New rules for bank transfers for EU companies with Russian participation

On 18 December 2023, the European Union adopted its 12th sanctions package, which includes a new Article 5r in Council Regulation (EU) No 833/2014 of 31 July 2014. Antwort Law explains what additional reporting obligations the EU is introducing for organizations in any way connected with Russia.

From 1 May 2024, companies registered in the EU and directly or indirectly owned by more than 40% Russian persons must report quarterly any transfers of funds from the EU exceeding EUR 100,000. These reports must be submitted to the competent authority of the Member State in which they are registered within two weeks after the end of each quarter.

The same applies to credit and financial institutions, which from June 1, 2024 are required to report to the competent authorities of the Member State information on all transfers of funds from the EU exceeding 100,000 euros made by such companies. Reports must be submitted within two weeks of the end of each semester.

Let's first define what a “Russian face” is. This definition, according to the law, means:

1) Legal entity or organization registered in Russia;

2) Citizen of Russia;

3) An individual residing in Russia.

It is important to note that this requirement also applies to persons with dual citizenship, including Russian and EU citizenship.

Now let's move on to the reporting object - translations.

The law defines as reportable transfers all transfers of funds from the EU, regardless of direction, including transfers to G7 countries and other partner states. “Funds” refers to various financial assets and benefits, such as:

- Cash, checks, money orders and other payment instruments;

- Deposits, account balances, debts and promissory notes

- Securities, shares, bonds, warrants and derivative contracts.

- Interest, dividends and other income.

- Loans, guarantees and other financial obligations.

- Letters of credit, bills of lading and other documents confirming the right to funds.

So, let’s define the deadlines again:

First report for obligated companies: until 1 May 2024, covering the period from 1 January 2024 to 31 March 2024.

First report for credit and financial institutions: after July 1, 2024.

Please note that reporting requirements may vary between EU Member States and local guidance must be followed.

...What additional consequences of the new sanctions can be expected in practice?

In addition to complicating reporting, the following consequences should definitely be expected:

  1. Opening new accounts for companies with “Russian participation” will become even more difficult.
  2. Already open bank accounts for companies with Russian participation will be closed en masse.

This is not directly provided for in the new sanctions package, but such a reaction from banks is quite expected.

Financial institutions, in addition to additional reporting, will be responsible for monitoring compliance with the new sanctions regime, which will make opening and maintaining accounts for clients with Russian participation simply “uninteresting” for them...

Vladislav Makarenko, Managing Partner Antwort Law

The legal company Antwort Law is ready to provide you with full support in the process of complying with the new EU requirements. We offer assistance in collecting and preparing the necessary reports, advice on compliance with new rules and provide legal support at all stages. Contact us for professional advice and to ensure compliance with all regulatory requirements.

Lidia Ivanova

International lawyer
Antwort Law

Which companies are required to report fund transfers under the new EU rules?
Starting from May 1, 2024, all companies registered in the EU and more than 40% owned by Russian entities are required to report quarterly on fund transfers from the EU exceeding 100,000 euros. This rule also applies to credit and financial institutions, which must report such transfers semi-annually from June 1, 2024.
What types of financial assets are subject to reporting under the new rules?
All fund transfers from the EU are subject to reporting, including: - Cash, checks, money transfers, and other payment instruments. - Deposits, account balances, debts, and debt obligations. - Securities, stocks, bonds, warrants, and derivative contracts. - Interest, dividends, and other income. - Loans, guarantees, and other financial obligations. - Letters of credit, bills of lading, and other documents entitling the holder to funds.
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