New details concerning counteraction of illegal financial operations

The President of the Russian Federation signed the Federal Law No. 134 "On the Introduction of Amendments to Certain Legislative Acts of the Russian Federation With a View to Counteracting Illegal Financial Operations" on June 28, 2013.
It is to be recalled that a draft law was submitted to the State Duma for consideration on December 24, 2012. A great deal of amendments were made to it during the consideration in the State Duma. During the third reading the draft law was sent back to the second reading with a view to making additional amendments concerning the sequence for certain articles of the law to come into force.

The Federal Law was adopted in the fulfillment of the Presidential Order dd. January 12, 2012 No. Pr-65 by Russia's Government with the participation of representatives fr om law-enforcement agencies, the Bank of Russia and the Federal Tax Service of Russia with a view to enhancing effectiveness in detecting and restraining financial operations (including operations with the use of fly-by-night companies) aimed at legalizing proceeds of crime, financing of terrorism, evading taxes and customs duties, generating corruption-related income.


The Federal Law makes amendments to fifteen federal laws, including the Civil Code, the Criminal Code, the Administrative Offences Code, the Tax Code of the Russian Federation, etc. The adopted Federal Law introduces the following state measures of counteracting illegal financial operations.


Statutory provisions of the Russian legislation concerning the expansion of the scope of persons who must observe the requirements set forth in the Federal Law "On the Counteraction of the Legitimization (Laundering) of Proceeds of Crime and the Financing of Terrorism", authorization of investigative bodies to obtain information about legal entities and individuals which constitutes a banking secret, are to be brought in line with the international standards, according to FATF's requirements; with regard to criminal liability: measures are to be hardened against legalization (laundering) of proceeds of crime, non-observance of the foreign exchange legislation's provisions concerning foreign currency repatriation, non-observance of the rules concerning the transfer of foreign currencies through CU's customs border within the EEC, etc.


The Federal Law authorizes tax authorities to obtain information on bank accounts and bank deposits of individuals other than self-employed persons. С July 1, 2014 banks will have to notify tax authorities within three days of opening or closing of accounts, bank deposits, changes in bank account details, bank deposits of individuals, as well as provide tax authorities (at their respective request) with receipts about bank accounts, bank deposits and/or balances of accounts, bank deposits, transactions on bank accounts, bank deposits of individuals.


Amendments were made to respective federal laws which concern the scope of persons who are prohibited to participate in the management, establishment, purchase of shares of insurance companies, professional securities market players, non-government pension funds, leasing companies, investment funds, microfinance organizations.


The Federal Law made a series of amendments to the Civil Code of Russia and other federal laws which provide extra protection of businessmen against raiders. In particular, more detailed description was given to the procedures for registration of organizations and amendments to charter documents, as well as events of filing appeals against making illegal amendments to the Unified State Register of Legal Entities or refusal of such registration.

The provisions of the Civil Code of Russia were complemented with events and obligation of a winding-up commission to initiate bankruptcy of organizations to be liquidated.


A new rule was introduced: wh ere a bank account holder fails to withdraw the balance on such account within 60 days of an account closing notice, the balance must be credited to a special account opened with the Bank of Russia.


A great deal of amendments were made to Parts 1 and 2 of the Tax Code of Russia. In particular, a new procedure for collection of tax arrears from associated and parent companies' accounts is to be introduced within a month of the date when the law is officially published.

A great deal of amendments cover the delegation of tax authorities with extra powers to request taxpayer source documents in the course of cameral tax inspections. Tax authorities were entitled to request, outside the scope of tax inspections, participants in a certain transaction or other persons who have documents (information) about the transaction to provide documents and information concerning the transaction.


An amendment was made to Article 119 of the Tax Code of Russia, under which a penalty for failure to submit a tax return will be imposed on fiscal agents and other persons who are also responsible for the submission of such tax return.


A few amendments and updates were made to Chapter 21 (Value Added Tax) of the Tax Code of Russia which concern the procedure for mandatory submission of VAT return in electronic form, updating the procedure for issuance and record-keeping of invoices and submission of tax returns during agency transactions, as well as by persons who are recognized as VAT taxpayers, but upon occurrence of liability for them to pay VAT to the budget. Most of the foregoing amendments and updates are to take force in January 1, 2014.


Supplementary provisions were introduced into the accounting legislation to ensure safety of accounting d

ocuments when the general manager of an entity is replaced.


Article 20 thereof made amendments to the Federal Law "On Customs Regulation in the Russian Federation" which abolish special simplification of customs procedures available for the authorized economic operator with regard to transactions with the participation of legal entities registered with offshore zones, or when payments under transactions are effected through offshore zones.


It should be noted that the adoption of the foregoing Federal Law has no effect on violators thereof, because it requires timely adoption of a series of by-laws by the Russia's Government and the Bank of Russia. It is not until respective legislative acts are drafted that the state will have a new and fairly efficient set of instruments to combat illegal business.


N. Y. Korniyenko, Phd in Law, Head of Tax System Development Department;
N. Y. Postnikova, a researcher of Tax System Development Department