In the past few years, the European Union imposed several restrictive measures in view of Russia’s actions destabilising the situation in Ukraine, seeking to diminish Russia’s economic strength and curtailing Russia’s ability to wage war.
The introduction of Article 5r of Council Regulation (EU) No.833/2014 is an additional measure imposed by the European Union on certain legal entities and on credit and financial institutions, enabling national competent authorities to evaluate whether certain transactions indicate a serious risk of infringement or circumvention of Russia-related sanctions. This Articles introduces reporting obligations regarding payment transfers by entities established within the European Union (hereinafter referred to as ‘EU’) which have significant links to Russia.
As of 1st May 2024, legal persons, entities, and bodies established within the EU which are directly or indirectly owned for more than 40% by legal persons established in Russia; Russian nationals; or Russian residents, shall report any transfer of funds that during that quarter, in one or several operations, exceeds 100,000 Euro and is sent to a recipient outside of the EU. This report shall be submitted to the competent authority of the Member State where the legal entities are established. Even though the obligation to report such transfers initiates as from 1st May 2024, the first reporting shall cover the period between 1st January and 31st March. The following reports shall be submitted within two weeks of the end of each quarter hence the report of the second quarter shall be submitted by 15th July.
A similar obligation is imposed upon credit and financial institutions which are obliged to report information on transfers of funds out of the Union, of a cumulative amount exceeding 100,000 Euro over a semester. This information shall be reported to the competent authority of the Member State where they are located. The reporting shall be made within two weeks of the end of each semester and shall cover the above-mentioned transfers which were initiated by the credit and financial institutions, for the legal persons, entities and bodies that are directly or indirectly owned for more than 40% by legal persons established in Russia; Russian nationals; or Russian residents. The first report shall be submitted by 15th July 2024 whereas the second report for Semester 2 shall be submitted by 15th January 2025.
The obligation to report is extended to those transfers exceeding 100,000 Euro that are indirectly sent to a recipient established outside the EU, for instance via the use of several intermediaries established within the EU. Moreover, the obligation is still applicable if the Russian national has a dual citizenship, even if he/she has an EU citizenship.
Further information regarding Article 5r may be found within the document published by the European Commission containing ‘Frequently Asked Questions’ on the reporting of outgoing transfers and a reporting template[1].
Avv. Mattea Abdilla
[1] https://finance.ec.europa.eu/document/download/5e05f301-c39e-4cd0-bdcb-f1d13e9b9dcd_en?filename=faqs-sanctions-russia-outgoing-transfer-reporting_en.pdf
