As we previously highlighted, the last changes of the Foreign Exchange Law brought important novelties in the sphere of foreign exchange supervision. Specifically, starting from 1 January 2019 the National Bank of Serbia (“NBS”) assumed the competencies from the Tax Administration for performing foreign exchange control of operations of all types of residents and non-residents. Subject matter of control is checking and determining “legality and regularity of performance of foreign exchange operations”. To fully implement this switch in supervision, the NBS rendered a Decision on Detailed Conditions and Manner of Conducting Supervision of Foreign Exchange Operations (“Decision”).
This marks a new period for market participants, since so far only certain regulated entities such as financial institutions were supervised in detail, while for general corporates and other entities control of foreign exchange operations was in practice mostly indirect and limited in scope. When it comes to the change of the controlling authority and closer regulation of the control process, stricter and more active scrutiny of operations of business entities is expected in practice. This is also indicative from control procedures being already initiated with local companies since the beginning of the year.
Among other, the NBS is granted with two forms of supervision – indirect and direct – and a relatively broad scope of actions which can be undertaken. Indirect control implies the NBS remotely reviewing reports and other documents that the company provides regularly or upon the NBS’ request. Direct control would mean the NBS’s officers visiting premises of the company or its related parties, upon issuance of a decision on initiation of direct control. Importantly, within the course of direct supervision, the NBS is entitled to temporarily seize assets i.e. cash (bills/coins or funds on bank account), securities, objects, official documents and papers, if there is a reasonable doubt that they were used or intended for or were generated through perpetration of a criminal offence or an offence. Seized objects are deposited with the NBS or (in case of objects, documents and papers) with other suitable depositary. Upon seizure of assets, the NBS shall initiate offence or other appropriate proceedings before the competent authorities.
The NBS decides in the control process by adoption of the resolution. Such resolution may be challenged before administrative court, but this does not delay its enforcement (similarly as in tax procedure).
In performing control, the NBS co-operates with the Tax Administration, customs body as well as other competent authorities, with focus on mutual exchange of information.
It is yet to be seen in practice what will be the main matters on the supervisory radar of the NBS. Be that as it may, this certainly gives a new practical dimension and weight to foreign exchange rules. Thus, this seems to be the moment when it is advisable for the companies to perform legal check-ups and ascertain if business operations are compliant with the foreign exchange rules. This concerns in particular cross-border operations, including foreign trade, loan transactions, assignments, set-off, payment transactions etc. and related reporting procedures.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.