Type "S" accounts: procedure for opening and utilization

Presidential Decree No. 95 of 05.03.2022 introduced S-type accounts as a measure to counteract the withdrawal of assets by foreign creditors from "unfriendly countries". Their main purpose is to regulate the fulfillment of obligations to foreign persons related to the states that have imposed sanctions against Russia.

Main characteristics of "S" type accounts

• Maintained in rubles.
• They are used to fulfill obligations of Russian companies, constituent entities of the Russian Federation and municipalities to foreign creditors.
• Transactions on such accounts are restricted and regulated by the Bank of Russia.

When the S-accounting mechanism is applied

• If the amount of liabilities to foreign creditors exceeds RUB 10 million per month (or the equivalent in currency at the CBR exchange rate).
• If we are talking about dividend payments by joint stock companies registered in the Donetsk, Luhansk, Zaporizhzhya and Kherson regions, in this case the "C" account is used regardless of the amount of liabilities.

Restrictions and protection of funds

• Funds in "S" accounts cannot be recovered under judicial and executive documents if the acts thereon are issued after 03.01.2024.
• Their seizure, collection of mandatory payments and other interim measures are not allowed if the acts on them are issued after 03.01.2024.

Procedure for opening a S-type account

1.    In whose name a "S" account is opened

• Foreign creditor.
• Foreign nominee holder of securities.

2.    Opening procedure

• The account is opened upon application by a Russian debtor to a Russian bank.
• Self-opening of an account by a foreign creditor is not provided for.
• A bank account agreement shall be concluded with a foreign creditor when he applies to a bank for the purpose of utilization of funds placed on a "S" account opened in his name.

3.    Requirements for banks

• The bank where the account is opened determines the application form and may establish additional internal procedures.
• Opening a "S" account at another bank where the debtor has no service is allowed.

4.    Peculiarities of identification of a foreign creditor

• The bank is obliged to identify a foreign creditor within 30 days after opening an account in accordance with 115- Federal Act on Combating Money Laundering on the basis of available information about such creditor.
• Personal appearance of the representative of the foreign creditor is not required.
• The Bank checks foreign creditors to the full extent within the framework of 115- Federal Act on Combating Money Laundering.

5.    Special conditions

• If a bank is not licensed to deal with individuals, it may refuse to open an account if the foreign creditor is an individual.
• A previously opened bank account cannot be converted to a "S" account, a new one must be opened.

Thus, S-type accounts regulate the fulfillment of obligations to foreign creditors and protect Russian assets from sanctions risks. Their use is strictly limited by law and controlled by the Bank of Russia.

1. Approximate basic package of documents for conclusion of "S" type bank account agreement

1.    Application for banking services signed by the head of the company or an authorized representative.

2.    Certified copies of articles of incorporation, including:

• Articles of Association, Memorandum of Association or similar document (depending on the laws of the country of registration).
• State registration document (extract from the commercial register, registration certificate, etc.).
• A document confirming the authority of the head of the company.

3.    A copy of the tax registration certificate certified by a tax authority, a notary public or an employee of the Bank (provided that the original document is submitted to the Bank to establish compliance of the copy with the original).

4.    Identity documents of persons authorized to sign and dispose of funds on the account (notarized copies with translation into Russian if the document is in a foreign language).

5.    Power of attorney (if the application is signed by a representative acting on the basis of a power of attorney) - certified by a notary or consulate.

2. Documents for customer inspection within the framework of internal control for anti-money laundering purposes

6.    Questionnaire in the form established by the Bank for conclusion of a bank account agreement.

7.    Financial statements or a letter showing profit and loss for the previous year if the laws of the country of incorporation do not require reporting.

8.    Information on the rating of the legal entity assigned by an international rating agency (Standard & Poor's, Fitch-Ratings, Moody's Investors Service and others) and/or a national rating agency (Expert RA, National Rating Agency (NRA), AK&M, RusRating and others).

9.    Information on business reputation confirmed by customer or bank references.

10. Questionnaires for beneficiaries, beneficiaries and company representatives.

11.Self-certification form to determine tax residency.

3. Additional documents for branches and representative offices

• A certified copy of the Branch/Representative Office Regulations.
• A document confirming the authority of the head of the branch.

4. Special conditions

• Documents from the countries-participants of the Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Matters of 2002 are accepted without legalization and apostille.
• If the company already has a bank account, resubmission of previously filed documents is not required, as long as they are up to date.
• The Bank may request additional documents in accordance with Russian legislation, including anti-money laundering measures.

This list is approximate, for a more precise number of documents you should contact a specific bank.

Law firm "Nadmitov, Ivanov and Partners" provides services for opening type S accounts.