How to check a company from Russia?

Currently, there is a financial penalty of up to 20 million PLN, and even up to 15 years of imprisonment for violating Polish and EU bans on economic cooperation in specific market areas or with entities from Russia.

Economic cooperation with Russia

Polish-Russian economic relations are primarily governed by the Agreement between the Government of the Republic of Poland and the Government of the Russian Federation on Economic Cooperation dated November 2, 2004, which established the Polish-Russian Intergovernmental Commission for Economic Cooperation. This is supplemented by a number of intergovernmental agreements concerning various spheres of economic relations, including the Agreement between the Government of the Republic of Poland and the Government of the Russian Federation on the Avoidance of Double Taxation with respect to Taxes on Income and Capital of May 22, 1992.

Since Poland’s accession to the European Union, the Partnership and Cooperation Agreement establishing a partnership between the European Communities and their Member States and the Russian Federation of June 24, 1994, extended to new member countries by the Protocol signed on April 27, 2004, has been fundamental in relations with Russia.

According to Eurostat data, despite the ongoing war in Ukraine and the imposed economic restrictions and sanctions on Russia, Polish-Russian trade began to return to pre-war levels from mid-2022. In the last quarter of the previous year, Polish exports to Russia amounted to 1.2 billion EUR, significantly more than in the second and third quarters. Before the Russian aggression against Ukraine, i.e., in January and February 2022, we exported goods and services worth 600 million EUR per month. In the first full month of the war, it was only 300 million EUR, and in the second, 200 million EUR. From June, the export value started to increase and reached 300 to 400 million EUR per month. Currently, Poland remains the 3rd largest exporter to Russia among all EU member states. We mainly export products from the machinery industry, plastics, and pharmaceuticals to Russia.

The war in Ukraine and international sanctions significantly impacted Poland’s imports from Russia. In the last quarter of 2022, we imported 61% less goods and services than in the same period of 2021. However, the total import value was 2.3 billion EUR, and for the whole year of 2022, it amounted to 17 billion EUR, making Russia one of Poland’s most important economic partners. We import nearly everything from Russia, primarily including crude oil, coal, and gas. Despite the war, we are the largest purchaser of Russian LPG among all EU member states.

Threat to the Existence of Companies

The armed invasion of Ukraine by Russia that began on February 24, 2022, caused an economic crisis and brought many negative consequences for market participants. The international community turned its back on Russia, trying to force it to end military actions in Ukraine. One way of resistance is the imposition of embargoes, such as trade bans with Russia, and restrictions on the exchange of goods and services with the country. Public condemnation directly affects the activities of companies, even if they are only remotely associated with the Russian side. Therefore, for a year now, Polish entrepreneurs have been hesitant to engage in business with foreign counterparts, as it is not easy to determine ownership structures, especially for complex entities and holding structures. Media reports daily about French, German, and Hungarian companies that, despite global opposition to Russia, continue to conduct business with the country.

National and EU Sanctions

How to check a company from Russia? The European Union imposes sanctions on Russia in packages. By the end of 2022, nine such packages have already been introduced. The imposed sanctions can be found in the EU Official Journal accessible online at: https://eur-lex.europa.eu/oj/direct-access.html?locale=pl. Additionally, Poland introduces its own sanctions based on the Act of April 13, 2022, on special solutions to counteracting support for aggression against Ukraine and serving national security.

The Polish Ministry of Interior and Administration (MSWiA) publishes and updates the official list of individuals and entities subject to sanctions at: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami. It is possible to check one’s business partner there, their connections, the reason for inclusion in the list, and the sanctions applied to them. Considering the severe consequences for violating sanction prohibitions, Polish entrepreneurs should continuously monitor this list. Among other things, for breaching the prohibition on providing financial means or failing to promptly provide information regarding operations on frozen accounts, the Head of the National Revenue Administration can impose a fine of up to 20,000,000 PLN.

What else do the sanctions mean for Polish entrepreneurs?

