Payments of expenses and commissions originated in cross-border financings are subject to registration before the Central Bank

1.    Legal framework

In the setting of the foreign exchange controls existing in Argentina since 2002, Decree No 285/2003 established the first information regime on funds flowing from and into Argentina. This Decree established that any transfer — inside and outside Argentina— of foreign currency had to be registered with the BCRA. Later, Decree No 616/2005 abrogated the former decree and made compulsory the registration of any transactions entered into by Argentine residents which may imply a future payment in foreign currency to non-resident parties.

To make the latter Decree operative, the BCRA passed Communication “A” 4359, through which —among other things— it was decided that the reporting requirements before the BCRA will be deemed complied with if the requirements of the Foreign Exchange Transactions Informative Regime set by Communications “A” 3471, “A” 3810 and “A” 3602 are satisfied.

Within this framework, Communication 4752 establishes the registration of certain payments (expenses and commissions) made by resident debtors. As these payments take place before the resident debtor accesses the local foreign exchange market, it could have been considered that they were excluded from registration. With this new regulation the doubt has been clarified.

2.    Objective

After Decree No 285/2003 was passed, the Federal Executive Branch considered it was necessary to provide the BCRA with the adequate legal framework to monitor flows of money, to provide adequate information to those establishing the economic and financial policy. This Communication is aimed at fostering the monitoring scheme.

3.    Payments which have to be registered

The payments subject to this reporting requirement are:

i)             the amounts which have been set-off from the proceeds received by the resident debtor that correspond to expenses and commissions paid directly by the lender or underwriter abroad; and

ii)             the proceeds corresponding to fees and expenses withheld by the lender or underwriter.

4.    Proceedings

According to this Communication, the payments referred to above have to be reported at the time the first foreign exchange transaction with respect to them takes place. The Communication does not discriminate between partial or total disbursements. Therefore, in the case of partial payments it is reasonable to conclude that the expenses and commissions have to be registered at the time each foreign exchange transaction originating such expenses or commissions took place; while in the case of expenses or commissions which derive from the transaction considered as a whole, the registration has to be carried out at the time the first foreign exchange transaction takes place.

5.    Requirements

To register the transaction it is required that:

i)             the amounts of the expenses and commissions are consistent with market practice; and

ii)            the client submits the back-up documentation which evidences the payment of expenses and commissions.

6.    Grace period to regularize

Communication “4752” sets a 30-calendar day grace period (i.e. until February 15, 2008) to comply with its requirements and register the transactions where the foreign exchange transaction is pending as of December 21, 2007 (the date when the Communication was passed).