Firms’ licenses will be taken away, their assets will be confiscated, aliquot fines will be imposed on them

The Investigation Committee has prepared and sent to the relevant institutions the draft law on criminal liability of legal entities. The Committee representatives told Izvestia that organizations with criminal records will not be able to take part in the government orders and privatization process.

Major of Justice Georgy Smirnov, Senior Inspector of the IC, one of the authors of the document, says that the IC insists on taking away the licenses of the organizations involved in criminal activities, confiscation of their assets and imposition of fines in the multiples of the damage done. The scope of the punishments is still being discussed, but sanctions will only be applied for the deeds, which are stipulated by international conventions: financing of terrorism and extremism, legalization of criminal income, crimes against peace and security of mankind, ecology, illegal trade in arms and drugs, corruption crimes, human traffic, trade in body organs and tissues, organization of illegal migration.

The reference to the conventions is not accidental. According to G.Smirnov, this is motivated by the fact that foreign courts frequently refuse to enforce execution of Russian sentences regarding property exaction from organizations involved in a crime. They allege that Russia, having joined the conventions, which oblige it to establish legal entities’ liability for involvement in corruption and money laundering, still has not stipulated such measures in the legislation. <…>

Besides, according to the Committee’s idea, the accused companies, before the execution of the criminal punishment ordered by court, will have to gain approval for the transactions, which would directly or indirectly cause alienation or purchase of property for a price over 25% of the balance value of all assets.

G.Smirnov explains: “We decided to include, inter alia, the approval of property purchases, since if a company strives to bring out the assets, it might purchase, for example, a trade mark or something else having no actual value, and then claim that it has no funds to pay the fine with”.

The Federal Penal Execution Service (FPES) will be given the powers to approve or to forbid the transactions, in all likelihood. Advocate Igor Pastukhov of the Law Firm "YUST", however, says that the staff of the FPES lacks people, who would be able to adequately resolve such matters.

He is convinced: “But this is not required: the employees of the bailiff service have their own instruments. It would suffice for them to timely exact fines or, for example, timely sequester the debtor’s assets – and there will be simply no need to endow the FPES with a new approval function”.

The subject of criminal liability of organizations is not new to the Russian legal community. All three drafts of the Penal Code submitted to the State Duma in 1996contained provisions stipulating criminal liability for legal entities. However, said provisions were excluded from the draft law due to significant drawbacks of the wordings.

Later, in 2011, the IC presented the first draft of the law – it was different from the current one in that criminal law measures were suggested for those legal entities, which were involved in the crimes committed by individuals. Nowadays organizations are considered independent crime subjects along with the individuals. Should the current draft by the IC be adopted, it will be possible to return the bigger part of the criminal profits obtained in Russia and transferred abroad. We remind that, according to the information from the Central Bank, the flight of capital in 2012 was of 56,8 billion USD, 35,1 million USD of which were transferred by way of the so-called dubious financial operations.

For more detail see here.