Anti Corruption International Issue6

aNTICORRUPTION
INTeRNaTIONal 6
Anti-corruption practice as the norm of business life is the task we set as a company that works all over the world. Dietrich Moeller, President and CAO of Siemens, Russia and Central Asia, Senior Vice-President of Siemens AG
World Without Corruption

At the beginning of 2011 Interregional Non-Governmental Organization Committee for Fighting Corruption and the Russian Noncommercial Partnership Center for Business Ethics and Corporate Governance proposed an initiative in a form of a Program aimed at promoting the Tenth Principle of the Global Compact in 20112015 A WORLD WITHOUT CORRUPTION, which was supported by the participants of the Russian UN Global Compact Network. We would like to particularly note that this is a first initiative of the Russian Federation within the UN Global Compact, which was presented to the international community and alliance of the European Networks of the UN Global Compact. Any commercial and non-profit organization from any country interested in eliminating corruption may participate in the implementation of this Program, selecting the most comfortable format for their participation. We expect that such practical initiative of the Russian Network of UN Global Compact will draw a positive response from the members of the Global Compact worldwide, contribute to the soonest elimination of corruption not only in the individual countries, but globally, will significantly increase the UN Global Compact influence, contribute to social peace and solidarity, will have a positive impact on achieving Millennium Development Goals and give a new impulse to the sustained development of humanity. our mailing address: 123007, Russia, Moscow, 2-oy Khoroshevskiy proyezd, building 7/1 INGO "Committee for Fighting Corruption" Phone number: +7 (495) 978-64-86 E-mail: press-komitet@mail.ru
The CommiTTee for fighTing CorrupTion
When public money is stolen for private gain, it means fewer resources to build schools, hospitals, roads and water treatment facilities. When foreign aid is diverted into private bank accounts, major infrastructure projects come to a halt. Corruption enables fake or substandard medicines to be dumped on the market, and hazardous waste to be dumped in landfill sites and in oceans. The vulnerable suffer first and worst. But corruption is not some vast impersonal force. It is the result of personal decisions, most often motivated by greed. Development is not the only casualty. Corruption steals elections. It undermines the rule of law. And it can jeopardize security. Ban Ki-moon, UN General Secretary
Combating corruption the proceeds of which are deposited and used outside the national borders, is no longer any internal affair of the country, not even the subject of exclusive relationship of those countries where such senior official resides. At the very least because crime proceeds freely and legally move out of these countries and around the world. And if we do not establish an order which makes such migration extremely difficult, if not impossible, we cannot hope for any success in our fight against corruption. We should not forget that corruption is a necessary condition for the existence of terrorism, drug trafficking, violations of political, social and cultural rights, as well as damage to the environment. It is no exaggeration to say that today corruption is a major obstacle in resolving major problems of mankind. Anatoly Golubev, the Chairman of the Board of NGO Committee for Fighting Corruption, Russian UN Global Compact Network Steering Committee member
Dear Readers,
The Anticorruption International magazine, which you are holding in your hands, continues a project of the Anti-corruptionist magazine that has been published by the Inter-regional NGO The Committee for Fighting Corruption since 2008. From the very beginning we viewed Anti-corruptionist magazine as a publication providing its pages for analysis and exchange of opinions and suggestions in a field of fighting corruption. Up to now the magazine has been oriented mainly to the Russian audience. However, the corruption knows no national borders. It affects all countries, and can only be counteracted by joint efforts of the governmental and public organizations within the international community. In 2010 the Committee joined a largest global public initiative - UN Global Compact. One of the most important principles of the UN Global Compact is the 10th principle - fighting corruption. Nowadays our magazine has become an international forum for the members of the UN Global Compact as well as for other representatives of business and public circles and governmental bodies, where they can exchange anti-corruption activity experiences and express their ideas and suggestions in the above mentioned field. At present the magazine is published only in Russian and English languages, but in the future we plan to publish it in other languages as well, in order to attract a maximum number of participants possible. Anatoly Golubev, Chairman of the Board of INGO Committee for Fighting Corruption. Chief Editor of Anticorruption International magazine
6 Certificate PI # FS 77-42516 issued 01.11.2010 Founder Inter-regional non-governmental organization Committee for Fighting Corruption Publisher Noncommercial Partnership Anti-corruption International Chief Editor Anatoly Golubev Deputy Chief Editor Roman Barashev Managing Editor Michael Dvorkovich Design and Layout Andrey Kuzmin Translation Dmitriy Shtefan Photo Michael Bibichkov Printed in Viva Star press Correspondence Address: 123007, Russia, Moscow, 2-oy Khoroshevskiy proyezd, building 7/1 E-mail: press-komitet@mail.ru Phone number: +7 (495) 978-64-86 The issue is passed for printing on 07.06.2011 Circulation 5000 copies Reprinting is allowed only upon written approval of the publisher
Anti-corruption International
CONTENTS
14
20
69
4 CLEAR BUSINESS CULTURE
Interview with Dr. Dietrich Moeller, President and CAO of Siemens, Russia and Central Asia, Senior Vice-President of Siemens AG
42 JOINT FIRST AND SECOND ROUND
EVALUATION COMPLIANCE REPORT ON THE RUSSIAN FEDERATION Group of States Against Corruption (GRECO)
9 PROTECTION OF WHISTLEBLOWERS 14 BUSINESS ETHICS:
REPORTING FACTS OF CORRUPTION Interview of Anatoly Golubev, the Chairman of the Board of NGO Committee for Fighting Corruption
INTERNATIONAL EXPERIENCE
61 THE UKS FIGHT AGAINST BRIBERY 69 THE US EXPERIENCE ON FIGHTING

CORRUPTION Alexander Sukharenko
TOOLS AND MECHANISMS Matthew Murray, Chairman of the Center for Business Ethics and Corporate Governance answers the questions of Anti-corruption International
THE BRIBERY ACT 2010 COMES INTO FORCE ON 1 JULY 2011 John Hull, Marc Hansen, Dan Smith (Latham & Watkins, London), and Kseniya Elfimova (Solicitor)
20 BUSINESS AND CIVIL SOCIETY:
A COALITION AGAINST CORRUPTION Sergey Chernyak, Board member of NGO Committee for Fighting Corruption
