Draft legislation to regulate the use of nominee banks accounts is being considered by the State Duma.

Further changes are expected before draft becomes law and nominee accounts can start being used. However, the current proposals involve:

  • a bank opening a nominee account for a client who is deemed to be a nominal holder of the account
  • the nominal holder carrying out transactions with funds deposited in the account, even though they do not belong to him and have been deposited there by another party for a particular purpose
  • the nominal holder and the depositor of the funds entering into a nominee account agreement regulating ownership of the funds and the beneficiary to whom the funds are to be transferred on the depositor's instructions
  • the nominee account agreement possibly requiring consent from the beneficiary for the nominal holder to set up direct debit payments from the account, following the bank's usual direct debit forms and procedures
  • the nominal holder having no right to use the funds for another purpose
  • the funds being protected from debt enforcement action against the nominal holder
  • the nominal holder being obliged to cease dealing with funds in the account up to the amount stipulated in any debt enforcement documents against the depositor involving seizure of his monetary assets

Russian law gives the bank account holder full control over the account in most situations, although a company's control is sometimes restricted under an account agreement. The draft law attempts to address the legal issues related to ownership and control of accounts, so that there is sufficient certainty for the bank to be able to accept instructions from the beneficiary to transfer money deposited in the nominee account.

Companies would still use an ordinary bank account for all their normal financial transactions, and would only use a nominee account to transfer money for particular purposes defined in advance.

In a normal account, the beneficiary's money would be pooled with the account holder's own funds and so could be used to satisfy claims against the account holder by his creditors. Beneficiaries would be protected against this risk as regards the funds they place in a nominee account under the control or management of the nominal holder. As those funds would not belong to the nominal holder, they would not be part of his bankruptcy estate were he to go bankrupt.

Law: Draft of Federal Law No. 393713-4 "On amending several legal acts of the Russian Federation"

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The original publication date for this article was 10/06/2009.