As another measure to support Russia’s financial market, Presidential Decree No. 126 imposes further limitations on cross-border monetary transfers for both Russian and non-Russian residents. However, Decree No. 126 also gives Russian regulators broad discretion to make exceptions from the previously adopted general bans and specific restrictions.
Decree No. 126, "On Additional Temporary Economic Measures to Ensure Financial Stability of the Russian Federation in the Sphere of Currency Control,” of 18 March further narrows the scope of foreign currency transactions in which Russian residents and nonresidents may engage. The restrictions imposed by Decree No. 126 are to supplement and clarify those restrictions that were enacted by the earlier presidential decrees of 28 February and 1 March 2022.
Importantly, Decree No. 126 continues the trend of granting more powers and more flexibility to Russia’s Central Bank in regulating the Russian financial market.
Under Decree No. 126, the following transactions are only permitted within the thresholds to be set forth by the Central Bank's board of directors not later than 28 March 2022:
Any transaction from the above list that is in excess of the threshold to be set forth by the Central Bank requires approval of the Government Commission for Foreign Investment Control (the Government Commission).
Until 31 December 2022, the following transactions require the prior consent of the Central Bank:
The Central Bank is likely to adopt implementing regulations by 28 March 2022.
Decree No. 126 also gives further powers and discretion to the Central Bank in enforcing various currency control measures enacted earlier. In particular, the Central Bank may issue authorizations to certain Russian residents allowing them to:
Separately, Russian residents may apply to the Government Commission to change (i.e., lower) the percentage of the foreign currency proceeds subject to mandatory sale. The implementing regulation is expected to be enacted by 28 March 2022.
Furthermore, the Central Bank is expressly authorized to make official clarifications on the enforcement of Decree No. 126. This is not customary under Russian law, as typically authorities would avoid giving any official clarifications on regulatory norms or enforcement practices and the final interpretation would be given by court in case there is a dispute.
On 16 March 2022, the Central Bank issued a letter to banks and other financial institutions (regulated institutions) urging them to pay additional attention to transactions of natural persons and legal entities related to transfers of funds and assets by nonresidents from "unfriendly states" abroad that may be attempting to circumvent the imposed restrictions.
According to the letter, any transactions that are not typical for a client or are a change in the structure of the client's spending may be signs of such circumvention. Further, a series of repeated transactions of the same type that was not ordinary for a client earlier may indicate that the client is acquiring goods for "follow-on re-sale," is engaged in transferring funds abroad, or is dealing with cryptocurrencies. Upon identifying any such signs, a regulated institution must perform enhanced checks on the client and consider refusing to process the client’s instruction by reference to the Russian anti-money laundering laws.
Given the above, even pending the adoption of implementing regulations envisaged by Decree No. 126, one may expect that the transactions covered by Decree No. 126 will be subject to heightened scrutiny by Russian regulated institutions.
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