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Legal Requirements for Foreign Companies in Russia’s Banking System: What You Need to Know

Operating a business in Russia involves navigating a financial and regulatory environment that is often unfamiliar to foreign investors. One of the most important areas to understand from the outset is the country’s banking system and the legal obligations it imposes on foreign companies. It is essential for smooth financial operations and avoiding costly disruptions.

Opening a bank account in Russia

Foreign companies registered in Russia whether as subsidiaries, branches, or representative offices must open a corporate bank account with a Russian-licensed bank. This is necessary for handling local transactions, paying taxes, and complying with currency control regulations.

Implications for foreign investors

Without a local account, you cannot process payments in rubles, settle with suppliers, or fulfill payroll obligations. Additionally, Russian banks are subject to strict anti-money laundering (AML) and counter-terrorism financing (CTF) rules, which means the documentation process can be more rigorous than in many other jurisdictions.

Best practices

Prepare all corporate documents in advance, including notarized translations into Russian.
Choose a bank experienced in working with foreign clients to avoid delays during compliance checks.
Ensure company representatives in Russia have proper authority to sign banking documents.

Currency control and reporting obligations

Russia maintains currency control regulations that govern transactions between residents and non-residents. Payments in foreign currency and certain cross-border operations are subject to detailed reporting.

Implications for foreign investors

Failure to comply with currency control rules can lead to significant administrative fines. These obligations apply to contracts with foreign suppliers, intra-group payments, and even some shareholder transactions.

Best practices

Maintain a dedicated compliance calendar for reporting deadlines.
File passport-of-deal (PoD) documents for contracts above the threshold set by the Central Bank of Russia.
Work closely with a local accounting team to prepare accurate reports.

Know your customer (KYC) and ongoing compliance

Under Russian law, banks are obliged to conduct regular KYC checks on all clients. This includes verifying company ownership, sources of funds, and the nature of operations.

Implications for foreign investors

Banks can suspend transactions or freeze accounts if compliance documentation is not updated promptly. This can disrupt operations and harm relationships with suppliers and clients.

Best practices

Keep corporate records (charter, shareholder list, licenses) up to date.
Respond quickly to bank requests for additional documentation.
Appoint a responsible officer to liaise with the bank and monitor compliance status.

Tax payment and banking integration

All Russian taxes must be paid through a Russian bank account. Banks integrate with the Federal Tax Service to process and confirm these payments.

Implications for foreign investors

Late or incorrect payments can lead to penalties and interest charges. The bank’s role as an intermediary means that payment formats and deadlines must be strictly followed.

Best practices:

Use accounting software that integrates with your bank to reduce errors.
Verify payment details in advance, especially tax codes and budget classification numbers.
Schedule payments ahead of deadlines to account for processing delays.

Restrictions on certain banking operations

Some transactions require prior approval or are restricted under Russian law. This may include large foreign currency transfers, payments to certain jurisdictions, or transactions involving sanctioned entities.

Implications for foreign investors

Unapproved or prohibited transactions can be blocked, investigated, and subject to fines. Sanctions compliance is particularly important for companies with global operations.

Best practices

Consult with legal advisors before initiating large or unusual transactions.
Regularly check sanctions lists and update internal compliance procedures.
Train staff responsible for initiating payments on these restrictions.

Conclusion

Navigating the Russian banking system as a foreign company requires a clear understanding of laws, currency control regulations, and ongoing compliance obligations. Working with experienced local experts can minimize risks, ensure timely reporting, and keep operations running smoothly.

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Banking compliance in Russia is not just about opening an account, it's about maintaining a continuous dialogue with your bank and anticipating potential changes. With the right processes in place, foreign companies can operate here as confidently as they do in their home markets.

Ivan Masley, Head of Legal Services, Outsourcing Solutions

If your company is planning to operate in Russia or already manages a local entity, our team can help you meet all banking and regulatory requirements. Contact us to learn how we can support your financial compliance and ensure uninterrupted business operations.

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