Russian Federation: Review Of Some Amendments To The Russian Laws Made In July 2014

Last Updated: 9 September 2014
Article by Yana Dianova

1. BANKS AND FINANCE

1.1. Disclosure of the information on individuals and legal entities by organisations of the financial market

The Federal Law, dated 28 June 2014, No. 173-FZ 'On Specific Features of Financial Operations with Foreign Nationals and Legal Entities, on Amendments to the Code of the Russian Federation on Administrative Violations and Annulment of Certain Provisions of the Legislative Acts of the Russian Federation' ('Law No. 173-FZ'), as effective from 30 June 2014, obliged organizations of the financial markets (including credit companies, insurers engaged in the voluntary life insurance, professional players of security market engaged in the brokerage and(or) securities management, and(or) custody business) to take measures to identify persons among their clients, who are subject to the laws of foreign state on taxation of foreign accounts (foreign taxpayers). Organization of the financial market may transfer to the foreign tax authority and(or) foreign tax agents the information on the clients being foreign taxpayers only subject to the consent of the latter to such a transfer. Thereat, organizations of the financial market are prohibited to collect and transfer the information on the following clients to foreign states:

  • Russian citizens except for those, who at the same time have foreign citizenship (except for citizenship of member states of the Customs Union) or residence permit in a foreign country;
  • organizations established in accordance with the laws of Russia, where over 90 percent of the shares are directly or indirectly controlled by the said citizens of Russia and(or) by the Russian Federation.

If the organization of financial market has justified and documented assumption that the client belongs to foreign taxpayers, but did not provide the requested information to confirm or overcome this assumption, and if the client being a foreign taxpayer failed to provide within 15 business days after the respective request the consent (refusal to provide consent) to transfer information to a foreign tax authority, the organization of financial market may refuse to perform transactions for or on behalf of the client, and(or) in the cases provided for by the Law No. 173-FZ, to terminate the agreement unilaterally with the notice to the client of the decision made. At the same time, foreign organizations of the financial market are obliged to inform the FTS of Russia the details of the opened accounts (deposits) of Russian citizens and organizations directly or indirectly controlled by Russian citizens. This information shall be provided annually before 30 September of the year following the year when those accounts (deposits) were opened. The Law No. 173-FZ also supplemented the Code on Administrative Violations of the Russian Federation (hereinafter - the Administrative Code) with Article 15.27.2 providing for the liability for the failure to meet the requirement to provide information on persons, who are subject to the laws of a foreign country on taxation of foreign accounts, in particular:

  • failure of the organization of the financial market to provide the Russian authorities or improper provision with information on clients, who are foreign taxpayers, shall entail an administrative fine on officials in the amount of 20,000 to 30,000 rubles; for legal entities - 300,000 to 500,000 rubles;
  • provision of a foreign tax authority with the information about a client, who is a foreign taxpayer, when it is prohibited, shall entail an administrative fine on officials in the amount of 40,000 to 50,000 rubles; for legal entities - 700,000 to 1 million roubles.

1.2. Widening the scope of application of the Federal Law 'On Credit Records'

The Federal Law, dated 28 June 2014, No. 189-FZ 'On the Introduction of Amendments to the Federal Law 'On Credit Records' and Certain Legislative Acts of the Russian Federation', which in most shall enter into force on 1 March 2015, significantly changes the rules for compilation of credit records and obtaining information from them. In addition to the borrowers under the agreement, subjects of credit records will include grantors and principals, in whose respect the bank guarantee was issued or there is an outstanding court decision for the recovery of money from the debtor due to the arrears in payment for housing, utility services, communication, or in connection with the failure to perform of maintenance obligations. Accordingly, the range of persons who may send information to the credit bureaus (sources of credit record compilation) increases and now includes:

  • lending organization - creditor under a loan agreement;
  • organization which is a beneficiary under the court decision to collect money from the debtor in connection with the failure to for pay the living room, utility and communication services, and this decision was not executed within 10 days after the entry into force;
  • the FBS of Russia, when collecting money from a debtor under the court decision not enforced within 10 days after the entry into force, which related to the outstanding maintenance obligations, rental payments, payments for utility and communication services;
  • guarantor, which is a credit or insurance company undertaken to pay to the principal's creditor a certain amount.

