The Central Bank will have access to data on the assets and liabilities of exporters abroad

The government has introduced amendments to the law on currency regulation and control to the State Duma – they provide for the expansion of the powers of the Bank of Russia in terms of control over the assets and liabilities to non-residents of foreign subsidiaries of Russian resident exporters. The exact requirements for companies will be described in a separate decision – it should be prepared by the Central Bank together with the Ministry of Finance and the Ministry of Economy. The regulator will not publish a list of companies subject to the new requirements, but must develop a procedure for informing them. According to Kommersant, the ability to monitor such transactions is limited, and in order to monitor the implementation of the new legislation, it may be necessary to strengthen supervision over the activities of companies – in the case of foreign currency earnings, this function has already been entrusted to representatives of Rosfinmonitoring.

The government has submitted to the State Duma a bill to amend the law “On Currency Regulation and Currency Control,” which obliges exporters from January 1, 2024 to report on currency transactions not only of the company itself, but also of its foreign subsidiaries. The list of Russian resident companies falling under the new regulation will not be published – the procedure for communicating information to them must be determined by the Bank of Russia. Together with the Ministry of Finance and the Ministry of Economy, the regulator must also determine the composition, form, timing, procedure for compiling and submitting data.

The explanatory note to the project states that “the changes are aimed at more effective monitoring and assessment of the uniformity of the inflow and outflow of foreign currency, as well as the timely identification of potential imbalances that threaten the stability of the financial market against the backdrop of ongoing geopolitical risks.” The amendments should also provide “the possibility of more comprehensive coverage of the assessment of currency risks in the context of restrictive measures from unfriendly countries.”

Note that the rule that the Central Bank, in agreement with departments, can determine the procedure for exporters to provide information on the receipt of foreign currency earnings under contracts, as well as on their assets and liabilities denominated in foreign currency and payable in favor of non-residents, appeared in the law on currency control after the approval of the amendments of June 2021, but it did not apply to the subsidiaries of exporters.

The introduction of sanctions complicated the flow of funds across the border – it turned out to be easier for companies to use the foreign exchange earnings received both to pay for imports and to pay off debt or accumulate in accounts without returning to the Russian Federation. The assumption that companies are not returning a significant part of export earnings and this is putting pressure on the ruble has revived the discussion about the need to strengthen foreign exchange controls. As a result, in addition to the introduction of a formal requirement – from October 16, for six months, exporters from the closed list (there are 43 of them in total, these are companies whose share of exports in revenue exceeds 60%) are required to credit their accounts in Russian banks with at least 80% of the currency received through export contracts, in order to then sell at least 90% of these amounts on the domestic market, a tool for monitoring its implementation was also introduced: a presidential decree obliges exporters to submit indicative plans and schedules for the purchase and sale of foreign currency to the Central Bank and Rosfinmonitoring, in addition to In certain companies, authorized representatives of Rosfinmonitoring have been introduced, who must make sure that “the companies show everything honestly,” said a participant in the discussion.

The draft submitted to the State Duma stipulates that companies will transfer data to the Central Bank “on a consolidated basis,” while the regulator does not yet have complete data on the foreign assets and liabilities of Russian companies. “The data is extremely scattered, and no one sees the full picture,” a senior official previously noted in a conversation with Kommersant. Other participants in the discussion note that the effectiveness of control will depend on the completeness of the data that the regulator receives; for this, the same representatives of Rosfinmonitoring can be used. “Companies can make it difficult to obtain relevant information, including by lengthening the chains, but if, after the slightest suspicion, they send reinforcements, then a staff of lawyers will not help,” says Kommersant’s interlocutor in business circles.

Maxim Chereshnev, a member of the General Council of Business Russia and Chairman of the Board of the Council for the Development of Foreign Trade and International Economic Relations, believes that for exporters the new requirements will create an additional element of bureaucratic burden – companies may see the risk of additional regulatory measures on this foreign exchange earnings. But taking into account the fact that there is already an obligation for exporters to return foreign currency earnings to the Russian Federation within six months, the project “simply gives transparency to the existing state of affairs and the ability for the government to forecast,” he believes. The expert does not see any risks of disclosing trade secrets, since the information will only be available to the regulator.

Tatiana Edovina