74 LEGAL SYSTEMS OF CONFISCATION.
26 WORLD WITHOUT CORRUPTION
The Russian Federation UN Global Compact Network initiative. Program aimed at strengthening the advancement of UN Global Compact Principle 10 (anti-corruption) in 2011-2015
Regulations of the United Kingdome, USA, Germany, Austria, Switzerland, Netherlands and Japan legal systems on confiscation of funds and assets obtained as a result of crime State Duma Security Committee, State Duma Commission on Anti-corruption Legislation
37 WHISTLEBLOWING IN THE FINANCIAL
INDUSTRY: THE RIGHT MEANS TO CURB ILLICIT FLOWS FROM DEVELOPING COUNTRIES? Zora Ledergerber, Alessandra Fontana
CLEAR BUSINESS CULTURE

Interview with Dr. Dietrich Moeller, President and CAO of Siemens, Russia and Central Asia, Senior Vice-President of Siemens AG
implementation of anti-corruption standards and practices in the countries where we work. In Russia, our efforts were directed at the support of the Russian initiative to adhere to corporate ethics in the course of commercial activity on the territory of the Russian Federation which we joined from the moment of its approval on April 21, 2010. Having started practical realization of the Initiative in Russia, the participating companies thus declared that they are for honest and transparent business and are prepared to give any assistance in practical implementation of high corporate ethical standards, share their experience of anti-corruption work. And in my opinion, the fact that over 90 companies joined the initiative clearly testifies to the good prospects of the project. Another similar project was started in December, 2010 after our holding company distributed the first trench of the fund for fighting corruption under the conditions of Siemens agreement with the World Bank. This project, related to the dissemination of anti-corruption standards among Russian companies and managers, has a partner the International Business Leaders Forum (international NGO).
Since 2003, the concern Siemens AG has been a participant of UN Global Compact, whose 10th principle establishes the mandatory character of anti-corruption business conduct. UN Global Compact was joined by a number of Siemens subsidiaries in Finland, Spain, Slovenia, Argentina, Ukraine. Why did the Siemens subsidiary in Russia joined the local Agreement on adherence to corporate ethics principles in the course of commercial activity on the territory of the Russian Federation, not UN Global Compact, and is it going to participate in the Russian network of UN GC? Siemens takes part in UN Global Compact on a global level. It concerns the whole company all over the world, and us, Siemens in Russia, as well. I must say that we have fully realized all the anti-corruption standards and mechanisms developed by our global company, especially in connection with overcoming the consequences of corruption crisis in our company in 20062007. Now we are setting a wider goal. It is important for us not only to preserve and improve our own corporate anticorruption system which, by the way, is now considered exemplary all over the world, but also possibly assist in the
So we are putting great efforts to contribute to the formation of a favorable anti-corruption climate in Russia and work on it as a part of global Siemens and as an independent regional business organization. Siemens actively joined the efforts on fighting corruption in the world, including the funding of anti-corruption initiatives of the civil society institutions. How is participation in this work and its funding profitable for the business on the whole? Unified rules of the game for all market participants, transparency of the market, minimization of commercial risks, healthy competition, improvement of investment climate in the country: here are the benefits for the business and not only for it related to decreasing corruption risks. Anti-corruption practice as the norm of business life is the task we set as a company that works all over the world. Can Siemens say today, on the basis of its own experience, that it is possible to work successfully and efficiently, without using corruption schemes? Yes. We know exactly that one can work without corruption schemes in Russia. The past few years of our activity here are a direct confirmation to that. Siemens in Russia deals with a large number of projects in all the main spheres of our business industry, energy and healthcare. We set up our production facilities in the regions, develop new branches of business. Since 2006, the Compliance program (adherence to legal and ethical norms) has been realized in the Siemens AG. Today we have implemented it in our regional company, improved the system of internal control; we carry out trainings and teaching programs for the personnel. We also engage our suppliers and business partners in the Compliance program: if they cooperate with Siemens, they have to comply with Code of Conduct for Siemens Suppliers that we have in place. What methods and mechanisms of fighting corruption, used by Siemens, practically showed their high efficiency, and which did not come up to your expectations? In my opinion, one of the most efficient instruments of fighting corruption is the introduction of Compliance notion and norms into the companys corporate culture at all levels. Every employee should know exactly what and how he or she should do. In fighting corruption, an example should be given from President to an ordinary employee showing that Siemens will not participate in doubtful transactions. And the employees should be free from any pressure in this respect. They must know for sure that the tasks set to them must only be carried out in legal and no other ways. I have already mentioned that the Compliance program has been introduced and realized in the company. There is a special department for adherence to legal and ethical norms which consists of 8 persons in Russian Siemens to-
day. The sphere of Departments activity includes Russia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, as we manage Siemens business in the whole regional cluster of Russia and Central Asia. Another important aspect includes implementation of certain standards in relations with our partners and suppliers. In this year alone, we are planning to open four production facilities where Siemens products and solutions will be localized, and it means that we will enter into contractual relations with hundreds of local manufacturers and suppliers, and all of them just like our current partners will also have to sign and adhere to the rules of business conduct. I consider it an important channel of an honest business zone formation in Russia. The third important instrument is the promotion of this theme in the business community and assistance in practical realization of high corporate ethical standards. I have already told you about our participation in the Russian Initiative on adherence to corporate ethics and a joint project with the International Business Leaders Forum. And, for example, we provide consulting support to the Russian-German Chamber of Commerce, sharing our experience with its members, for example, with small companies that do not have such a department in their structure, and organize trainings in the systems of adherence to legal and ethical norms. We should say that all the steps which our company undertakes to implement the standards of an honest business conduct proved to be efficient in practice. In the future we are going to use these instruments in our activity and develop them.
