Foreign agents in Russia:
NCOs and FA status
Q:
Our NCO was recognized as a FA and it was included in the registry. What should we do now?
A:
If you see your organization in the registry of NCOs performing FA functions, then you must be prepared to pay an administrative fine for the failure to voluntarily submit an application for the inclusion in the registry. The fine is usually about 200-300 thousand rubles for the organization and 100-200 thousand rubles for the head of organization (payable at the same time).

It is necessary to prepare for the annual audit of accounting and financial statements and to budget for audit-related costs.

From the date of notification of the organization's inclusion in the registry, it is necessary to mark all materials, including the organization's website, that they were created/distributed by an NCO that performs FA functions.

The specific wording, size, font, color, and place of marking for an NCO-FA have not been established by the law yet.

The next step is to prepare for the submission of additional reports to the MoJ. Some organizations also consider liquidation as a way to be removed from the FA registry.

Q:
What are the practical problems associated with being recognized as a FA?
A:
FA status, on its own, does not prohibit the organization's activities and does not preclude acquiring support from various sources, including foreign sources. However, FA status limits the scope of opportunities for an NCO-FA. For example, the status of an NCO-FA:

  1. prevents an NCO from being recognized as provider of public benefit services and claim priority support from the state; if the NCO is in the registry of public benefit services providers, it will be excluded from the registry upon acquiring FA status;
  2. prohibits an NCO from including one its representatives in a public monitoring commission;
  3. prohibits participation in activities that promote or hinder the election of legislators or the president;
  4. eliminates the right of the NCO to utilize the simplified accounting system, and to prohibit NCOs to assign responsibilities of an accountant to the manager of an NCO and to combine these two positions (which, in practice, is typical for small NCOs);
  5. may restrict the access of employees to events held on the sites located in closed territorial entities;
  6. obliges an NCO publish a report regarding its activities on the internet once every six months, according to the MoJ's procedure;
  7. bars the NCO from inclusion in the Federal Registry of Youth and Children's Associations that can receive state support; and
  8. significantly diminishes the possibility of any interaction with authorities at various levels.
In addition, an NCO-FA must:

  1. conduct an annual audit of its financial (accounting) reports;
  2. submit additional reports to the MoJ on a quarterly basis;
  3. label all materials that are published and distributed by the NCO that they are published or distributed by an NCO performing the FA functions. The same marking should be used by the founders of the NCO, its participants, members, managers, and members of its governing bodies on all materials distributed on behalf of the NCO; and
  4. fully comply with all relevant requirements for NCO-FAs, including adherence to reporting deadlines, with risk of significant fines in the event of noncompliance.
Q:
Apart from the NCO itself, can its head or employees also be recognized as FAs?
A:
Yes, it is possible. If the organization's director or an employee receives wages from the NCO, which is recognized as a FA (i.e. receives foreign funding and engages in political activities), the NCO itself will be perceived as a foreign source vis-à-vis the CEO and employees. The law does clearly separate the political activities of the NCO-FA and the activities carried out by its employees. However, there are no practical examples yet.
Q:
Can both an NCO and its employee be punished simultaneously for the same offense?
A:
Yes. For executives/managers, the risk is higher because it is easier to hold them liable for the NCO's failure to comply with the requirements of FA legislation.
Q:
What penalties are stipulated for NCOs that violate FA legislation?
A:
If an NCO failed to submit an application for inclusion in the registry voluntarily and the MoJ issues a subsequent decision recognizing the NCO as a FA, such NCOs included in the FA registry are subject to fines: for executives – from 100 to 300 thousand rubles, for legal entities – from 300 to 500 thousand rubles.

If an NCO-FA fails to submit required additional reports, does not comply with the required deadlines, submits the report(s) to the wrong agency (other than the MoJ), or the MoJ determines that information in the report was distorted or mispresented, the NCO will be subject to further administrative liability. The MoJ may issue a warning, or a fine may be imposed: for executives - from 10 to 30 thousand rubles, for legal entities - from 100 to 300 thousand rubles.

In addition, NCO-FAs are required to label materials when creating and distributing them, including those disseminated via the media or the internet. If an NCO fails to comply with this requirement, it will be subject to additional fines: from 100 to 300 thousand rubles for executives, and from 300 to 500 thousand rubles for legal entities.
Q:
What are the potential criminal liabilities for the heads of NCOs?
A:
If an NCO, including an NCO-FA or a structural subdivision of a foreign NCO, conducts activities that encourage citizens to violate their civil obligations or commit illegal acts, the head of the organization may be forced to pay a significant fine (up to 200 thousand rubles or in the amount of his/her income for a period of up to 18 months) and could be sentenced to community service or a prison term of up to three years.

In addition, participation in the activities of such NCOs is also punishable by a fine (up to 120 thousand rubles, or in the amount of annual income for one year), as well as restriction of liberty, community service, or a prison term of up to two years.

Egregious violations, such as repeated failure to provide the documentation required for inclusion in the FA registry, can result in both a fine (300 thousand rubles, or the equivalent of annual income for up to two years), and up to 480 hours of community service, correctional labor for up to two years, or a prison term of up to two years.

Q:
If an NCO-FA decides to liquidate, what difficulties might arise in addition to the usual liquidation procedure?
A:
The procedure for the liquidation of an NCO is no different than for other legal entities. NCOs included in the FA registry will have to continue submitting additional annual and quarterly reports to the MoJ (Form ОИА001) until the NCO terminates its activities and is removed from the Unified State Registry of Legal Entities.

Q:
Which of the government agencies can inspect an NCO-FA, and how often? What areas do they focus on?
A:
Unlike other NCOs, which are inspected once every three years, the MoJ has the right to conduct annual inspections of NCO-FAs. All other government agencies carry out their inspections following the same procedure that is applied to all NCOs.

In addition, when an organization decides to apply for exclusion from the FA registry, an unscheduled inspection is mandatory. The inspecting government agencies will focus primarily on financial contracts to make sure that the NCO does not have any foreign financing.

Q:
What are the special reporting requirements for NCO-FAs in comparison to all other NCOs?
A:
All NCOs, including NCO-FAs, are expected to submit annual reports on their governing bodies and the purpose of spending funds to the MoJ by April 15.

An NCO-FA is also required to provide the following additional information during the year:

  • report on its activities and the composition of its governing bodies - once every six months;
  • report on the purpose of spending funds and the use of property - quarterly; and
  • audit report – once a year, as the annual accounting (financial) statements of an NCO-FA are subject to mandatory audit.
Q:
Is it possible to remove an NCO-FA from the registry?
A:
NCOs-FAs have four main approaches to being removed from the FA registry:

  1. after being included in the registry, the NCO can give up all funds and property acquired from a foreign source within three months, and return all previously received funds and property;
  2. for a period of one year following submission of a request to be removed from the registry, the NCO can refrain from receiving any funds and property from foreign sources and all political activities;
  3. the NCO can file a court appeal against inclusion in the registry (so far, there have been no successful appeals);
In the first two cases, the NCO applies for removal from the registry and prepares for a mandatory unscheduled inspection.

  1. The MoJ decides to remove an NCO-FA from the registry if the organization has been liquidated or undergoes a reorganization procedure with subsequent termination of its activities as a legal entity.