Georgia Circumventing Russian Foreign Agents Act

  • Georgian banks are circumventing the Russian Foreign Agents' Act.
  • The anonymity factor makes cryptocurrency an attractive option.
  • It is clear this loophole will not last for a long time.

The new Foreign Agents’ Act came into effect in Russia this month. The law has six categories based on the level of the risk to Russia. The full analysis of the new act available here. The act created difficulties for the Russian nationals to be able to open bank accounts outside of Russia.

Alexei Navalny is a Russian politician and anti-corruption activist. He came to international prominence by organizing demonstrations, and running for office, to advocate reforms against corruption in Russia, Russian President Vladimir Putin, and his government. In 2012, The Wall Street Journal described him as “the man Vladimir Putin fears most.”

However, it seems Georgia is facilitating this service. At present, it is the only nation that will allow Russian citizens to open a bank account via remote access. The Georgian banks cannot be contacted directly, but there is a specific third party provider that is the bank proxy.

Moreover, a Russian national will need to send notarized power of attorney to the proxy agent and a copy of their Russian passport. There is a security concern with such transactions.

Additionally, could the Russian passport’s information be leaked? For example, would an individual like Alexey Navalny have such bank accounts for multiple transactions and foreign funding?

Mr. Navalny recently admitted that his sponsor is located in France, who covers his personal expenses. He disclaimed that.

Therefore, given the new law, he would automatically have to register as a foreign agent and display such an identifier on social media, documentation, an so forth.

The next step of the process is for the Georgian agent to translate the documentation. Once this step is completed, the Georgian bank opens an account in the Russian citizen’s name.

The account allows one to receive funds, shop online, and send and receive money using PayPal. The account is online only and the individual does not get a bank card.

This scheme allows one to bypass the new Foreign Agents’ Act. Foreign nationals and organizations can transfer the funds to the Georgian account, the individual transfers funds to the Russian bank, and then donates the money to another party.

Vladimir Vladimirovich Putin is a Russian politician and a former officer of the KGB who has served as President of Russia since 2012, previously holding the position from 1999 until 2008.

The donation is made to look like it came from a Russian citizen and not the foreign entity. According to the guide, Russian opposition members are counseled to use this method.

However, the question is, if the Russian opposition wants transparency and honesty, why one would want to have foreign funding and not declare their source of funding? Wouldn’t it make the opposition members in to the same law-breaking citizens that they are trying to out?

Another option that the opposition is using is cryptocurrency. Bitcoin transactions are not illegal in Russia and also the anonymity factor makes it an attractive option. Nevertheless, not everyone is comfortable using Bitcoin and many non-profit operations still prefer actual bank transactions.

So, what is the benefit for Georgia to facilitate these bank accounts and an attempt to circumvent the Russian Foreign Agents’ Act? Is Georgia calling out the Kremlin? Otherwise, why orchestrate additional tensions with Vladimir Putin?

It is clear this loophole will not last for a long time. Russia will find a way to stop this activity. It is highly likely that Russian citizens would be jailed if caught using the service.

Additionally, there is a concern this type of virtual account openings, in theory, could be used by terrorist groups, money laundering, and even human traffickers.

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Christina Kitova

I spent most of my professional life in finance, insurance risk management litigation.

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