|                                                                                                                                                                                     |  | Managing Cash During the Russian Banking Crisis                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsCustomsCornerPublicationsSourcesof FinanceFinanceLinkLeadsand EventsExchangeRatesState ExportsOtherSources** |  | April 1999by Edward Merewether and Brian MulladyThe current banking crisis in Russia has demanded that U.S. companies develop new ways of
moving and managing the cash needed to pay employees and vendors and to support client needs
throughout the nis. One of the keys to successfully and legally conducting business in today's Russia
is to realize that the labyrinth of impediments to conducting banking operations does not mean that
it is impossible to legally realize almost any desired financial objective. The critical element is
understanding and taking advantage of the full range of regulations (or, one might say, opportunities)
to accomplish your financial objectives. Although the banking crisis has created a difficult situation,
it is possible to develop unique ways to successfully work within the current system.Prior to the crisis, many companies simply transferred cash to a Moscow bank by wire transfer and
then withdrew the funds for payment of salaries, goods, and      services. Now that Russian banks
are no longer stable intermediaries for funds, getting cash into the country for payroll and operations
must be addressed in other ways. First, however, it is a good idea to reconsider the status of a
number of banks in Moscow on a regular basis in hopes of finding one that remains solvent and
operates normally. In-country staff and various international accounting firms and public information
services can help evaluate the situation. If the situation with the banks appears too uncertain, it may
be best to seek alternative solutions to the normal banking routine. (This may be particularly
necessary for small companies whose monthly cash transactions may be too low to be deemed of
interest to the major international commercial banks in Moscow.)In finding new cash management solutions, it is essential to be straightforward and legal, while
minimizing the cost impact as much as possible. To accomplish this, it may be necessary to consider
a range of solutions that can be used by in-country staff as the daily situation demands.
1.   Continue to transfer small amounts of cash to a local bank account, then withdraw the funds
upon arrival. Periodically, banks may function normally as funds become available. But, remember
that transferring and placing large sums in a bank remains risky. 
2.    An alternative means of getting funds into Russia for normal office operations is to hand carry
it. Due to relatively low airline fares between Moscow to several U.S. cities, professional courier
services can be useful. (With the cheap airline fares, in some cases, the costs can be as low as the
cost of a normal wire transfer when substantial amounts of dollars are involved.) 
3.    Direct transfers of funds from corporate headquarters to the accounts of suppliers and vendors
in Russia even directly to the accounts of employees can be successful. This works as long as
the vendor or employee has some confidence in their local bank. It may be surprising to some, but
many local banks still function and can be used. When cash is delivered into the hands of local
national staff, the funds should be registered with local authorities both when passing through
customs and at the local bank. Funds are deposited into the bank only when the banks (both the
sending bank and a recipient bank) concur that funds can be deposited, transferred, and then
delivered to suppliers or vendors.Handling cash makes everyone nervous. Therefore, if you decide to follow this course, it is a good
idea to establish some internal rules of procedure. 
--Declare all cash (if more than US$10,000) with U.S. Customs when leaving the country. 
--Don't establish fixed schedules or flight patterns and take nonstop flights between the United
States and Moscow. 
--Declare all cash when clearing customs in Russia. 
--Arrange for unobtrusive security to meet you at the airport. 
--For your own peace of mind, establish a good paper trail for funds being transferred. 
--Get official receipts for all cash disbursed in Moscow. 
--Don't deliver cash to individuals, only to business entities.For business transactions in a nearly all-cash environment, it is also wise to keep clearly within legal
bounds from both the U.S. and Russian perspectives. To ensure this, all cash transfer transactions
should be made at a bank where the U.S. dollar can be converted to rubles at the time the payment
is made. The transaction must be conducted in rubles (legal), not in dollars (illegal). With the bank
as witness to the cash conversion and transfer, all issues of audit trail and accountability should be
satisfied, at least for the time being. It is important to maintain a friendly business relationship with
the local bank so that it acknowledges you as a valued, if not current, customer.In a "cash only" environment, it is important to avoid the temptation to bypass the rules. Some
suppliers and vendors may suggest that this will save them taxes collected by the bank, if applicable,
and precludes accountability by the business to the tax authorities, and that it will save you money.
But sooner or later illegal activities will come home to haunt you. The legal environment is rapidly
changing in Russia. It takes some work to stay on top of the changes and to always seek those
options and opportunities that give the maximum benefit to suppliers, vendors, and employees while
still complying with the law. Ultimately, it's worth the effort and, once the vendors understand that
you are not going to break the law, they will work with you.For more information on the current banking situation in Russia, visit BISNIS Online at
www.mac.doc.gov/bisnis/country/rusfed.htm#Russia.Ed Merewether is the Vice President for Business Development and Brian Mullady is Country
Manager, Russia, at Technology Management Company in Albuquerque, New Mexico.This report is provided courtesy of the Business Information Service for the Newly
Independent States (BISNIS)