Certain entities associated with Russia or Belarus are not only banned from entering the territory of the EU but also have their assets frozen, which includes all accounts in EU banks. Additionally, sanctions mean that no financial means or assets, even indirectly, can be made available to such entities. The sanctions also cover exports to Russia, including modern technology, certain types of machinery and transport equipment, luxury goods, as well as equipment, technology, and services used in the energy industry. Sanctions involve bans not only on the import and export of specific goods but also on certain services, such as accounting, bookkeeping, or tax advisory services.

Exercising Due Diligence in Verifying a Counterparty

In today’s times, establishing a company is very easy. In many countries, it can be done without leaving home, through the Internet. Therefore, one can never be sure who is actually hiding behind the created name and entry in the register until it is verified. Verification involves actions commonly used in economic intelligence, which primarily include checking the reliability and current status of the counterparty’s documentation, National Court Register (KRS), Tax Identification Number (NIP), Statistical Number (REGON), as well as permits and certificates necessary for conducting specific types of activities.

Verification can be done by obtaining information from the relevant individuals and institutions such as registry courts, Social Insurance Institution (ZUS), tax offices, or national and international chambers of commerce. It is essential to delve into the history of the company and its owners, including opinions about the firm, by searching the Internet or consulting other entrepreneurs and counterparts of that entity, as well as the party in question directly. One must remember that failure to exercise due diligence in selecting a counterparty can lead to legal consequences, such as being accused of knowingly participating in irregularities and facing subsequent tax and legal sanctions.

How to Verify a Counterparty?

The most crucial method of verifying a counterparty and its potential ties to Russia is to determine its ultimate beneficial owner and then check whether they are listed on the aforementioned sanctions list maintained by the Ministry of Interior and Administration (MSWiA). Determinations can be made in the Central Register of Ultimate Beneficial Owners maintained by the Minister of Finance. Registries such as CEIDG and KRS, as well as their foreign equivalents maintained by Russia (http://egrul.nalog.ru/), may also be helpful in determining the ownership structure of the company.

Frequency of Economic Intelligence Counterparty Checks

Sanctions lists are updated periodically. Economic intelligence activities aimed at verifying the ownership structure of the counterparty should be carried out at least every time we enter into cooperation with a new business partner or enter new markets to avoid sanction-related risks. Media and public sources also announce updates to the sanctions list, and in such cases, it is responsible behavior to familiarize oneself with the update. It should be noted that Russia may also maintain its own sanctions lists. If information regarding which entities these states have placed on their lists cannot be accessed, determining the scope of the import embargo to these countries should not be a problem.

Verification of a counterparty can be entrusted to a professional economic intelligence agency that specializes in executing such orders. A private detective in Warsaw, Poznań, Wrocław, or other cities will know how to obtain the necessary information to verify the current or future counterparty.

Direct Inquiry to the Counterparty

In case difficulties arise in determining the ownership structure of a business partner using available registers, another method of verifying the counterparty as part of economic intelligence activities is to directly inquire about the real beneficial owner. Of course, to verify the response received, it is possible to ask the foreign entrepreneur to provide documents confirming their declarations.

Environmental Intelligence

A publicly accessible method to gather information about a counterparty is to search online resources. Verifying a company, checking if it has a website, and finding out opinions about it may lead to some publications about the company. It is possible to request references from other firms that have dealt with the same counterparty. There are many sources of information beyond the World Wide Web. For example, Polish-Russian chambers of commerce or the Polish Embassy in Moscow may provide information.

National and EU Information Sources

Detailed information about the types of economic transactions with Belarus and Russia prohibited by the EU can be found on the European Council’s website: https://www.consilium.europa.eu/. In the EU Official Journal at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721, there is a list of individuals and entities subject to sanctions. The Polish Ministry of Interior and Administration also maintains an up-to-date register of entities subject to sanctions, where one can check a counterparty, their connections, reasons for inclusion in the register, and the applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.

In the first step of verifying a company from Russia, it is, therefore, possible to check if it appears in any of the aforementioned registers. Another source of useful information is Regulation (EU) 2022/576 of April 8, 2022, amending Regulation (EU) No 833/2014 concerning restrictive measures in relation to actions undermining the situation in Ukraine.