Russian economy is the task which state, society and business should solve together. This is the main prerequisite for successful fighting corruption as the public evil. The concern Siemens allocated the total of USD 100 mln. to the support of anti-corruption initiatives of non-profit organizations in different countries of the world. What criteria did Siemens use to select projects for anti-corruption initiatives funding? What are the quantitative indicators of estimated efficiency of the selected projects? Among such criteria, are there any particular characteristics of the expected decrease in the level of corruption in the relevant countries? How will you practically trace the compliance of the results of these initiatives with the indicators contained in the applications of candidate organizations? Siemens acts here within the framework of the agreement with the World Bank of July 2, 2009. Our company is mainly concentrated on the projects of two categories: support of collective initiatives and training projects. 150 experts from different Siemens subdivisions took part in the project selection process. The World Bank has the right to check the use of funds and veto the choice of anticorruption groups or programs made by Siemens. When selecting projects, we pursued the goal of reaching an optimal balance by the set of tasks solved, and also distribution of funds in the world regions. The projects were mainly assessed using such criteria as the presence of a clear business plan, evaluation of the events held previously in this sphere, their relevance for the business community and for the civil society in general.
Who does Siemens see as one of the most important and efficient business allies in fighting corruption governmental authorities, business community organizations, civil society institutions, and why? Such a large-scale task requires the participation of all the parties without exception. The state should provide a legal basis for fighting corruption, and this basis should really work with due state control. The important role of the society is to form clear anti-corruption foundations, the atmosphere of absolute corruption intolerance. On the part of the business community, we need a clear position as to the fact that business is incompatible with corruption, and a clear opposition to signs of corruption or unethical behavior. Strictly speaking, this is the essence of the Russian Initiative on adherence to corporate ethics. So widening the space for clear and honest business in the
There are clear goals set for each project, like, for instance, holding different conferences, realization of training programs, conducting trainings, increasing the level of the problem awareness. The particular parameters of the expected decrease in the level of corruption in the corresponding countries were not set, but on the whole we suppose that it should be done. In each country, Siemens has its team which deals with the development of such projects and traces their results. I, for example, have become a mentor in Russia. In Russia, International Business Leaders Forum (IBLF) was selected to be a Siemens partner in the initiative. We will talk about implementing of the best international corporate practices in the sphere of adherence to legal and ethical norms, increasing the level of awareness about risks and possible real consequences of corruption for business, and also the advantages of corruption suppression in the business practice. At the same time, we are going to implement innovational management systems for local and global companies that work in Russia. We are going to hold a number of events for managers of different levels to exchange the experience of practical implementation of anti-corruption standards. We are also planning to provide the leading business and legal schools in Russia with training materials on business ethics. We also envisage supporting Russian websites and publishing materials containing latest information about international and local legislation, methods of management, and also positive foreign experience. As we know, some companies use corruption schemes to get additional profit, which is admittedly higher than the one of the more ethical competitors. Siemens undertook an obligation to fully get rid of the use of any corruption schemes. How does Siemens manage to remain a competitive company at the expense of reducing its shareholders dividends, cutting personnel expenses, diminishing expenses on the environmental protection, charity, or any other methods are used? Our last financial year was a record one by the number of new orders: we rose from 1.3 bln. Euros in 2009 financial year to 2.7 bln. Euros at the end of 2010 financial year. The business of Siemens in Russia is actively developing, we find new customers, conclude new agreements, and develop strategic partnership relations with the most important players on the Russian market. But we do not reduce the funds spent on charitable projects or environmental protection. On the contrary, these themes remain among our priorities. The success of our business is connected, first of all, with the demand for our products, solutions and services in Russia, and also the technological know-how. Our portfolio is practically ideally suitable for the demands of the country in modernization of the economy and infrastructure, in innovations and energy efficient technologies. As for our anti-corruption standards, they are gradually becoming the companys competitive advantage, as our
Russian partners and customers can be absolutely assured that if they deal with Siemens, they will avoid doubtable schemes, and thus they do not risk becoming the object of auditing and persecution on the part of Russian law enforcement agencies. What should be done to make all the companies follow the Siemens way, that is, not just undertake the obligations to adhere to anti-corruption standards of conducting business, but also strictly follow them, and also contribute to anti-corruption initiatives of the civil society institutions? This decision should be made on the level of the companys top management. In our case, the position of top executives played an important role both on the global and on the local levels regarding the questions of opposing corruption within the company. Any employee has a choice here: to adopt the culture of honest business or look for another employer. And the more companies make adherence to legal and ethical norms a part of their corporate culture, the higher is the probability of conducting business in an honest and transparent way. What would you advise the companies interested in working on the international market but fearing corruption risks? To be clear and consistent in building up their business let everybody know that corruption schemes will entail an unambiguous reaction using the principle only clear business.
