Foreign companies’ financial services and Russian consumer protection

The Bank of Russia has issued a warning to all Russian financial organisations that it finds unacceptable their mediation between foreign financial companies and Russian financial consumers.

The relevant information letter signed by Bank of Russia Governor Elvira Nabiullina has been sent to banks, non-bank financial institutions and self-regulatory organisations of the financial market.

The regulator considers unacceptable a situation when an investor, by communicating with a broker or visiting his website, receives information about services provided by a foreign financial organisation operating out of the Russian jurisdiction and, furthermore, has the opportunity to sign a contract with such an organisation through the actual mediation of a Russian company.

The Bank of Russia on multiple occasions warned investors about the risks and legal consequences of concluding contracts with foreign financial organisations: in case of problems or disputes with such organisations, financial consumer rights cannot be protected by the Russian legislation. However, it follows from complaints addressed to the regulator that consumers, both individuals and legal entities, are left unaware of the fact that the contract is being signed with a foreign organisation or about the risks arising out of such contracts. Investors are confident that they are interacting with a Russian financial company that offers them certain financial services at its office (or on a website).

The regulator reminds market participants that the legislation of the Russian Federation imposes a number of restrictions on foreign banks’ and non-bank financial organisations’ operations in Russia. According to the letter, any circumvention of these restrictions, while involving risks to financial consumers, undermines investor confidence as regards individual financial companies and the Russian financial market overall. The Bank of Russia reserves the right to take the appropriate supervisory action to address any such violations of legislation (including even the cases of Russian financial companies’ websites posting links to foreign financial organisations’ addresses).