Polish and EU Registries

The Bulletin of Public Information by the Ministry of Entrepreneurship and Technology, as the competent minister for the economy, maintains a register of foreign entrepreneurs’ representations. If we find the representation of our counterparty in this register, we can assume that they are still in existence and conducting business.

Another such register where one can check a counterparty is the European Union’s VAT taxpayer register and EORI register. Companies and individuals wishing to conduct commercial activities within the Union must use the EORI number as their identification number in all customs procedures. The VAT Information Exchange System (VIES) is a search engine operated by the European Commission, allowing verification of whether a given entity is registered as conducting intra-Community transactions. This is essential, among other things, to apply a 0% VAT rate to a specific transaction. If VIES does not confirm the counterparty’s registration, one can request verification from the tax authorities of the country where the counterparty is based.

The Debtors’ Register allows checking whether a particular counterparty is listed. There are also economic information bureaus that possess detailed information about companies’ activities. BIK, the Credit Information Bureau, established by the Polish Banking Association, collects data on the credit history of bank customers, credit unions, and even non-bank loan companies.

Russian Business Registries

The Russian Federation is an extensive country with a status of a superpower. Corresponding to its size, it has many registries from which information about local companies can be obtained. Among the most important and popular ones are the registry of the Federal Tax Service of Russia (https://www.nalog.gov.ru). It provides a search engine for entrepreneurs on the website: https://egrul.nalog.ru/index.html. This is a state database of companies that allows searching for any company in Russia by its name, Taxpayer Identification Number (Russian NIP), or OGRN (primary state registration number). The search is possible in both Russian and English languages.

The Enquiry Service of Legal Entities is a commercial database with the option to purchase official information about a company, additional details, and financial indicators (http://russianpartner.biz). The search is available in English and, similar to the Tax Service registry, can be conducted using INN or OGRN numbers or the company name. Similarly, Disclosure.ru is a database with some public companies, containing annual reports, lists of associated entities, and financial documents (http://www.disclosure.ru). Additionally, the search engine Skrin.ru (https://disclosure.skrin.ru) operates in the same way.

Another commercial search engine is SPARK Interfax. It is a database that provides various information about companies (gathered from official sources). It usually includes data about owners, CEOs, company affiliations, financial reports, legal cases, and much more (https://spark-interfax.ru). On the other hand, Ras.Arbitr (https://ras.arbitr.ru) is the official website of Russian arbitration. It allows searching by name (individual or company) of those who have used it. There is also https://sudact.ru – a website that gathers various legal cases and provides documents about them. However, it is only accessible with a Russian IP address.

Infoclipper is a commercial register that allows searching for any company in Russia, information, and documents to verify its registration, financial results, credit rating, and identification of directors and board members (https://www.info-clipper.com/en/company/search/russia.ru.html). Access to information is subject to a fee. The website is also available in English and French.

What Does Business Intelligence Provide?

Verification of the ownership structure of a foreign company can be done by conducting one’s own “investigation” in publicly available, independent sources: checking information on the counterparty’s website, available opinions on the internet. Embassies and national chambers of commerce can also provide information. In many cases, access to financial reports of foreign companies is possible. However, the simplest and most reliable way to check a counterparty is to entrust their verification to a professional business intelligence agency, a detective agency that knows where to look and what methods to use to obtain the necessary information. They will enable entrepreneurs to make an informed assessment of the risk of potential cooperation with the scrutinized counterparty, especially in terms of current sanction risk. This is not always a simple matter, especially when dealing with a counterparty with an extensive holding structure, consisting of many entities from different jurisdictions.

It is worthwhile to thoroughly check a counterparty

Before completing a transaction or starting cooperation with a counterparty from Russia, it is worth conducting business intelligence and thoroughly verifying them. Violation of sanctions imposed on transactions with this country can result in financial penalties of up to 20 million PLN and imprisonment for 3 to 15 years. Besides that, trade prudence, caution in purchasing, and proper selection of a counterparty are always required. These are obligations that entrepreneurs must fulfill every day, regardless of the current situation in Eastern Europe, as imposed by the law on companies as professional entities in commercial transactions, violations of which carry specific sanctions.

Do you know how to check a company from Russia? If not, or if you need to find more detailed information, we can help. Contact us.

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