Types of transactions with monetary assets in bank accounts of individual residents of Russia

The Russian legislation, specifically Federal Law No. 173-FZ, also known as the "Law on Currency Regulation and Control" dated December 10, 2003, imposes a number of restrictions on individuals regarding their use of foreign accounts.

Firstly, let's consider the provisions related to transferring financial assets to foreign bank structures, which are possible in the following cases:

- Withdrawal or deposit of funds by residents into banks located in other countries is prohibited, with exceptions provided for in parts 4 and 5 of Article 12 of this law;

- Replenishment of bank accounts in foreign financial institutions by physical persons who are residents of the Russian Federation from both foreign and domestic accounts, as well as from the accounts of close relatives and spouses;

- Replenishing up to five thousand dollars transferred from Russian bank accounts by an individual resident of the Russian Federation, not more than once per operational day through a single bank;

- Transfers to bank accounts from both physical and legal entities-residents of the Russian Federation in rubles, either from foreign or domestic accounts;

- Transfer of interest accrued on deposits to the balance of foreign accounts as a minimum contribution according to the rules of the foreign bank when opening an account there, as well as converting financial assets using these accounts;

- Conducting transactions involving legal entities-residents without operating bank accounts in certain banks for the purpose of transferring money from physical persons-residents who are not present in Russia;

- Replenishment of a bank account by a spouse or close relative under a gift arrangement;

- If funds were received onto the account from non-residents in the following forms:

a) As payment for labor agreements;

b) According to court decisions of other states that oblige payments, excluding international commercial arbitration decisions;

c) Various social payments, including alimony, scholarships, and pensions;

d) Insurance payments made by non-resident insurers;

e) Refunds of previously transferred funds by physical person-residents back to their bank accounts.

• The transfer of monetary amounts and repayment of loans under credit and other agreements signed with residents of FATF and OECD member countries for periods exceeding two years. However, such sums must be credited exclusively to foreign accounts of RF residents, or to accounts in banks located in FATF and OECD member countries;
• To the accounts of RF residents in banks located in FATF and OECD member countries, financial resources can also be transferred from non-resident accounts:

a) Dividends received by a physical person-resident from renting or sub-renting real estate and other property not located in Russia;

b) Receiving financial dividends from interest income specified in the contract for crediting assets from securities, bonds, and other profits owned by the physical person-resident;

c) From November 28, 2015, all amounts received by a physical person-resident as profit from financial assets transferred to a non-resident trustee;

d) Also included here are financial assets obtained by a physical person-resident from January 1, 2018 after listing procedures on a foreign or Russian stock exchange, resulting in the acquisition of securities;

• Receiving payments from non-resident customers who construct real estate in other countries within the specified construction timeframes;
• Receiving payments in foreign currency by residents from organizations and events held abroad, including exhibitions, sports, and others, to cover expenses and costs associated with organizing and conducting these events;
• Receiving payments for transportation services based on signed agreements;
• Making salary payments, reimbursements, insurance payments intended for the organization and maintenance of diplomatic missions, consular offices, and other official bodies of Russia outside the country.

These are all the cases where, according to the legislation, it is permissible to transfer funds to a resident's account in a foreign bank, excluding involvement of Russian banking services. Any methods not listed here are illegal and subject to penalties under tax and administrative laws of the Russian Federation.

As for spending the funds held in foreign bank accounts, we can say the following:

Resident individuals may freely conduct currency transactions using funds they have received from their foreign accounts, in compliance with Russian tax regulations, provided these funds do not involve transfers of real estate or provision of services within Russia.

Engaging in currency transactions prohibited by Russian legislation, carrying out transactions in violation of established norms, or approving transactions involving transfers from accounts in foreign banks constitutes an administrative offense punishable by a fine ranging from three-quarters to the full amount of the illegal currency transaction, according to Part 1 of Article 15.25 of the Code of Administrative Offenses of the Russian Federation.

It is worth paying attention to one important detail. All the above provisions do not apply to accounts and transactions of individuals who use branches of Russian banks abroad.

Additionally, starting from January 1, 2015, resident individuals began submitting reports to tax authorities not only about the creation of accounts in foreign banks in other countries but also about financial transactions on those accounts in the aforementioned foreign banks.

According to Parts 6, 6.1-6.5 of Article 15.25 of the Code of Administrative Offenses, failure to submit data or submission of false information in the report carries a penalty of up to forty thousand rubles for officials and up to six hundred thousand rubles for legal entities. Additionally, according to the note to Article 2.4 of the Code of Administrative Offenses, entrepreneurs are also considered among the first category.

Furthermore, upon initial transfer, the Russian bank will require presentation of a letter from the tax service confirming the establishment of a bank account outside of Russia.

The Russian accounts we discussed are those created at credit institutions in accordance with Russian standards and holding licenses from the Central Bank of Russia to carry out banking transactions involving foreign currency assets.

Exceptions also include money transfers carried out by close relatives or a spouse. According to Subparagraphs 12 and 17 of Paragraph 1 of Article 9 of Law 173-FZ, the restriction on the amount of the transfer does not apply if the funds were transferred by close relatives or a spouse.

Currently, the list of countries belonging to FATF and OECD includes 34 nations. For example, Denmark, Turkey, Slovakia, and even Hong Kong, which is considered an offshore jurisdiction.