PROTECTION OF WHISTLEBLOWERS REPORTING FACTS OF CORRUPTION

Interview of Anatoly Golubev, the Chairman of the Board of NGO Committee for Fighting Corruption
tion. Moreover, criminal cases are often brought for reasons unrelated to the events he reported. In such situations, without conducting an independent and professionally competent investigation, it is impossible to understand whether there is actually some sort of connection between the allegations of corruption and criminal prosecution of the whistleblower. Moreover, such a connection, if any, does not always demonstrate an attempt by a corrupt government officials to silence or discredit the whistleblower. Just as often the offender, in order to avoid punishment, would politicize the situation and act as an innocent victim of prosecution. Among tens of thousands of reports received by our organization within 5 years, such reports constitute a significant part. In a highly corrupt law enforcement and judicial system, which is not the only Russian problem, it is not
Increasing importance in the anti-corruption fight is assigned to an active role of people with specific information about corruption facts. Many of them are prepared to report the corruption crimes, and do so, but many fear the consequences of such action, fearing persecution. Dont you think that, in this context, the problem of protecting the whistleblowers comes as a priority? The issue of protection for whistleblowers who reported corruption crimes is indeed very complicated and has multiple aspects. I would like to highlight some of the most important ones from our point of view. First of all, we must be aware that in most cases a person who publicly reports corruption crime of individual officials, as a rule, becomes subject to criminal prosecu-
10
ITAR-TASS photo
always possible to ensure a fair investigation and justice at the national level. In addition, the majority of Russia's population has no appropriate education and no sufficient funds for the competent petition not only to the European Court, but even to the higher courts of our country, not to mention those cases when not everyone survives to see this justice. Rare exceptions, usually associated with major cases, only confirm this rule. The matter is complicated by the imperfection of Russian legislation, leaving unacceptably wide choices for the judges in evaluating evidence and in sentencing. As a result, each particular judge decides whether the same act will be punished by a long imprisonment term or a small fine, or even not be considered a crime. And when the allegation of corruption is addressed not to small clerks, but more high-ranking representatives of the government even at the district level, not to mention regional or federal the witness finds himself even in more complex and vulnerable situation. Corrupt officials at this level in the vast majority of cases do not keep their savings in Russia. Most of them are deposited abroad, in foreign banks. Usually, they do not have any titles to major property and assets in Russia luxury villas and cars are formally owned by relatives or some nominees. Even their watches worth hundreds of thousands of dollars turn out to be a gift from some old friends or relatives, and, of course, are not connected to their official public service. And even though these officials live in their own luxurious mansions, and spend hundreds of thousands, sometimes millions of dollars for entertainment when abroad, in Russia they pose as honest and very modest people with limited means. That is, usually, the results shown by even the most diligent audit conducted internally, based on allegations of corruption. As a result, those who speak about the corruption of officials, at best, are posed as false accusers and their actions become a subject to a criminal offense. The question arises: how efficient is the activity of state institutions in fighting corruption?
It is obvious that measures aimed at reducing corruption implemented in recent years by state institutions have no noticeable effect. And this is not only due to a reason that these measures are massively sabotaged by the state apparatus across the whole power vertical. The measures themselves are mainly of administrative and law-enforcement nature that is, the nature that falls under the competence of the government itself. But the administrative and law enforcement measures cannot eliminate corruption in order to do that we need a radical change in relations between government and society. In a democratic society, the individuals entrusted with authority always represent the interests of various social groups. And the career of such official largely depend on whether the social group was chosen correctly, and how strong is the influence of this group on public mentality of the entire society. In todays Russia, the situation is quite different the career of any official actually does not depend at all on any social groups. It is defined only by his relationships with a small number of people, also entrusted with authority. These people can be divided into two categories those deciding on his appointment and promotion, and those who can have him removed from the office. In this situation, the role of society is non-existent, and people do not participate in this process.
ITAR-TASS photo
11
ITAR-TASS photo
As a result, the authorities at all levels depend only on themselves. Interests of the population and the will of people have practically no influence on the position of each official. The authority figures also have no practical need to take into account the interests of various social groups. And if such an authority figure acts upon those interests, then he, and the relevant social group perceive this largely as nothing but his mercy. It should be admitted with regret that Russian people at the moment have no experience of political life in a well-functioning civil society, nor clearly expressed will to urgently create such a society. Individuals prepared to make free choices, that is, to bear responsibility for such choices, represent exception rather than the rule. Therefore, I think that today the people of Russia most likely are not ready to competently and responsibly decide on the hiring of officers serving their interests and getting paid for it from taxes paid by citizens. In these circumstances, the establishment of power vertical in early 2000s in Russia seems justified to some extent. However, even if the majority of people still cannot competently and responsibly assess a particular candidate for state or municipal office, they can certainly evaluate the quality of his work simply because in their everyday life they constantly face the results of this work, and, in most cases, lack thereof. And, if the population is not satisfied with these results, the population should have mechanisms to remove incompetent or dishonest official from his office. What needs to be done in order to ensure this? We must create a legally valid and practically feasible mechanism for the population to dismiss officials of all three branches of government and local governments, thus breaking up a circle of dependence of authorities exclusively on each other. And the right to initiate such a dismissal should be granted to any independent civil institutes, that is, legal entities organized by socially active citizens.
