Russia: New Rules Tighten the Central Bank’s Control Over Payments


Back on August 26th, 2019, the Russian Federation Ministry of Finance finalized a series of new regulations, effectively banning international companies from conducting online operations in the Russian market without a Russian entity, or without having domestic representation.

However, these regulations were never enforced. Following a lengthy period of grace without pro-active enforcement, the new policy has been enforced starting mid-April 2021 and many Russian-facing CFD and Forex

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operations, previously working with major Russian banks either directly or through popular gateways (such as Platron.ru and others), were suddenly in need of new legal and payments solutions.

Additionally, foreign electronic payment service providers faced harsh requirements and changes in operations. These include registration and information disclosure, along with other major changes. Also affected by these rules are payment application providers, payment system operators, payment aggregators, payment gateways, and information exchange operators.

Many CFD brokers with operations facing the Russian-speaking market were reporting significant hurdles from the Russian Ministry of Finance already, but with proper advice, they were able to navigate through the new regime and find themselves in an even better position than before the regulations have been enforced. We had the opportunity for lawyer Genia Gurevitz, Russian born and raised from Tal Ron, Drihem & Co., Law Firm to discuss the matter with Emily Helmer and Tal Itzhak Ron from the firm.

Genia: What are some of the changes these sectors are experiencing, operation-wise?

Tal: Russian and foreign companies that provide software to clients of Russian banks for processing card payments, for example, will have to disclose information to clients obtaining their services, as well as to the Central Bank. In particular- they will have to inform about fees charged for the use of the payment application and other non-identifiable data. Payment applications can only be used if the provider has no access to information that allows it to identify the client, and if the company’s information availability is that limited. Naturally, in the first phase, like with any change, it might reduce conversion rates of new clients.

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Genia: Are solutions for foreign companies available?

Emily: These operational changes are introducing plenty of challenges to clients of our firm, and our corporate department is particularly busy working on viable solutions for small to large companies wishing to remain

Emily Helmer
Emily Helmer

operable in Russian markets. Solutions are definitely available; it’s all about getting creative and working with the regulations. We’ve created several solutions to date for clients at the firm. One of them is establishing a company in Scandinavia which shall have a service agreement with a payment provider facing the Russian users which is both Russian and European (there are a couple of those), in order to eliminate VAT accidents. The settlement will be done through a European bank or EMI. Lithuania is an ideal location.

Genia: Are there any further tips you are able to give the readers as the legal consultant of many companies in this field?

Tal: When it comes to legal advice and ongoing legal services this is no one-size-fits-all, but the key is to try and create a tailor-made solution for each client and its specific banking and legal needs. It is extremely important to choose a team with specific expertise, one that understands the entire business aspect of your activity; has extensive knowledge of where the landmines are and how one can avoid them; and what are their business needs for growth, and more. When you are capable of seeing the big picture – from the operation’s perspective – finding the right creative solutions can be the difference between failure and success. For example, acquiring tailor-made legal opinions for your specific financial activity and specific jurisdictions is a great way to expand activity internationally. This legal ‘tool’ is handy when opening foreign bank accounts, onboarding with EMI’s (electronic money institutions), and conducting business agreements with international partners, as well as raising capital.

Having the right payment and legal partners is critical for doing business and staying on route when it comes to government regulations and sanctions. Not only this, according to the official Russian law, Russia’s Central Bank will maintain, keep and update a list of companies that provide payment applications, payment aggregators, foreign payment systems and more, for monitoring purposes. This alone is a reason to stay particularly compliant when it comes to onboarding clients, keeping up with AML and CFT regulations (including the new AML 5 directive) while having your business grow.

 

Emily Helmer, Genia Gurevitz, and Tal Itzhak Ron from Tal Ron, Drihem & Co.





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