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Lawmakers warn Russian banks against giving up data under US FATCA

Published time: May 22, 2014 13:52
The Central Bank of Russia on Neglinnaya Street in Moscow.(RIA Novosti / Vitaliy Belousov)

The Central Bank of Russia on Neglinnaya Street in Moscow.(RIA Novosti / Vitaliy Belousov)

The head of the Lower House financial markets committee said that until Russia passes a law, any report to US tax authorities about a client accounts in Russian banks would be considered a violation of bank secrecy.

MP Natalya Burykina (United Russia) added that bank employees who permit it could face criminal prosecution. She also said that if the United States applies sanctions to Russian banks for refusing to comply with the requirements of the Foreign Account Tax Compliance Act (FATCA), Russia would reciprocate with similar sanctions.

Under current Russian law, the illegal collection of data that falls under the definition of commercial, tax or bank secrets is punished by fines of up to 80,000 rubles (about $2,285), or up to two years behind bars. Illegal disclosure or use of such information without the consent of its owner can be punished by up to 200,000 rubles in fines ($5700), a prison term of up to 3 years, and a 30-year ban on occupying certain official or commercial posts.

The Foreign Account Tax Compliance Act was passed in the United States in 2010 and will come into force on July 1 this year. It requires foreign financial institutions to report to the US tax authorities about their American clients and even persons who are connected with US citizens or suspected of being such. The non-compliant banks outside the US can face punishment – US entities making payments to such institutions are required to withhold 30% of the gross sum.

Russia has already prepared a bill that would regulate relations between Russian banks and their US counterparts. The draft was approved by the Finance Ministry and the Central Bank, but in mid-May this year the Lower House sent it back for reworking, saying that passing such legislation required a two-sided treaty between Russia and the US that would specify the obligations of both parties and the responsibility to failing to observe these obligations.

MP Anatoly Aksakov (Fair Russia) told reporters that the bill would be finished before June 1 and it will include both the type and amount of information that Russian banks can send to US authorities and the requirement that the information transfer must be performed only on condition of the client’s consent.

Earlier this month, Russia’s Financial Ombudsman Pavel Medvedev complained about the country’s banks’ refusal to work under the FATCA, saying that this undermined the international financial cooperation parts of which could be beneficial to the Russian state. Medvedev was commenting on the President’s order to develop a working scheme allowing enforcement of the ban on civil servants’ and officials’ foreign assets through cooperation with foreign banks. As Russian banks had earlier refused to participate in the US FATCA project, the Russian authorities should not now count on cooperation from the West, Medvedev noted.

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