The planned mechanism would significantly reduce the corruption within government apparatus, since the corruption is inevitably related to the poor quality of work demonstrated by the authority figure. In essence, it actually replaces the work process. Therefore, the common practice of buying the place in the office will become largely meaningless, as well as vertically-integrated structures of corruption. At the same time, this will dramatically increase the protection of individuals reporting on corruption they will be protected by the civil institutions that can overcome solidarity of officials, law enforcement and security officers, parliament members and judges, and guarantee the dismissal of corrupt official by the direct will of citizens. It is clear that establishing such efficient legal tool will require significant changes to the legislation. However, this mechanism alone is not enough to significantly reduce the corruption of senior officials and, therefore, to protect those who report cases of such corruption. What, in your opinion, could be an effective mechanism? As I said, resolution to this problem is practically impossible to facilitate at the national level.
ITAR-TASS photo
12
Meanwhile, there are many countries where money laundering presents almost no difficulties, and through which those legalized funds go to the U.S. and EU financial markets. It is also bad that the national law enforcement agencies are unable, and sometimes unwilling, to conduct pretrial investigations on allegations of corruption outside their jurisdiction, and, above all, in countries where the property is effectively protected by the government. It turns out that corruption knows no borders, and the countermeasures are largely limited. Given that the corruption has been recognized by most developed countries as one of the greatest threats to both national and international development, and taking into account numerous global and local international initiatives in this area, it would be appropriate to establish a UN based specialized center or bureau, as a single international specialized body, authorized to develop common international witness protection program. The units of such international body would be authorized to conduct investigations on corruption allegations against senior officials, including verification of information about assets and funds owned by such individuals outside their respective countries, on the territory of any country. If such facts reported by the whistleblower will be confirmed, materials on the case should be handed over to the national law enforcement services of all member countries so the actions against such offender could be taken under national laws. This same body should be entitled to provide the international legal pro-
tection and immunity from prosecution to whistleblowers, who report about such crimes of corruption, for a complete period of investigation (and, if necessary for a longer period). We realize that the actions of such body may be interpreted by some political forces as interference with the internal affairs of the countries. However, we are convinced that combating corruption the proceeds of which are deposited and used outside the national borders, is no longer any internal affair of the country, not even the subject of exclusive relationship of those countries where such senior official resides. At the very least because crime proceeds freely and legally move out of these countries and around the world. And if we do not establish an order which makes such migration extremely difficult, if not impossible, we cannot hope for any success in our fight against corruption. We should not forget that corruption is a necessary condition for the existence of terrorism, drug trafficking, violations of political, social and cultural rights, as well as damage to the environment. It is no exaggeration to say that today corruption is a major obstacle in resolving major problems of mankind. It seems that the United States and Russia, as permanent members of UN Security Council, have a perfect opportunity to suggest to international community a joint initiative, for example, in the form of an international convention. Countries that refuse to join it, in our view, should be subject to the same scrutiny in terms of financial flows, as offshore zones.
13
Center For Business Ethics

and Corporate Governance
BUSINESS ETHICS: TOOLS AND MECHANISMS

Matthew Murray, Chairman of the Center for Business Ethics and Corporate Governance answers the questions of Anti-corruption International
The Center for Business Ethics and Corporate Governance has been working for more than 10 years. In one of the interviews before you rolled it out you stated that ethics in the Russian capitalism until recently played no part. What do you think has changed over the years and what ways of spreading ethics in business are most effective? The core issues facing honest business in Russia today are the same as those faced by companies in other countries. And, to say that ethics has played no part is Russias recent economic development is not fair. There are many ethical Russian companies. The challenge is complex, that is, when you consider all of its historical, cultural political and Economic dimensions. The problem in Russia as I see it is a legal environment characterized by a combination of over-regulation and under-enforcement. The gap provides the Russian authorities with the ability to selectively apply the law. It provides businesses with the temptation and opportunity to exploit grey areas in the law. The gap between over-regulation and under-enforcement thereby creates opportunities for rentseeking conduct by government officials and state capture by business. The Center for Business Ethics and Corporate Governance was founded in St. Petersburg in 2000 to fill gap created by over-regulation and under-enforcement. That is, how can a company operate ethically in this environment? How can a company benchmark ethical performance? Finally, how can a company be rewarded for ethical performance? The Centers mission statement makes clear that business should not wait for government to reform itself. That business has an incentive to change and indeed is a source of dynamic social change. Business, in short, is a change agent. Many Russian companies do indeed aspire to achieve high international standards in all aspects of its performance. Anti-corruption agenda and ethical business conduct have been identified among key drivers for a company's successful and long-term sustainable devel-
14
15
