Laundering gets very dirty // It is proposed to extend responsibility for legalization of funds and property to legal entities

A draft amendment to the Code of Administrative Offenses has been submitted to the State Duma, extending liability for laundering proceeds of crime to legal entities. The measure of responsibility will depend on the fault of the individual who, being, for example, a member of the governing bodies or the beneficial owner of the company, made such transactions or operations in its interests. It will be possible to avoid liability in case of assistance in identifying violations or even investigating a criminal case against such an individual. Otherwise, companies will face fines, confiscation or suspension of operations.

The government has submitted to the State Duma a bill expanding liability for participation in money laundering or property laundering. The Code of Administrative Offenses is proposed to be supplemented with an article on the responsibility of legal entities for the actions of “physicists”: representatives acting on the basis of constituent documents or a power of attorney; persons holding positions in management bodies; as well as beneficial owners. The punishment will follow if they, knowing that the property was obtained illegally, made transactions or operations with it to give the property a legitimate look.

For this, the company will face a fine of up to three times the amount of funds or the value of such property, or the suspension of the legal entity’s activities for up to 30 days with possible confiscation. The company will be able to avoid all this if it contributed to the identification of the offense, the investigation, as well as the disclosure of the crime, that is, if it contributed to the investigation of the criminal case against such an individual. Foreign companies will also be held liable, even if the offense was committed abroad, but directed against the interests of the Russian Federation.

Separately, the procedure for confiscating property obtained by criminal means is recorded, if it has already been attached to the lawfully obtained one: the part corresponding to its value is confiscated. If this is not possible, for example due to its use, then a comparable amount of money is confiscated by a court decision. If the company does not have sufficient funds for this, another item corresponding in value is subject to confiscation.

Employees of Rosfinmonitoring and the prosecutor’s office will draw up protocols on such offenses, while cases will be considered by the courts. The limitation period and the application of security measures in the form of seizure of funds and property of a legal entity is proposed to be extended – three years instead of one. Note that in the initial version of the document, developed by Rosfinmonitoring in March 2020, a tougher option was proposed – six years.

Then the department argued the need for changes by the fact that the criminal-legal impact for such acts is applied to individuals, without providing for measures against legal entities. Because of this, companies lack the motivation to comply with the law when breaking it provides economic benefits. The explanatory note notes that the introduction of liability of legal entities is due to the need to “create new effective measures to counter crimes” committed in the interests of legal entities or using their capabilities. In addition, such changes bring Russian legislation in line with the recommendation of the Financial Action Task Force on Money Laundering (FATF).

The head of the criminal practice of BMS Law Firm, Alexander Inoyadov, notes that after the amendments are adopted, “of course, the work to identify such violations and their suppression will intensify, which will create additional pressure on both businessmen and persons involved in such operations.” At the same time, adds Mr. Inoyadov, the procedures established for confiscation presuppose a mandatory court decision as a basis – “this is especially true in cases of attachment of an object to other property, which does not exclude biased criteria.”

Dmitry Gorbunov, partner of the law firm “Rustam Kurmaev and Partners,” assesses the project more critically, noting that such responsibility is “excessive and exorbitant,” the fault of a legal entity is made dependent on the fault of an individual. “This implies that everything will be based on the materials of a criminal case, which is investigated, as a rule, without the participation of a legal entity, and the confessions of the“ hero of the occasion ”as part of the investigation or the court’s verdict will predetermine the outcome of the administrative proceedings,” he says.

Evgeniya Kryuchkova

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