Caravanserai
Crime & Justice

Russian law banning cash payments to non-residents draws criticism

By Ksenia Bondal

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A woman walks past a currency exchange in Moscow on March 10, 2020. Under Russian law, paying cash to foreign workers who lack Russian tax residency is considered a currency transaction and a threat to Russia's security. [Yuri Kadobnov/AFP]

ALMATY -- A Russian law banning employers from paying non-residents in cash is drawing scrutiny following the case of a Kazakh cleaning woman in Kurgan, Russia.

An appeal court earlier this month upheld the fine that the Kurgan municipal court handed down to the employer, the Akademiya Cultural Centrе, for using cash to pay A. A. Kholodova, a Kazakh citizen who for taxation purposes is not a resident of Russia, according to Valentina Grechishnikova, a lawyer at Usconsult in Novosibirsk, Russia.

Akademiya appealed but lost, as reported by Inbusiness.kz earlier this month.

A tax resident is defined as an individual who has been recognised as a resident of Russia for at least 183 calendar days during the year.

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A screenshot from Kazakh director Sergey Dvortsevoy's film 'Ayka' that tells the story of a migrant woman working illegally in Moscow. [File]

Under Russian law, dispensing cash to foreign workers who lack Russian tax residency is considered a currency transaction, Grechishnikova said.

This means that the company violated currency legislation, and the court levied a fine of almost 85,000 RUB (504,000 KZT or about $1,186), she said.

Furthermore, the court claimed in a statement "the offence committed by the organisation threatens the national security of the Russian Federation".

The law includes a list of situations in which a Russian legal entity may pay non-residents in cash, said Grechishnikova.

The list, which is not publicly available, "doesn't include an option for a resident employer to pay wages in cash to a non-resident worker, and consequently, paying wages to a non-resident of Russia in cash is an illegal currency transaction", she said.

In unsuccessfully appealing the fine, the Akademiya Cultural Centre said that it paid Kholodova in cash because her bank card had expired.

Because of the COVID-19 pandemic, Kholodova had difficulty travelling to Kazakhstan and settling the matter with the bank, it said.

"It is possible to avoid accountability, but it [Akademiya] needs to prove that the violation is minor -- and to do that it has to provide evidence refuting the claim that it acted intentionally -- and must prove the interests protected by law," Grechishnikova said.

Why does the EEU exist?

The court's claim that a cleaning woman's case "threatens" national security and the failure of the European Economic Union (EEU) -- of which Kazakhstan is a member -- to back up its own lofty words have irked observers.

The Russian-dominated EEU is supposed to allow the free movement of goods, services, capital and labour.

Kuanysh Satayev of Shymkent, an activist, called the entire episode absurd.

"How can we possibly threaten our neighbour? Besides, we're not just neighbours -- we're also fellow members of the CIS [Commonwealth of Independent States], EEU, CSTO [Collective Security Treaty Organisation] and plenty of other organisations," Satayev said, reciting a list of bodies that Russia founded to keep former Soviet republics in its fold.

"We're constantly being told about Russia and Kazakhstan's indestructible friendship -- we have the longest [continuous] border in the world, and our countries have signed countless agreements with each other, yet it's impossible for Kazakh citizens to go work there and receive the money they earn honestly."

"How is that possible?" he asked.

While the EEU claims to guarantee the free movement of goods, services, capital and labour within the union, it's clear that all these signed agreements may not actually work, he added.

"If we enter a single union and value friendship and proximity to each other, our citizens shouldn't have problems moving around and getting jobs," Satayev said.

How could a poor woman working as a cleaner pose a threat to an entire country -- and one of the world's nuclear powers at that? Now all Kazakhs working in Russia can be placed in that category," he said.

"It's absurd."

Benefiting Russia

The EEU benefits only Russia, which uses the organisation to further its agenda.

Moscow has not only used it for economic advantage but also to push political goals.

The integration processes put in place through the EEU agreement were not only designed to address economic and customs matters but also entailed elements such as the free movement of labour among the union's member states, said Rasul Zhumaly, a political analyst from Almaty.

However, Russia often tacks on additional demands on top of EEU agreements, according to Zhumaly.

For example, in March and April 2020, an international dispute arose when Russian authorities barred some trucks from Kazakhstan from entering Russia because they allegedly did not meet the standards of the administrative district in question, Zhumaly said.

"Many Kazakh businesspeople have accused Russia of routinely interpreting various EEU provisions in its own interests. When it needs to, it demands one thing of Kazakhstan and then later it demands something else."

"That's the kind of legal sophistry that's taking place," he said.

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