LEGAL NEWSLETTER. Overview of Legal Developments in February March 2014

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1 LEGAL NEWSLETTER Overview of Legal Developments in February March 2014 Counteractions to Money Laundering Banking IP Amendments to the RF Civil Code Enforcement of Judicial Decisions Bankruptcy The Key Interest Rate Constitutional System of the RF 14 April 2014 Counteraction to Money Laundering The Federal Service for Financial Monitoring of the RF and the Central Bank of Russia (hereinafter the FSFM and the CBR respectively) issued a number of clarifications 1 on the application of the RF Law On Counteraction of the legitimization (laundering) of the proceeds of crime and financing of terrorism (hereinafter the Anti-money laundry law ). The regulations concern the actions of organizations carrying out operations with money or property (i.a. banking institutions, professional securities market participants, insurance and leasing companies, etc.; hereinafter the Organizations ) with 1 The Information notices of the FSFM dated February 17, 2014 and January 16, 2014; The Letter of the CBR No. 14-T dated January 28, 2014; regard to the identification of the beneficial owners of their clients. The clarifications contain answers to the frequent questions arising in the course of the implementation of the Anti-money laundry law provisions. Inter alia, it is expressly stated that the Antimoney laundry law provides no exceptions for the identification obligations depending on the risk level and/or amount of the operation. When the beneficial owner of a client cannot be determined prior to granting it the requested services, respective records on such client should be kept for further processing (and establishing the identity of the beneficial owner) and establishing if there is a risk that a client might be involved in money laundering in this case respective information should be transferred to the competent authorities. The FSFM keeps a list of companies reasonably suspected of involvement in extremist or terrorist Page 1

2 activities. The Organizations are to block (freeze) certain operations of their clients if they are identified as companies included on such list. The Organizations are recommended to include the following in their internal control regulations: precise grounds for the determination of the beneficial owners, list of measures to be taken, regulations on the decision-making process and record keeping. Earlier, the RF Government provided regulations 2 with regard to the registration of Organizations that were previously not subject to any type of supervisory registration. For instance, this extends now to leasing companies, financial agencies (parties to factoring agreements), etc. Such registration is performed by the territorial department of the FSFM. Regulations of the CBR The CBR issued two Orders 3 amending previously existing identification proceedings and internal control regulations` content to be applied by the Organizations banking institutions (hereinafter Banking Organizations ). 2 3 The RF Government Regulations No. 58 dated January 27, 2014; The Orders of the CBR No У dated January 21, 2014 and No У dated January 31, 2014; The above-mentioned CBR Orders specify the terms, scope and procedure of beneficial owner identification actions. The updated regulations provide an extended list of documents to be requested for the purpose of such identification, options to file discovery requests and addressing open Internet databases along with an obligation of Banking Organizations to regularly renew the data obtained. It is emphasized that the identification proceedings should be made prior to granting services to the client. The CBR provided a list of terms to be included into the internal control regulations (such as precise grounds for the determination of a beneficial owner; terms of operations` block and its removal, etc.). All of the above-mentioned regulations are aimed at preventing money laundering and provide the Organizations (Banking Organizations) with a clear set of instructions in this regard. Banking Representative offices of all foreign Banking Organizations are now subject to an obligatory accreditation being performed by the CBR and are entitled to operate in the RF only upon such accreditation. The CBR determines the accreditation procedure and processes the personal data of the Page 2

3 representative offices` chief executives (as well as candidates` for such positions) 4. IP - Amendments to the RF Civil Code A new set of amendments to the RF Civil Code provides extensive changes to the regulation of IP issues 5. The new regulations, inter alia, concern: - Pledge of exclusive rights; - Registration of assignment (license, pledge) instead of the registration of relevant agreements (relevant applications can be signed by one of the parties or by both of them); - Protection of IP rights (especially the issues of guilt and burden of proof); - Term of a patent s validity for industrial design (5 years instead of 15 with a maximum limit of 25 years upon relevant renewals); - Monetary compensation for patent infringement; - Terms of appeal against decisions (with regard to trademark registration proceedings) 4 months from the date of its issuance. Most of the amendments become effective on October 01, Enforcement of Judicial Decisions Interim Measures The Presidium of the Supreme Arbitrazh Court of the RF clarified that interim measures in the form of a seizing of funds shall be granted in the currency of the initial claim 6. For instance, if a claim is over a certain amount in EUR, the court shall issue a ruling on the seizing of the respective sum in EUR. Consequently, the banks, when seizing the funds in another currency, shall apply the official exchange rate of the CBR effective at the moment of the seizure. This measure is aimed at ensuring the actual enforceability of judicial decisions. Russian Court Bailiffs` Operations The court bailiffs powers against debtors were increased while related proceedings were amended to improve the enforceability of judicial decisions 7. Inter alia, court bailiffs now have more options to search for debtors and their assets. It is explicitly stated that the court bailiffs can request information from investigative authorities` databases, perform questionings, search premises, etc. 4 5 The RF Law No. 12-ФЗ dated February 03, 2014; The RF Law No. 35-ФЗ dated March 12, 2014; 6 Information letter of the Presidium of the SAC of the RF No. 163 dated February 12, 2014; 7 The RF Law No. 34-ФЗ dated March 12, 2014; Page 3

4 The court bailiffs can now issue their orders electronically (protected by their qualified signature). Regulations on enforcement proceedings held by several bailiffs are provided. The amendments also now indicate the right of applicants to provide the bailiffs with all of the information they have on the debtor`s whereabouts and assets available to the claimant (earlier it was only an accepted practice). Bankruptcy Information on bankruptcy proceedings shall be officially published in a publication to be determined by the RF Government based on the results of a tender 8. The respective contract with the winning publisher will be concluded for a period of 5 years. Currently, information on bankruptcy proceedings is officially published in the Kommersant newspaper. The Key Interest Rate The CBR preserved the previously established 7 % key interest rate 9. The next review of the rate is scheduled for April 25, Constitutional System of the RF On March 21, 2014, the Russian Federation ratified the Agreement on acceptance of the Republic of Crimea into the Russian Federation 10. The Republic of Crimea obtained the status of a Federal Region of the RF and consists of two constituent entities: the Republic of Crimea and the Federal City Sevastopol. The official languages within the territory of the Republic of Crimea are: Russian, Ukrainian and Crimean-Tatar. All permanent residents of the Republic of Crimea are thereby granted RF citizenship and have the right to change their passports (or refrain from doing so). The transition period for establishing economic, financial, legal and other issues will commence on January 01, Until then, the Russian laws apply within the territory of the Republic of Crimea as of the date of acceptance. The laws of the Republic of Crimea are also applicable to the extent that they do not contradict the Constitution of the RF. Elections of the governmental bodies are scheduled for September The RF Law No. 30-ФЗ dated March 12, 2014; 9 Information of the CBR dated March 14, 2014; 10 The RF Law No. 36-ФЗ dated March 21, Page 4

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