Credit, microfinance institutions and credit cooperatives will continue to be obliged to submit information for the credit records compilation. Other lending organizations under the loan agreements will provide such information voluntarily. However, they will be obliged to provide information about the repayment of loans, details of which was previously sent to credit bureaus. All of the above entities will have to provide the credit bureau with certain information, if they are subject to bankruptcy proceedings or under liquidation. An administrative fine is established in the amount of 30,000 - 50,000 rubles for the failure of or delay in submission by microfinance institutions and credit cooperatives of the information contained in the credit records to credit bureaus, as well as for other lending organizations for the failure to provide credit bureaus with information on repayment of loans (Article 15.26.5 of the Administrative Code as amended by the Law No. 189-FZ).

1.3. Changes in the regulation of private pension funds, securities market, banking activities, currency regulation

The Federal Law, dated 21 July 2014, No. 218-FZ, as effective from 2 August 2014 (except for certain provisions), makes comprehensive changes in some legislative acts governing the operation of securities market and banking activities, in particular:

  1. in connection with the adoption of the Federal Law, dated 5 May 2014, No. 99-FZ 'On the Introduction of Amendments to Chapter 4 of the First Part of the Civil Code of the Russian Federation and Repeal of Certain Provisions of the Legislation of the Russian Federation' (which change the classification and names of the forms of business entities) the Federal Law 'On Joint Stock Companies' (hereinafter – the JSC Law), , was amended to provide that the provisions of the JSC Law regarding open joint stock companies shall apply to public joint stock companies to the extent not contradicting the Civil Code of the Russian Federation, as effective from 1 September 2014;
  2. the Federal Law 'On Securities Market' was supplemented with the article establishing features of participation in the general meeting of persons, whose rights to securities are asserted by nominal holder; Russian and foreign accounting institutions were granted the right to take part in the meeting on behalf of the owners of securities, without a power of attorney; organizations, which by their personal law and not being legal entities take part in the civil turnover, are entitled to open accounts in the Russian books accounting system.

    Changes were made in the procedure for the issue of bonds, in particular:

    • new concept of the bonds program as the first part of the decision to issue certain types of documentary bonds with obligatory centralized custody without collateral;
    • possibility to issue bonds, including within the bonds program without collateral placed by closed subscription, without state registration of the issue (additional issue), registration of the bonds prospectus, state registration of the report on the outcome of issue (additional issue) of bonds in simultaneous observance of certain conditions.
    In addition, the procedure for admission of securities of foreign issuers to the Russian organized biddings was amended;
  3. The Criminal Code of the Russian Federation was supplemented with Article 172.1, which establishes criminal liability for falsifying financial accounting documents and statements of financial institutions, including credit organizations, insurance companies, professional players of the securities market, private pension funds, etc.;
  4. The Federal Law 'On Private Pension Funds' was supplemented with the following requirements: to the charter capital and equity of a private pension fund, to fund management and officials, to the arrangement of internal control in the fund, to permitted assets (investment objects) of pension savings. In addition, the changes clarify implications of the revocation of licenses of private pension funds, the procedure for reorganization and liquidation of private pension funds, regulation of relations on investment of pension savings of insured persons;
  5. the Federal Law 'On Insolvency (Bankruptcy)' was amended to facilitate the submission of the creditors claims within the bankruptcy procedure of credit institutions for inclusion into the register of creditors' claims provided that the credit institution has relevant information. In addition, now there is a possibility for citizens, who are bank clients with deposits exceeding 700 thousand rubles and subject to insurance, to receive the amount of 300 thousand rubles on a priority basis within the bankruptcy procedure of the bank;
  6. the Federal Law 'On Combating Legalization (Laundering) of Proceeds of Crime and Financing of Terrorism' was amended to provide for the right of professional players of the securities market, managing companies of investment funds, mutual investment funds and private pension funds to assign a credit institution under the contract to identify the individual client, client's representative, beneficiary and beneficial owner, and to specify liability of credit institutions for the failure to comply with the requirements of identification or simplified identification and obligation of these organizations to transfer data obtained in the course of identification or simplified identification in the procedure prescribed by the contract;
  7. the Federal Law 'On the Central Bank of the Russian Federation (Bank of Russia) was amended to clarify the procedure for observance by banks of reserve requirements of the Bank of Russia (by applying averaging ratio of required reserves in addition to the reserve requirements), and provide that the subsequent pledge of property pledged as a security for the obligations of a credit institution to the Bank of Russia is only allowed when it is established by the agreement between the Bank of Russia and the credit institution, and clarify the procedure for the implementation of such pledged property;
  8. the Federal Law 'On Currency Regulation and Currency Control' was amended to provide for the option to enter into accounts of resident individuals opened:

    1. in banks located outside of the territory of the Russian Federation, - certain types of payments received from non-residents, including salary and other payments related to the labor duties of resident individuals, pensions, scholarships, alimony and other social payments, as well as insurance payments made to non-resident insurers;
    2. in banks located in the member states of OECD or FATF, - amounts received from non-residents, including proceeds from the lease (sublease) the real estate and other property of the resident individual located outside of the territory of the Russian to non-residents, grants, income on foreign securities (including dividends, bonds, bills, payments in decreasing the charter capital of foreign securities emitter).

1.4. Insurance of liability of a person being the debtor of the obligation secured by the mortgage

Federal Law dated 23 June 2014 No. 169-FZ, as effective from 25 July 2014, amended the Federal Law 'On Mortgage (Mortgage of Real Estate)', concerning the mechanisms of insurance of liability of a person being the debtor under the obligation secured by the mortgage, as well as financial risk of the lender of incurring losses due to the insufficient value of the mortgaged property. Moreover, the amendments identified:

  • beneficiaries under the contract for insurance of liability of the borrower and the contract for insurance of the lender's financial risk;
  • insurance events under the above contracts;
  • amount of insurance under the contracts and procedures for payment thereof;
  • terms of the contracts, procedures for the insurance payments.

The changes also provide for the right of the insuring lender when signing the contract for insurance of the lender's liability for the period of obligation secured by the mortgage to decrease the insurance payment in case of repayment of over 30 percent of the principal amount in commensurate with a corresponding decrease and for the corresponding revision of the insurance premium under certain conditions.

2. STATE PROCUREMENTS

2.1. Expansion of the list of procurement cases from a single supplier

The Federal Law dated 21 July 2014 No. 224-FZ amended the Federal Law dated 5 April 2013 No. 44-FZ 'On Contract System in the Area of Procurement of Goods, Works and Services for State and Municipal Needs', with an effect from 22 July 2014.

The executive and local authorities are now entitled to make procurements from a single supplier, in case of contracts are signed for the purchase of premises of economy class and the following conditions are met:

  • the single supplier, in accordance with the provisions of the Town Planning Code of the Russian Federation, signed an agreement for the development of the territory for the construction of economy housing, or agreement for the integrated development of the territory for the construction of economy housing (hereinafter - territory development agreements);
  • the territory development agreements provide the option to enter into the state and(or) municipal contracts.

2.2. Ban on the procurement of foreign engineering products

The Resolution of the Government of the Russian Federation dated 14 July 2014 No. 656 approved the list of engineering goods prohibited to purchase in order to meet that state and municipal needs, including three groups of products: The first group products (in particular, cranes, trucks, trailers for trucks) are prohibited to purchase, if the country of origin is not a member of the Customs Union. The second group products (including cars) cannot be purchased in the following circumstances:

  • a sufficient number of production operations listed in the notes to the list was not performed in the territory of the Customs Union in respect of such products;
  • the products were not produced by economic entities included in the list approved by the Decision of the Customs Union Committee dated 27 January 2010 No. 169; and
  • the products were not produced in the mode prescribed by the Agreement for free (special) economic zones in the customs territory of the Customs Union and customs procedure of free customs zone dated 18 June 2010.

The third group products (including buses, trucks) are prohibited to purchase, if a sufficient number of production operations listed in the notes to the list was not performed in the territory of the Customs Union in respect of such products.

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