There are Alternative Approaches to Interactions Between Companies and Public Authorities

13 september 2018 | Kommersant

The Ministry of Economic Development of the Russian Federation has suggested simplifying the registration of Russian companies. The draft bill allows a legal entity to use the address of a postal office as its registration address during registration, the Kommersant writes.

Elena Kovaleva
Elena Kovaleva
Department for Competition Policy

"One of the conditions is that a founder must have an open bank account. By law credit organizations must identify clients when they open accounts for them and once that is that they are then required to keep the information about them up to date. Thus, the activities of the legal entity can be monitored through its founder," Elena Kovaleva, Analytical Center expert, told the newspaper.

Under certain conditions, the proposed approach may contradict the FAFT recommendations that financial organizations must identify each client, including the actual address that they operate out of, the expert noted. "Thus the bill does not include a procedure to be followed in the event when the founder closes their bank account or leaves the company. In this case, the bank will not have any information about the actual address of the legal entity and thus run afoul of the FAFT recommendations," Ms Kovaleva explained.

Earlier FATF already prevented the release of Russian exporters from the obligation to return revenue they earn in foreign currency: it was the anti-money-laundering requirements of the FATF that the Bank of Russia cited as the reason why it couldn't drop this requirement, even as the Russian Finance Ministry continued to insist that it be dropped, the newspaper notes.

According to the expert, analysis of international experience suggests there are alternative approaches to organizing interaction between companies and public authorities. "For example in the US there is an institute of professional procedural agents that get all the requisite official documents on behalf of companies. A company cannot get registered without appointing such an agent first," Ms Kovaleva said. It should be said though, that it is unclear whether paying an intermediary would be cheaper than renting a token office, the analyst believes.