For many years now, our officials, including the president, have said that capital outflow from Russia must be reduced and its return encouraged. On this issue, the Anti-Corruption Foundation fully agrees with them.
We have uncovered dozens of cases of “capital flight” to soulless Western countries. And we are not talking only about businessmen’s money, but about the assets of our officials and lawmakers (officials, incidentally, are Putin’s subordinates). For example, a State Duma deputy—who also happens to be the son of deputy speaker Zhirinovsky—owns an apartment in Dubai worth 80 million rubles; or take the Moscow health minister, who moved his family into apartments purchased in Switzerland for approximately 200 million rubles. If you like talking about how the rotten West wants to destroy us, then kindly spend your family’s millions here. And don’t say “it just turned out that way” when your son lives in London, obtains British citizenship, and runs a business on land bought from his father’s company in Russia.
Or take this very recent example: the Americans are investigating the transfer of money abroad by friends and relatives of our dear president. The “kings of state contracts” moved $6 billion out of the country at the very height of the campaign against capital flight. It is bad for our country when people make money here and spend it abroad.
Moreover, we have every reason to believe that this “fled” capital is of corrupt origin. It is not earned—it is stolen or received in the form of bribes and kickbacks. Let us recall that the officially declared income and property of many of these officials in no way matches the apartments and houses they have bought abroad. So this capital must not only be brought back, but its origins must also be investigated. To that end, we have long proposed implementing Article 20 of the UN Convention against Corruption in Russia and introducing criminal penalties for illicit enrichment.
But today we are not going to talk about how to punish those who cannot explain the origin of their wealth, but about how to reduce the “flight” of such corrupt money.
The flight of corrupt capital can be fought not only in the country where that capital is “earned,” but also in the country where it is spent. Over the past two years, various international organizations have repeatedly approached the Anti-Corruption Foundation. Their inquiries concerned the application of sanctions, details of our investigations, and requests for expert opinion in the field of combating international corruption. Among other things, we explained what, in our view, should be done in the West to influence Russian corrupt officials. As a result, the Anti-Corruption Foundation formulated several recommendations for foreign governments (the recommendations were prepared by Nikita Kulachenkov). We are confident that implementing these recommendations would significantly reduce the number of officials who spend their workdays telling citizens that the West wants to “bring Russia to its knees,” and then fly to Europe on weekends to be with their families.
The essence of these recommendations is that Europeans should systematically ask our officials and their family members about the origin of the funds used to buy homes or make bank deposits, and compare their explanations with what those officials have officially declared in Russia.
The term “officials” should include not only those in government service, but also the heads of state corporations. Note that senior managers of Russian television channels, who work around the clock to turn Russian citizens against the West, also fall into the category of officials. And as for family members, we recommend including not only minor children, but also, for example, fully grown daughters or mothers-in-law.
Ideally, the process should look like this:
A Russian citizen applies to an EU government authority or a bank, where they are asked to provide information about themselves, their family members, the origin of their funds, and their sources of income.
The staff of the government authority or bank verify the information received, and if the applicant is or was previously an official or a member of an official’s family, the income they declare is compared with what they officially reported in Russia.
Of course, it is not an easy task for an employee of a foreign government agency to determine that the person sitting in front of them is the mother-in-law of a Russian official. But the Anti-Corruption Foundation recommends—and is ready to help develop—special instructions and action algorithms such as “How to identify a Russian official” and “How to find Russian officials’ official declarations.”
If the income declared in the EU does not match what was declared in Russia, the applicant may be asked for additional explanations and information. Although such a discrepancy is already sufficient grounds to refuse to open a bank account.
Since it is generally impossible, for example, to refuse property registration in most cases, the employee of the EU government authority would pass information about the income discrepancy to law enforcement agencies in order to initiate a money-laundering investigation.
We are confident that the very existence of such procedures would significantly reduce the number of our officials who want to work in Russia while tying their own future and that of their families to the West. If an official believes that Russia should not follow the European path of development, then they have no business in the West—that is only fair.
As an extreme measure, we recommend creating a single public EU-wide register of the homes, shares, and residence permits held by foreign officials. Such a register could help Mr. Bastrykin not forget that he once had a residence permit in an EU country.
Our recommendations are not limited to checking the origin of Russian officials’ wealth. We also recommend increasing transparency in the dealings of foreign companies with Russian state corporations and government bodies.
For example, if the European company Siemens supplies a large batch of tomography scanners to Russian hospitals at state expense, then the company should disclose information about the subject of the deal, the supply price, the payment of any commissions, payment for consulting services related to the deal, the involvement of intermediaries, as well as the names of the Russian public officials responsible for the transaction. This would reduce the likelihood of Western companies bribing our officials to secure lucrative contracts, or Russian taxpayers paying triple the price for foreign equipment.
If foreign law enforcement agencies establish facts of corruption in relations between, for example, Hewlett-Packard and the Prosecutor General’s Office of the Russian Federation, then we recommend disclosing information about the Russian public officials who were involved in the corrupt acts. At present, such information is not made public, and our law enforcement agencies effectively ignore the results of their foreign colleagues’ investigations.
In May of this year, the European Parliament held special hearings on relations between Russia and the EU. One of the topics discussed was how to prevent the “export” of corruption from Russia, or “how to ensure that money obtained through corrupt practices in Russia does not end up in Europe.” Following the discussion, Members of the European Parliament prepared a directive for the European Commission, the EU’s executive body.
Ahead of these hearings, we set out our own vision of the measures that could reduce the flow of foreign corrupt income into the EU. We submitted this document to the European Parliament, as well as to other public and governmental institutions in the EU, such as PACE (the Parliamentary Assembly of the Council of Europe).
We understand that expecting all of these recommendations to be implemented immediately would be rather naive. Some of them would require changes to the laws of EU countries, while others could place European companies at a clear disadvantage. Taken together, these recommendations would reduce the volume of funds flowing into the EU. However, we believe that the changed international environment and Russia’s confrontation with the entire Western world should encourage a change in EU policy toward accepting funds of corrupt origin. It is fair to say that the EU’s current policy is quite hypocritical: “we believe there is corruption in Russia and that human rights are being violated, but we have no objection when your corrupt officials invest with us in real estate, factories, and football clubs.” For example, according to our data, the number of Russian citizens who applied for an investment visa in the United Kingdom doubled in 2014 compared with 2013. And such a visa requires an investment of at least £2 million, with the total amount of these investments in 2014 reaching no less than $700 million.
If recommendations like these are implemented in the EU, a little more money will remain in our country’s economy. That is especially important now, because sanctions have cut us off from Western capital markets. One could say that countering the flow of corrupt money from Russia to the EU benefits both sides. It promotes the “nationalization of the elites” in Russia and prevents the emergence in Europe of wealthy people who will spread their corrupt habits.
This whole situation of “capital flight” harms both the short-term and long-term interests of our country, and the Anti-Corruption Foundation will do everything it can to ensure that our recommendations are taken into account. The full text of the recommendations can be found HERE.