Offshore bank account: Funds Transfer [#5]

Russia is a special country. I love this country for things that make me excited.

Imagine this. You call your bank. A good and reputable bank, and ask a simple question. What documents are required to transfer my money to my account abroad. Call-centre guys usually tell something like: ha, just nothing. Give us SWIFT credentials and we’re going to do this.

But this request hasn’t reached FX compliance yet. Call-centre is often quite incompetent in this area, but you can’t just call FX compliance directly, because their phone number is not published.

Okay, I give them SWIFT account details and ask them to transfer funds.

Well, first problem: they don’t do it from RUB accounts. Fantastic, I say, what if I open a USD account with you? Will you be able to do the transfer?

It takes some time and they produce fantastic response, finally the reached FX compliance themselves: Yes. It will cost you $15 regardless of the transfer amount. BUT! And here is a stress on the word “BUT”. When you do your first transfer to your foreign account, you need to provide the bank with a notarized copy of an affirmation from Tax Authority (TA).

What this is? Actually, there is a regulation in place, saying that once you open an account abroad, you should notify TA about doing so. And this might be done only at local TA office, that in my case is in Novosibirsk, that is ~2900 km apart (it is possible by mail, but it requires a long waiting and no results are guaranteed because you can’t give any clarifications personally if they need).

Once TA are notified, they put a stamp on your form and this stamped form should be presented to the bank before they might do any transfer for you.

But it is only the beginning. TA might not like your notification because your bank account is only welcome in those countries that are members of FATF and OECD. After they got your notification form, you become automatically responsible for providing a bank statement to TA whenever they request it.

By now, if you think that notifying TA is a very bad deal, listen for this. It’s even worse.

Starting from February, 2013, it is prohibited to accept any money transfer to your foreign account if this transfer is not done thru Russian bank. This basically defeats any purpose of having personal foreign account properly declared. And once you’re obligated to provide bank statements to Tax Authority, they could easily see if any of such transfers took place. And if they find any such transfers, you’re liable for a fine of 75%-100% of the amount you’ve accepted. Great thing, next time you will be require to notify road patrol about your driving over a speed limit yourself.

But here is the thing. You only subscribe yourself to all this shit if you volunteer to notify your Tax Authority. If you fail to do so, maximum penalty is 2000 RUB (less than $100). The only thing left in question is how to transfer funds if banks make sure you notified a Tax Authority?

And here is a workaround that is perfectly legal in Russia. Never transfer any money to your personal account abroad. Just let your wife of child or parent doing so. In this case, banks do not request any tax papers from sender and the only document required is a confirmation of a close relationship.

So, if say my wife opens a USD account and I give her all the money, then she reaches the bank and requests a transfer to my account abroad… Nothing is needed! Only a marriage certificate. Fantastic! Ridiculous! All this hell was effectively voluntary.

I contacted the offshore bank and asked them if they will accept incoming wire transfer from my wife and they said YES. I only need a scan of a letter from my wife stating that it is her who is doing the transfer. Not even a marriage certificate is required at this point.

And what is about your duty to self-report your bank accounts abroad? Well, Tax Authority can’t enforce this on its own. They will never know unless you tell them yourself. And you know what nightmare you could potentially create for yourself if you do.

So, the bottom line is the following:

  • Don’t tell anything to Tax Authority (wire-transfers are not taxed anyway).
  • Transfer all the funds thru your close relative.
  • If you don’t do any money laundering or other crime, all you’re legally liable for is a fine of less than $100 for failing to report about your bank account abroad. That’s it.

Read: Part [#4] of the offshore bank account story

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