It has been widely reported that American actor Steven Seagal has joined American boxer Roy Jones in becoming a citizen of Russia. By becoming Russian citizens, Mr. Seagal and Mr. Jones are now subject to Russia’s Currency laws, which include the requirement to report their non-Russian bank accounts to the Kremlin. Messrs Seagal and Jones may admire Russia. That said, it’s clear that the Kremlin admires the U.S. Treasury in general and Mr. FBAR – America’s most important citizen – in particular.

Citizenship-based reporting: Russian nationals required to report on movements on their foreign bank accounts 

Although Russia has “residence-based taxation” it has “citizenship-based reporting”.

Russia has adopted a foreign bank account reporting law that reflects the values and principles of Mr. FBAR. The bottom line is that all Russian residents are now required to report their “foreign bank accounts”. But, what is interesting is that for the purposes of “foreign bank reporting”, the definition of “residence” includes NATIONALITY/CITIZENSHIP! in other words, Russian citizens, regardless of where they live in the world, are now required to report their non-Russian bank accounts to the Government of Russia. The Government of Russia appears to have copied the principle of “citizenship-based reporting” which was pioneered by U.S. Treasury in the Bank Secrecy Act.

Bottom Line: Mr. FBAR has a cousin in Russia. “Cousin FBAR” was described by two Russian lawyers at CMS Legal as follows:

This reporting obligation provided by Federal Law No. 173-FZ dated 10 December 2003 (the “Currency Control Law”) actually came into effect on 1 January 2015 but was in practice inapplicable in 2015. This is because the Russian Government failed to approve the required notification forms before the first reporting deadline (1 June 2015). The rules for submitting reports on movements of funds on foreign bank accounts and the applicable notification forms are now available under Russian Government Decree No. 1365 dated 12 December 2015 (see here in Russian).

Who qualifies as a Russian resident?

The above reporting obligation applies to all individuals deemed to be Russian residents under the Currency Control Law, namely:

• Russian nationals, including those temporarily living abroad or travelling as tourists, but excluding those living permanently abroad for more than one year; and
• foreign citizens who hold a Russian residence permit (“vid na jitel’stvo”).

What needs to be reported?

Reports on the movements of funds must be detailed and information needs to be filed separately in respect of each foreign bank account. From a practical standpoint, information on each foreign bank account should be filled in on a separate page if the individual has two or more bank accounts.

In addition to the personal data of the notifying resident, the report must include:

• information on the corresponding foreign bank;
• data on the movements of funds on the bank account with a breakdown of operations by currency type; as well as
• account balances at the beginning and at the end of the reporting period (amounting to one calendar year, the first one being 2015).

If a Russian resident chooses from now on to close his/her foreign bank account, the report on the movements of funds on such bank account still needs to be submitted together with a notification on the closure of this account. If he/she closed such accounts in 2015, then he/she must still file the relevant report by 1 June 2016, irrespective of the date when the account closure notification is submitted.

Notifying individuals are not formally obliged to provide any supporting documents confirming the information contained in their reports (e.g. bank statements), but are free to do so. However, the tax authorities are entitled to verify the submitted reports and request additional supporting documentation relating to currency transactions.

What if you fail to report in due course?

Administrative fines for the first violation of the reporting obligation range from RUB 2,000 to 3,000 (EUR 26 to 40). Any subsequent violation is punishable by a penalty of up to RUB 20,000 (EUR 260). In addition, Russian legislation on administrative offences provides for additional fines for violation of report submission deadlines depending on the length of the delay, but not more than RUB 3,000 (EUR 40).

Note that the penalties for failure to report non-Russian bank accounts to the Kremlin are far less draconian than the penalties to report to report non-U.S. bank accounts to U.S. Treasury!

Dual citizens of Russia and the United States are required to report their bank accounts to both governments! What about the reporting of their citizenships?

Russia requires its citizens to report any other citizenships they hold. Will the United States emulate the Government of Russia by requiring U.S. citizens to report any other citizenships they may hold?