opment. Conducting business in an honest manner is one of the prerequisites for any long-term, sustainable business. One of the Centers tasks is to help out Russian companies in learning how to use anti-corruption tools, what are these tools and how one can apply them? Actually, the Center makes many tools available to businesses in Russia. It all depends on the management of a company. The Russian law prohibiting corruption is very clear and detailed. It prohibits business from making illegal payments to state officials, both directly and indirectly. Business can take many steps to comply with this law. Recently I met with a major Russian company, which has created a state-of-the-art system for detecting illegal payments to state officials as well as commercial fraud and kickbacks. This company is doing what has never been done and creating Russian best practices. The difference is that management at this company wants to solve the problem of bribery and kickbacks. Thus, President Dmitry Medvedev has made the fight against official corruption the pillar of his presidency. The Center for Business Ethics encourages all companies working in Russia to visit the website of the National AntiCorruption Council of the Russian Federation. The Center also provides regular updates on anti-corruption legislation in Russia to all members and organizations with which we work. Specifically, the Center for Business Ethics helps companies operating in Russia minimize the risk of official corruption with the following tools:
Risk-Mapping: Examine companies business processes on enterprise-wide basis to identify areas of high-risk of non-compliance with company ethics procedures and anti-corruption laws. Development of Standards and Procedures: Creation and strengthening of enterprise-wide procedures to detect and prevent risk of non-compliance with anti-corruption laws. Specialized Anti-Corruption Training: Provide customized training for senior managers, benchmarked to Russian law and/or other applicable anti-corruption laws, including US Foreign Corrupt Practices Act. Optimization of Social Investment and Charitable Giving: Design methods to implement social responsibility programs to meet the aims of companies and stakeholders, including regional governments. Establish Internal Controls to monitor transparency in the expenditure of company funds. Develop Strategies to maximize long-term effects of social investment/charity programs and enhance connection between these programs and companies business plans and long-term commercial interests How well developed is your Centers cooperation with the civil society and what is the role of NGOs in development of honest business? Since being founded in 2000, CFBE has had the privilege to work closely with a number of leading public institutions and civil society organizations to build an ethi-
16
cal business culture, institutions of good governance and respect for the law in Russia. You can find several of our strategic partners listed on our website. NGOs have a significant the potential role in the struggle to reduce corruption. Many of those willing to take responsibility for repudiating corrupt business methods are found principally in the grassroots, among Russias NGOs as well as smallto-medium size enterprises (SMEs) and NGOs. Disproportionately injured by extortion practices of officials at all levels, SMEs have begun taking initiatives and creating the tools to counter the problem. They have started forming integrity pacts together with other businesses, NGOs, officials and civil society stakeholders, For example, the Center helped form the Honest Builders Club in St.Petersburg. This Club consists of 30 local construction industry leaders, NGOs and officials, who have formed a coalition committed to fair business practices and developing a more transparent investment climate. Local know-how and tools for combating corruption can also be found in the ground-breaking research being done by NGOs in Russia. The think tank INDEM, the NGO Transparency International Russia and others have taken huge strides towards defining and quantifying the national economic costs of corruption and revealing the regional dimensions of corruption. It should also be noted that there are several concrete methods for NGOs to define, measure and monitor a companys commitment to end state capture and commit to transparent business practices. To begin, Russian public companies are legally required to report certain
activities to both shareholders and the government. To reinforce this requirement, companies can take voluntary steps. For example, they can follow the best practices for financial reporting and control set forth in the Russian Corporate Governance Code, including by reporting on the nature and extent of their compliance with the Code. This Code was written with the help of the Center and several other NGOs. Compliance with the Code leads companies to be more transparent not only to shareholders, but also the government, and NGOs representing the interests of civil society in good governance. What is the role of NGOs in fighting corruption in the US? Could you provide some examples of their effective role in that field? Numerous NGOs in the United States play the role of a watchdog of both private and public sector compliance with anti-corruption laws. Watchdogs monitor interaction between government and business for unethical conduct and procurement practices. Such associations also serve to advise legislators and regulators as well as the private sector on ethical practices. They develop seminars to inform the private sector on important issues ranging from the environment to corruption. This dialogue should aim to ensure that government administrative processes at all levels are fair, open, competitive and informed. To reduce administrative obstacles, NGOs work with Congress to establish regulatory practices that promote efficiency and transparency.
17
What mechanisms do you think are necessary to develop and improve international cooperation of NGOs that fight corruption? To enhance accountability for business practices in global markets, NGOs are starting to coordinate their role as monitors of corporate activity more closely. NGOs have a stake in the success of international businesses that operate on a legal and transparent basis and fulfill their social responsibilities. In 2003, the Center for Business Ethics worked with the US NGO Business for Social Responsibility to create the CSR Leaders Forum, an international network of intermediary organizations dedicated to corporate social responsibility. We helped support more responsible and sustainable commerce by promoting joint and collaborative learning and action about strategic issues, opportunities and challenges. Membership includes CSR/Sustainability organizations from around the world who meet in Davos, Switzerland under the auspices of the World Economic Forum on a regular basis to conduct network planning. NGOs can also join forces to demand broad reporting from companies, designed to show their corporate governance, business ethics, social responsibility, community and charity activities that have an impact on national governance. NGOs can also insist that company reporting requirements be broadened to include the global best practice of publishing what you pay. This practice refers to disclosing to shareholders and other stakeholders in responsible business conduct the amount of funds that a company might disburse in support of public projects.
