Russia to induce a “renaissance” of banking secrecy

For the last decades the financial privacy has turned into dust. Nowadays banking institutions are no longer in the position to guarantee full confidentiality of financial assets. The reason is quite obvious – the introduction of FATCA and CRS rules changed the way the financial industry operates today.

Automatic exchange of financial information obliges financial entities to cooperate and to disclose information on bank accounts. By 2024 all most all civilized countries would need to participate in the automatic exchange of information.

Thus, on 21st of October the Russian Parliament adopted in the first hearing a new draft law. By virtue of this draft, all local financial institutions should not disclose the banking information they hold to foreign governments. Such a banking information includes all client’s data and performed transactions. On top of that, a local bank would need to report immediately about obtained request to the Russian Central Bank.

One will say that by doing this Russia can become the “second Switzerland” in terms of banking secrecy. Indeed, despite the political instability lots of high net worth individuals may choose this jurisdiction to place their money.

The trickiest point is that no one can predict the reaction of foreign governments once this law comes into force. The potential list of sanctions against Russian banks might be extensive. On the one hand, it can be a penalty for each day of delay to disclose the requested information. On the other hand, especially if it comes to the US, it can also be a closure of all foreign correspondence accounts in US dollars.

Of course the closer analysis should be given to the final version of the law. However, since the draft law was adopted anonymously by all deputies in the first hearing, it is unlikely that the final text will undergo profound revision in the nearest future.