The Central Bank has limited money transfers to four countries

At the request of the Central Bank, money transfer systems set limits on sending funds to Vietnam, China, Kyrgyzstan and Kazakhstan, Vedomosti writes . Experts interviewed by The Bell consider this restriction to be part of the regulator’s fight against the shadow sector of the economy. Elvira Nabiullina drew the attention of President Vladimir Putin to this topic in January, and already in March, searches took place in markets owned by businessmen God Nisanov and Zarakh Iliev.

What's happened. From April 16, money transfer systems introduced limits on sending funds to Vietnam, China and Kyrgyzstan (RUB 100,000 per month) and to Kazakhstan (RUB 150,000 per month). The restrictions were set at the request of the Central Bank, three people informed about this from employees of payment systems told Vedomosti. Representatives of the payment systems themselves did not disclose the official reason.

Causes. The new limits are a continuation of the Central Bank’s fight against shadow transactions and entrepreneurship without registration, one of the publication’s interlocutors said. Another source explained that foreigners trading in markets use money transfers to pay for consignments of goods without registering as an individual entrepreneur and creating a legal entity. So they can avoid registering contracts with banks for currency control, avoid taxation or withdraw funds abroad, the regulator reported.

It is the four mentioned directions that account for the majority of dubious transfers without opening a bank account. Transfers are carried out from points that are located near or on markets, says Vedomosti’s source. Kyrgyzstan is the second country after Tajikistan in terms of the volume of remittances received from Russia ($1.3 billion in 2018), China is in 4th place ($675 million), Kazakhstan is in 7th ($392 million), and Vietnam is in 12th ($175 million).

Putin's participation. Elvira Nabiullina drew Vladimir Putin’s attention to the shadow circulation of cash in the markets in January, and in February the president instructed the government and the FSB to develop measures to combat it. According to the Central Bank, most tenants of the Moscow markets “Sadovod”, “Moskva” and “Food City”, the St. Petersburg “Sofia Vegetable Base” and several regional markets tried to evade taxes. The main owners of the Moscow shopping center, as well as the Sadovod and Foodcity markets, are the structures of the Kyiv Ploshchad company of God Nisanov (Forbes estimates his fortune at $3.3 billion) and Zarakh Iliev ($3.3 billion).

Consequences. The restrictions are unlikely to affect ordinary senders, employees of the two payment systems are confident. According to one of them, the average monthly remittance of a labor migrant is 35 thousand rubles. True, this measure is unlikely to be able to completely close the loophole for illegal entrepreneurs, says Alma Obaeva, Chairman of the Board of the National Payment Council NP. To circumvent the limit, foreigners will simply attract more people.

Customers will ultimately have to pay for the limits, says EXANTE managing partner Alexey Kiriyenko. According to him, new “expenses” will be included by small and medium-sized businesses in the price of the final product, which will be a pressure factor, albeit an insignificant one.
The situation also creates geopolitical risks, Kiriyenko is sure. “Russia, Kazakhstan and Kyrgyzstan are members of the EAEU, and such actions against citizens of economically union states look strange. Before this, the Central Bank introduced similar measures in relation to Uzbekistan, but it is not yet a member of the union. However, within the framework of the EAEU, it is documented to ensure the freedom of movement of goods, as well as services, capital and labor, and the implementation of a coordinated, coordinated or unified policy in sectors of the economy.”
“Such tightening of control will have consequences similar to foreign exchange controls,” says Otkritie Broker portfolio manager Timur Nigmatullin. According to him, a slight improvement in the balance of payments may lead to some strengthening of the ruble, although it is still difficult to assess its scale.