NGOs are also working with business leaders to form integrity pacts that help promote transparent public procurement. Integrity pacts can eventually lead to nobribery pledges, under which companies entering a government tender and the officials responsible for choosing the winner commit to participate in the process in a transparent way. In particular, they pledge not to offer, pay, accept or seek bribes of any kind during the tender. To show their good faith, they place funds in escrow that they would relinquish if they did engage in bribery. If a business does not abide by the guidelines, the members of the integrity pact can stop doing business with or blacklist them. You take part in the US-Russian working group on countering corruption, so could you, please, tell about this groups work, who is part of it and what practical application it has in both Russia and the US? At their first meeting in April 2009 in London, President Barack Obama and Russian President Dmitry Medvedev agreed to work together to counter the transnational threat of corruption. The mutual determination of President Obama and President Medvedev to counter corruption demonstrates the global magnitude of the challenge. At their Summit in Moscow in July 2009, President Obama and President Medvedev engaged business and civil society leaders in both the United States and Russia to help deliver this common objective. In response, US and Russian civil society leaders have undertaken a dynamic new level of cooperation. They have formed a Working Group on Anti-Corruption and Institutional
18
Integrity, led by two US and two Russian organizations: the Center for Business Ethics & Corporate Governance; Transparency International Russia; Transparency International USA; and the Sunlight Foundation. As a co-chair of this US-Russia Working Group, the American Chamber of Commerce Russia has requested me to provide the membership with a summary of its principles and actions. The Working Group has now met 5 times in both countries. In June, 2010, the Working Group met in Washington, D.C. in parallel with the second Summit between presidents Obama and Medvedev. This meeting was conducted under the auspices of the US-Russia Bilateral Presidential Commission, which had convened a Civil Society to Civil Society Summit to spur C2C cooperation to address a range of problems affecting both societies. In October, 2010 the Working Group met in Moscow and invited several additional Russian organizations to participate in this C2C process, including Business Solidarity, Indem, Independent Center for Research of Methods of Fighting Corruption, and the Institute of Development of Freedom of Information. On February 17, the Working Group met in Washington, D.C., hosted by the Government Accountability Project, the leading US non-profit devoted to protection of whistleblowers and freedom of information. On March 18, we met again in Moscow to discuss how to strengthen the legal environment for whistleblowers both in Russia and global markets. As results of this C2C process, the Working Group has launched a robust action plan to increase knowhow and exchange best practices on such issues as egovernance, procurement reform and open government. This process is intended to increase the capacity of citizens, business executives and public officials to achieve higher standards of institutional integrity across borders. Our magazine is carrying out some journalistic investigation whose task is to study practical achievements in the area of fighting corruption in the Russian market involving both Russian and international companies who signed various agreements on this issue. What is the situation in this area presently in your opinion? The Center for Business Ethics & Corporate Governance is leading formation of a multi-stakeholder alliance to improve performance of the Russian energy market. By instituting best practices of governance in state procurement of power systems, the alliance will engender competition. Russia will procure more energy-efficient systems and implement higher standards of power usage. While modernizing the national energy grid, the alliance will help Russia reduce carbon emissions and combat climate change. Based on incubation with a wide number of stakeholders, the Center has developed an innovative model
to improve governance at scale in Russia. We have determined to focus our initiative on a single sector critical to Russias modernization the energy industry. Our objective is to increase voluntary compliance with anticorruption law in state procurement of power systems. Public and private sector participants will formulate and implement a new compliance standard to govern procurement. The private sector will be led by major multinational and Russian companies specializing in power generation. We act as the Russian Energy Compliance Alliance (RECA). RECA is aligned with two of Russias national priorities. First, it builds civil societys capacity to counter the systemic nature of official corruption. Russia has recently adopted the 201011 National Anti-Corruption Plan (NACP), a set of legislative and administrative initiatives intended to implement governance reform. Under RECA, the Center seeks to lead civil society and business to apply the NACP from the bottom-up and introduce a new layer of horizontal accountability. Second, RECA supports Russias objectives both to cut energy losses 40% by 2020 under its new Energy Efficiency Law and to re-focus on its global responsibility to mitigate climate change. The Center will facilitate public-private partnerships to modernize district heating, integrate smart grid components for electrical transmission and distribution and generate clean energy. According to the Russian Ministry of Energy, to meet the 40% target, the government will be required to spend a minimum of $140 billion on such projects over the next decade. Corruption has no national boundaries, so capital accumulated in criminal ways sometimes is used legally in other countries. What international mechanisms to fight that do you think are most effective? Fortunately, there are several new mechanisms available. Primarily, there are the main international conventions, including the UN Convention Against Corruption, OECD Anti-Bribery Convention, the European Criminal Convention on Corruption, and others. Notably, any country that ratifies these conventions must implement its provisions in many domestic laws. At the same time, there are several voluntary international instruments that business can participate in as a way of reaching new scale of self-regulation. These include the UN Global Compact and Partnering Against Corruption Initiative. But perhaps the most effective international mechanism is the cooperation between national law enforcement authorities of different countries to prosecute cases that occur across national boundaries. I have recently held several meetings with both US and Russian law enforcement officials to discuss their new programs to share information and coordinate investigations of parties suspected of corruption.
19
BUSINESS AND CIVIL SOCIETY A COALITION AGAINST CORRUPTION

Sergey Chernyak, Board member of NGO Committee for Fighting Corruption
Today it can be certainly said that corruption is a common problem in all countries, without exception. It has no national, ideological, religious or ethnic affiliation, and does not recognize national borders all countries without exception have some form of corruption. The difference is only in the level and extent of corruption in the authority bodies and, therefore, in the level of harm to society brought on by corruption. Already the corruption has been recognized by the international community as one of the greatest global threats. The UN Secretary General Ban Ki-moon called it a threat to the world development, democracy and stability, noting that it not only weakens the public service, but also distorts markets and hampers economic growth, leading to destructive consequences for the environment and public health. Corruption largely negates the enormous effort that humankind has made in recent decades to ensure basic human rights, harmonize labour relations and to protect the environment. Obviously, realization of these particular facts has led to a need to add an additional Tenth principle the principle of opposing all forms of corruption to Nine Universal principles of the UN Global Compact, four years after it was proclaimed. In recent years, the fight against corruption under the UN Global Compact has been implemented mainly in two areas: on the one hand, by promoting the quality of anticorruption legislation in the countries concerned through various business associations, and on the other hand, participants of the Global Compact develop and implement their own internal corporate codes of ethical business conduct. Undoubtedly, the progress in each of these areas is extremely important. However, it must be stated with regret that the actual results are far from planned there
20
21
are no signs of significant reduction of corruption at the global level. Moreover, the number of participants in the Global Compact is still very small as of today it was joined by a little more than 6,000 commercial organizations from 130 countries, representing a tiny fraction of the global business community. For example, in the U.S., there are just over 400 participants of the Global Compact, in the UK, Germany, India and China less than 250 in each country. In Russia, where the Global Compact Network has been around for more than 3 years, it was joined only by about 30 out of 6 million of operating companies. Even the fact that the Global Compact was joined by such major Russian corporations as RZhD, Lukoil, Rosneft, Rusal, Transaero, Renova, JSC Sistema and Rosvodokanal, does not compensate for this huge gap. It is understood, that, undoubtedly, only by following the Ten Universal principles proclaimed in the Global Compact, the humankind will successfully and harmoniously develop, avoiding global social, economic and natural disasters. All this makes us search for ways to enhance and speed up the promotion of universal principles into all layers and structures of society, in all countries and globally. This fully applies to the promotion of the Tenth principle, observance of which is a prerequisite for success in promoting all other Universal principles. This leads to a broader look at the problem of corruption and mechanisms being developed today aimed at overcoming it.
