At the beginning of December, 2012, Russian President Vladimir Putin signed into law Federal Law No. 230-FZ “On control over consistency of expenditures of persons holding government offices and of other persons to their incomes” (hereinafter – the “Law”). The Law enhances controls over the government officials’ expenditures and is viewed as the next important step in countering corruption.
The Law defines those individuals whose expenditures should be subject to control. These include employees of state owned enterprises, state non-budgetary funds, federal, regional and municipal state authorities, members of the Board of Directors of the Central Bank of Russia, and a few others (hereinafter – the “Controlled Persons”).
Pursuant to the Law, the Controlled Persons are obliged to report on their expenditures, expenditures of their spouses and underage children related to acquisitions of immovable property, vehicles, securities, equities, as well as of the sources of income used for spending. The above obligation is applicable with regard to transactions where the amount exceeds the aggregate income of the Controlled Persons and their spouses, over a period of three years prior to the transaction.
The verifications in respect to the Controlled Person can be undertaken on the basis of the information that the Controlled Person has entered into a transaction with the amount exceeding the threshold, provided the persons are authorized to conduct such verifications. The information can come from law-enforcement and other state authorities, employees of the Central Bank of Russia, non-budgetary funds, Public Chamber, all-Russian mass media and others. It should be noted that information from unidentified sources cannot be accepted as the basis for undertaking verifications. It is also stated by the Law that the Controlled Person has to be notified of the verifications in writing.
In accordance with the Law, the verifications should include requests for information from the Controlled Person, data completeness, and a verification check and determination as to whether the expenditures of the Controlled Person are commensurate with his and his souse’s aggregate income. In turn, the Controlled Person is required to provide to the persons carrying out the verifications all necessary information regarding the transaction and the sources of the relevant income, as well as to clarify the details of the transaction and provide additional documents if needed. Failure to provide information is considered an offence and will result in the discharge of the Controlled Person.
As a result of the verifications, if it is discovered that there is an inconsistency between the Controlled Person’s expenditures and his and his spouse’s aggregate income, the verification report should be sent to the Prosecutor’s Office. In case any elements of an offense are discovered, the report will be sent to the relevant agencies. The Law provides for the procedure of confiscation of property by the government in case there is an inconsistency between the Controlled Person’s expenditures and his and his spouse’s aggregate income.
Certain amendments have been introduced into a number of other Russian legal acts to help implement this Law. For example, new amendments have been added to the Russian Criminal Code. There is liability for the deliberate evasion of payment of a penalty. In such a case the penalty is the principal punishment for a Controlled Person who failed to prove that the source of his income is lawful.
The Law comes into effect from 1 January 2013. However, it should be noted that the Law provides for the obligation to report on transactions which have taken place from 1 December 2012 forward. The proponents of the Law believe that it will strongly discourage corrupt behavior and attempts to hide assets.