December 1996

by Padraic J. Sweeney & Lana Simkina

Questions like "Can you transfer money to Russia?", "Are there restrictions on getting money out of Russia?", and "How do I wire money to my joint-venture partner?" are among the most frequent inquiries we receive at BISNIS. In short, yes, you can; there are some restrictions; and this article will try to tell you how to send money back and forth between Russia and the United States.

Funds can be transferred to and from Russia via a wide range of Russian, U.S., and other banks, as well as through Western Union. To transfer funds internationally, a Russia-based bank needs--at a bare minimum--a license from the Central Bank of Russia (CBR) to deal in foreign exchange, correspondent relationships with one or more foreign banks, and access to the SWIFT international wire transfer network. In addition, Peter O'Brien of Moscow's DialogBank recommends selecting a bank with a separate import-export or currency control department, which indicates a further degree of expertise in international transactions. Russian banks such as Inkombank, Most-bank, DialogBank, and others have such departments, as do U.S. and other non-Russian banks doing business in Russia today.

Legal Requirements
Companies transferring funds out of Russia--to pay a U.S. exporter for example--must present a signed, authenticated contract specifying the type of business being conducted. The necessary approvals from the tax and customs authorities, especially the "Import Passport," must be presented, as well (see: BISNIS Bulletin, January/February 1996, Page 1).

When a Russia-based company receives money wired from abroad, the funds are placed in a so-called transit account for up to 14 days. During this period, the recipient firm must provide the bank with a legal document (a contract, invoice, etc.) proving that the company is entitled to the funds. Once the transfer is approved, the recipient is obligated to convert 50 percent of the amount into rubles. If a company fails to justify the funds, the bank has to send them back or notify the CBR of the transaction. Transfers into non-resident companies' accounts are not as closely monitored as those of Russian entities, according to many observers, and there may be advantages in some cases in transferring funds via a representation office, rather than to a subsidiary. The importation of charter capital must have a special authorization from the CBR.

Private individuals can wire money abroad only in the most limited circumstances. No restrictions apply to receiving money from abroad, however, although transfers into the country greater than $10,000 must be reported to the local tax authorities. Overseas transfers of $10,000 or more from the United States must be reported to the U.S. Treasury Department.

Fees, Terms
Service charges vary from bank to bank. Bank Menatep, for example, charges $46 for a transfer regardless of the amount, while Credit Lyonnais charges a currency conversion fee that varies from 0.3 to 1 percent, plus a flexible fee for the transfer itself. DialogBank clients pay a fee of 0.1 percent of the amount of the transfer, not to exceed $100. Inkombank assesses a $10 service charge for the SWIFT transaction, plus 0.2 percent of amount of the transfer, not to exceed $50.

Most Russian banks try to adhere to the international standard of two working days for a wire transfer completion. Elena Sokolova, Deputy Head of Inkombank's Correspondent Relationships Department notes that her bank's clients rarely have any problems with their money transfers. Thomas Butler of Chase Manhattan Bank suggests that one to two working days would be adequate for a wire to Moscow, "provided that the [recipient] bank has a general banking license and is a SWIFT member."

Western Union now has an extensive network of affiliated banks in Russia. Fees are relatively high--for example, a fee of $90 is charged to transfer $1,500 abroad, but it is not necessary to be a client of the affiliated bank to use this service. There are no restrictions on receiving money, once a passport and 10-digit confirmation number are presented. To send money abroad, a non-resident must present a customs declaration, specifying the amount of the transfer. Banks usually impose daily limits. Western Union transfers cannot exceed $6,000 a day via the Rossiyski Credit Bank, while MPI Bank's daily limit is $20,000. Residents must present a legal invoice or a Central Bank authorization to have the money wired.

Tips
DialogBank's Peter O'Brien recommends that when transferring funds U.S. companies "make every effort to be sure that you are following the law of the Russian Federation, and that your bank is as well." Tom Butler, of Chase Manhattan Bank, advises that "generally, the more detail you can provide, the better," such as the specific branch to which a transfer should be directed. Fluctuations in the dollar-ruble exchange rate will affect wire transfers to and from Russia, and U.S. companies should be aware of the ruble's position in Russia's internal foreign exchange markets. Finally, especially when transferring large amounts of money, or making transfers on a regular basis, U.S. firms should consult competent legal counsel to ensure that they are in compliance with Russian law. For a list of U.S. banks in Russia, call the BISNIS Fax Retrieval System and order document #6631. For a list of selected Moscow banks, order document #6630.

Padraic J. Sweeney is Managing Editor of BISNIS Bulletin. Lana Simkina represents BISNIS in Moscow.