Smart Dollars Leave Russia in Wallets

MTA Moscow Western Union office. Wire transfers can be made worldwide in minutes.
Editor's note: This is the second of two articles about taking money out of Russia.

In 2003 any dollar or euro that finds itself in a private pocket in Russia and wants to go home electronically is giving itself a hard time. Individuals cannot send hard currency out of Russia by wire or bank transfer without showing a slip to prove that it was bought by them in Russia for rubles, or a stamped currency declaration to prove that they carried it into the country.

A new version of the law on currency regulation and control, now going through the State Duma, should abolish all limits on personal wire and bank transfers in 2004 or 2005. Until then, the smart dollars leave in a wallet, using this year's legal amendment, which raised the limit for cash export to $10,000.

However, you do not need to be Einstein to spot a loophole. Anyone can get an exchange slip by changing dollars into rubles and back into dollars. That is strictly illegal but exchange points away from banks and shopping malls will often collude by issuing a slip, with no currency exchange taking place, for a payment equal to two commissions, as confirmed by a point near Smolenskaya metro.

A foreigner who needs to send a large sum abroad and has the necessary paperwork is in a better position than Russians, who can only send out $2,000 per day under current rules.

"Foreigners can receive or send money outside Russia with no limit on the amount, and with or without opening a bank account," said Olga Solodkina, head of customer service at the Moscow subsidiary of Turkey's Garanti Bank.

A foreigner with a passport and valid visa can open a hard currency account in most Russian banks on the spot and use it to send money abroad, but this is not the cheapest or quickest option. The SWIFT inter-bank money transfer system will swallow 10 percent of the sum and delivery speeds vary, according to a consultant at Raiffeisenbank in Moscow.

The recognized international leaders for rapid person-to-person cash transfer without bank accounts, Western Union and MoneyGram, have already divided Russia between them in Coke-and-Pepsi fashion. Western Union rates are slightly higher, but its network in Russia is bigger (around 2000 desks). The ballpark rates for both systems are 10 percent for the smallest sums, gradually descending to under 5 percent for several thousand dollars. Transfers can be made worldwide in a matter of hours or even minutes. When you need their services in Russia, you should make for the nearest large bank.

The leading Russian retail banks, except for state-controlled giant Sberbank, are signed up to one or the other of the two systems -- for example, Alfa Bank offers Western Union and First Mutual Credit offers MoneyGram. Sberbank has its own hybrid of wire and bank transfer, using the SWIFT system, but without need for the sender or receiver to open a bank account.

Sberbank, the post office and a few private sector banks have developed cash wire services with a focus on internal Russian and CIS transfers.

"Gastarbeiters [guest workers] from the CIS republics are 75 percent of our transfers, and the average sum is just $300," said Nikolai Gusman, chairman of the Russlavbank board, which set up the CONTACT wire cash system four years ago.

However, CONTACT, and the analogous systems Anelik and Migom, have also set up wire channels with the rest of the world, offering slower transfer times but significantly lower fees than Western Union and MoneyGram (two or three times less for sums up to $500).

CONTACT has over 30 outlets in Moscow and a dense network of corresponding outlets in the United States and most European countries. These outlets tend to target migrant workers who send earnings to families at home in poorer parts of the world.

"We are not talking about people who need to get $25,000 by wire to buy a diamond ring before their girlfriend walks out -- transfer speed is not of the essence," Gusman said, but added that CONTACT does offer international cash delivery within 24 hours.

Russlavbank is currently in a legal dispute with Western Union regarding the exclusivity clauses that Western Union offers Russian banks, and which prevent the Russian operator from extending its local network.

The Anti-Monopoly Ministry agrees with Russlavbank and has ordered Western Union to change its contracts, but the multinational is launching an appeal in Russian courts.

"Russlavbank accuses us of unfair competition, but banks have a choice whether to accept the agreement and can always withdraw from it," said Irina Konopolskaya, head of marketing at Western Union DP Vostok, the multinational's Russian subsidiary.