Instruction 181-I in plain English: what your bank will ask

Bank of Russia Instruction No. 181-I sets out which documents a company submits to its bank for currency transactions and how the bank keeps records on a foreign trade contract. For importers and exporters, it is a working procedure: what to bring to the bank before a payment, after a delivery and when the contract changes. Below we go through it following the steps of a deal.

What the document is and who it applies to

The Instruction was approved on August 16, 2017 and has been in force since March 1, 2018. It replaced the previous procedure based on deal passports. Instead of a deal passport, a contract is now registered with the bank and receives a unique contract number (UCN).

The Instruction is based on Federal Law No. 173-FZ on currency regulation and currency control. The law says that a resident must report on its currency transactions. The Instruction says exactly how: which documents, in what form and by what deadlines.

Three parties apply it:

• residents: Russian companies and sole proprietors that pay non-residents or receive money from them;
• authorized banks: they accept documents, keep records on contracts and pass information to the currency control authorities;
• non-residents with accounts at Russian banks, for their own transactions.

For a company, the main contact under 181-I is the currency control officer at its bank. The tax authority learns about violations later, from the bank’s data.

Contract registration with the bank

Not every contract is registered. The Instruction sets a threshold amount, and the thresholds differ for import and export contracts. A contract below the threshold is not registered, but the bank is still entitled to request documents on the transactions.

If the contract is above the threshold, the procedure is as follows:

1. The company submits the contract and information about it to the bank.
2. The bank checks the documents and assigns a unique contract number.
3. From then on, every payment and every delivery under the contract is linked to this number.

The contract must be registered no later than the first transaction under it: a payment or a delivery. If a supplementary agreement increases the amount above the threshold, the contract is registered after the change. If the company moves to another bank, the contract is deregistered at the old bank and registered at the new one.

For each registered contract, the bank keeps a bank control statement. It shows how much has been paid, how much has been delivered and which obligations are still open. It is worth requesting this statement and reconciling it regularly, not only during an inspection.

A contract is deregistered when the obligations under it have been fulfilled, when the company moves to another bank, when a claim or debt under the contract passes to another person, and in other cases listed in the Instruction. Deregistration is also done by application: fulfilling the contract does not deregister it by itself.

What the bank will ask for when you pay

When foreign currency is debited or credited, the company submits documents on the transaction to the bank. Usually these are the contract, the invoice or bill, and the specification. From them, the bank understands what the payment is for and determines the currency transaction code.

Under 181-I, the currency transaction report is most often prepared by the bank itself from your documents. This is simpler than the old procedure, but it works only if the documents are complete and consistent with each other: amount, currency, beneficiary, payment purpose.

Common reasons why the bank holds up a payment:

• the invoice shows a different beneficiary or different bank details from the contract;
• the payment amount exceeds the amount of the contract or the specification;
• the payment purpose does not match the subject of the contract;
• the documents do not make clear whether it is an advance payment or payment after delivery.

Documents after delivery

The payment is half of the record. The other half is confirmation that the goods have been delivered or the service rendered.

For goods that clear customs with a declaration, the bank usually receives the declaration data itself. For deliveries without a customs declaration, for example within the EAEU (Eurasian Economic Union), and for works and services, the company submits a statement of supporting documents together with the documents themselves: waybills, completion certificates, reports. The submission deadlines are set by the Instruction and tied to the date of the document. A missed deadline is the most common reason for currency control fines.

A special case is settlement through an agent. If a payment agent executes the payment under your contract, the bank must see the link between your roubles, the agent’s payment and the contract. This requires the agency agreement, the payment order, the transfer confirmation and the agent’s report and completion certificate. Agree with the currency control officer how to reflect such a payment in the contract records before the transfer, not after.

Where companies most often go wrong

• They signed a supplementary agreement with a new amount or a new deadline and did not pass it to the bank.
• The actual delivery slipped, but the contract still has the old date. The bank sees a delay.
• They did not submit the statement for services because “there was no customs”.
• They changed banks and forgot about the registered contracts.
• They received payments and deliveries in parts and lost track of the balance.
• They paid under the wrong contract when there are several with one supplier.

All of these errors show up in the bank control statement long before the tax authority asks questions. So regular reconciliation with the statement costs less than any fine.

What we take on

VEDmost is not a bank and does not keep your contract records. We are a broker: we select an agent from our pool for the payment and put the documents together so that your currency control officer has everything to match. Before the roubles are debited, the execution term is written in the agency agreement, and the rate and fee in the payment order. After the payment, you receive the transfer confirmation, the agent’s report and completion certificate, and the package for your bank. More about this part of our work on the currency control page; the list of documents is in the documents section. This is a general overview, not advice. We will give you an answer on your deal after reviewing the documents and before the roubles are transferred.