the procedure for settlements with non-residents, the repatriation and sale of foreign currency earnings, cross-border transfers, and operations with accounts of specific categories of persons. The parameters of this regime are periodically revised, necessitating the verification of every decision against the current date.

A separate layer of requirements applies to transactions with persons from unfriendly states. Many transactions and operations involving such entities require authorization from the Government Commission on Control over Foreign Investments.

Exchange Control in International Contract Settlements

Settlements under foreign economic contracts are an area where formal exchange control requirements most frequently lead to violations and penalties. Our legal support covers the entire lifecycle of a contract:

1. Registering the contract with an authorized bank. Foreign trade contracts and credit agreements where the obligation amount reaches or exceeds the statutory threshold must be registered and assigned a unique contract number (UCN). We help properly classify the contract, determine the applicable procedure, and prepare documents for the bank, including for contracts where settlements involve digital rights.
2. Navigating repatriation requirements. The law mandates residents to ensure the receipt of funds due from non-residents under the contract or the return to Russia of previously paid advances within the timeframes stipulated by the agreement. The scope of this obligation regarding foreign currency has been gradually liberalized in recent years. We evaluate non-repatriation risks and structure contractual mechanisms to mitigate these risks.
3. Managing supporting documents and deadlines. The timely submission of information, statements of supporting documents, and details on obligation fulfillment deadlines to the bank is a frequent source of disputes. We establish protocols for bank interactions and handle contentious situations.
4. Structuring payments under current conditions. Sanctions restrictions and cross-border settlement complications demand precise strategies for selecting the payment currency, routes, and counterparties. We analyze these frameworks for simultaneous compliance with currency, sanctions, and tax legislation.

Legal Counsel for Cross-Border Transfers

The procedure for transferring funds abroad is currently governed not only by statute but also by decisions of the Bank of Russia and the Government Commission on Control over Foreign Investments. The scope of restrictions depends on the entity's status (resident; non-resident from a friendly or unfriendly state), the account type, and the nature of the transaction.

Transactions utilizing special accounts established by counter-sanctions decrees operate under a specific regime. These include:

1. Type C accounts – utilized for settlements on obligations to foreign creditors from "unfriendly" states; the Board of Directors of the Bank of Russia sets the account regime.
2. Type I accounts – designed for new foreign investors making investments within Russia, providing guarantees that include the ability to transfer funds abroad.

It is critical to note that these restriction regimes are established for specific periods and are regularly extended, relaxed, or tightened. A number of Bank of Russia restrictions on transfers abroad for specific categories of persons are periodically prolonged. Because the regime's parameters fluctuate, we verify the current iteration of applicable acts for every transaction.

Our support encompasses:

1. Assessing the permissibility of a specific transfer and identifying a lawful settlement route.
2. Drafting applications for authorizations from the Bank of Russia or the Government Commission when a transaction requires approval.
3. Advising on transactions involving special accounts (Type C, I, and others) and operations involving controlled foreign companies.
4. Providing strategic guidance regarding notifications on opening (closing, altering details of) foreign accounts and cash flow reports.

Liability for Violating Currency Legislation

Violations of currency legislation primarily trigger administrative liability under Article 15.25 of the Code of Administrative Offenses of the Russian Federation. Common offenses include:

1. Executing unlawful currency operations – for instance, conducting settlements bypassing authorized banks in scenarios not permitted by law.
2. Failing to fulfill repatriation obligations, which carries enhanced liability for large sums.
3. Breaching the procedures and deadlines for submitting reporting and supporting documents.

For certain offenses involving large and especially large amounts, criminal liability may also apply – specifically for evading repatriation obligations (Art. 193 of the Criminal Code of the Russian Federation) and executing currency operations using forged documents (Art. 193.1 of the Criminal Code of the Russian Federation). Enforcement practice concerning currency offenses is actively evolving.

We assist in proactively mitigating these risks by building robust currency compliance frameworks and defending the client's interests if claims are already asserted:

1. Appealing decisions on the imposition of liability.
2. Asserting the absence of fault and the insignificance of the offense.
3. Representing the client during interactions with tax and customs authorities, as well as in court.

We manage related litigation matters within our Dispute Resolution and Litigation practice.

Why is Legal Counsel for Currency Operations Crucial for Business?

The cost of an error in currency operations extends beyond financial penalties; it encompasses blocked payments, disrupted supply chains, and reputational risks. In an environment where regulations change multiple times a year, businesses require comprehensive, ongoing support that simultaneously accounts for currency, sanctions, customs, and tax requirements, rather than isolated consultations.

The BRACE team evaluates currency issues holistically, leveraging industry-specific expertise, particularly within the Life Sciences and information technology sectors. We tailor our approach to the specific objectives of each client, delivering highly practical solutions.

Select Engagements in Currency Law

1. Advising a multinational Life Sciences company on exchange control concerning import contract settlements and contract registration.
2. Counseling a Russian medical device component exporter on revenue repatriation and mandatory foreign currency sale requirements.
3. Structuring cross-border settlements and payment routes for importing industrial equipment, factoring in sanctions restrictions for an IT sector company.
4. Defending a major radio electronics importer against liability claims under Article 15.25 of the Code of Administrative Offenses of the Russian Federation.

BRACE Legal Services in Currency Regulation and Exchange Control

1. Advising on currency regulation and exchange control.
2. Conducting legal analysis on the permissibility of currency operations.
3. Structuring settlements under foreign economic contracts.
4. Registering foreign trade contracts and credit agreements with authorized banks (UCN).
5. Safeguarding compliance with funds repatriation requirements.
6. Managing legal aspects of cross-border transfers and operations with special accounts (Type C, I, and others).
7. Drafting applications for authorizations from the Bank of Russia and the Government Commission.
8. Counseling on foreign account notifications and cash flow reports.
9. Designing comprehensive currency compliance systems.
10. Defending clients during audits by currency control authorities and agents.
11. Litigating decisions on the imposition of liability under Article 15.25 of the Code of Administrative Offenses of the Russian Federation.
12. Representing clients in court for disputes within the scope of currency legislation.