UN photo
There is no doubt that without the improvement of legal regulation of current socio-economic relations in each country we cannot achieve strategic success in fighting corruption. However, let us be realistic nowhere and never has corruption been defeated only by the power of state coercion, i.e., administrative and law enforcement measures, even if these measures were based on the most perfect anti-corruption legislation. Corruption, by its very nature, lies beyond the legal field. It is the opposite of law, and therefore not subject to the rule of law. Moreover, the law is actually enforced by various authority figures, public officials, including police officers, prosecutors and judges. And these authority figures are the very people who have the opportunity to commit the acts of corruption. It is as naive to expect that with the passing of a new, improved law they all will voluntarily abandon corrupt practices as it is naive to expect from frogs to voluntary drain their own swamp. But we cannot fall under delusion: corruption is not some accidental singular deviation; it is not just selfish and malicious actions of certain wrong people. It is naturally occurring form of social relations that exist precisely because of existing discretionary powers of officials that in one way or another affect the actual interests of citizens. Obviously, such social relationships have always existed everywhere. But their magnitude directly depends on how the authorities can actually affect the fulfilment of private interests, and the efficiency of the mechanism ensuring the feedback from society to authorities. When and where the authority is the most capable of influencing the private interests, and the mechanisms of civil control over the authorities and their acts (including the actual ability of society to influence actions of authorities and prevent the authority from turning into a tyranny) are undeveloped, unstable or ineffective, the corruption will inevitably grow and will reach levels threatening the very existence of such a society. In the history of mankind, we can find many examples when corruption had corroded the state and destroyed public morality to the extent that such states and societies simply disappeared from the world map. Perhaps the main factor contributing to the growing corruption is a civil infantilism and directly related legal nihilism of society. Especially when combined with poverty and low level of education of a significant part of the population. In today's world, unfortunately, we see many countries are still fighting those circumstances. In these countries, the fight against corruption as a system of social relations is often substituted by an imitation a sacrifice to the public of some corrupt official of a medium level. Such a downgrade of complex and multifaceted social problem to the deviant activities of individuals only contributes to a further spread of corruption, because it does not affect either its causes or mechanisms, and the place of eliminated corrupt officials will be taken by new ones, just like three new heads growing back in place of each severed head of the mythological Learnean Hydra.
22
Once upon a time, in order to downplay the degree of heat generated during public upheaval, the angry crowd was given some senior government officials appointed as a scapegoat in a particular case. By tearing the victim to shreds and pacifying themselves on a random symbol of the hated authority, the crowd would calm for a while until the next riot, just as senseless and ruthless. And everything would follow the same course. But strategies that worked in the medieval societies do not work now days in a time of mass media and Internet. Today, such substitution of systematic fight with corruption by a public slaughter (in the form of criminal prosecution, for example) of selected corrupt officials only destroys the civil society, leads to increasing social tensions and contributes to the spread of the most dangerous forms of extremism in the public mentality. Ultimately, this may result in a social catastrophe of a national scale, at the least. If, however, we will acknowledge that corruption is not a deviation, but quite natural system of social relations ensuring satisfaction of the interests of real people living in conditions of a certain socio-economic and political system, we will also have to agree with a number of inevitable conclusion from this thesis. First, we must realize that corruption, just like all other forms of social relations, occurs and exists not because of the ill will of some individuals, but as a result of objective laws of social development, and, therefore, it cannot be eliminated or even significantly reduced forcefully, by methods like state coercion for example, by simply adjusting the legislation. Moreover, in principle, no law is capable to describe all possible incidents and to give an adequate answer to all and every challenge we come across in real life. There are situations when following the spirit of the law demands from the official to violate its letter. Based on purely formal signs such violations should also be classified as corruption, despite the fact that no material benefit is received by the offender. However, any healthy society perceives such actions by the authorities with approval. This particular form of corruption acts as a lubricant that prevents wedging of social mechanisms and their turning against individual until the moment when overdue changes will be made to relevant regulations. Second, we must accept that corruption level can be reduced and gradually lowered to the level of such lubricant by gradually eliminating those specifics of the socio-economic and political systems which are the main sources of corruption. In many countries such specifics include the lack of accountability of officials to the civil society, combined with excessive state intervention in various aspects of populations private lives. This problem could be resolved by decisive actions of the population, if a large part of them would not have been characterized by civil infantilism and legal nihilism. This feature of the public mentality of the population in such countries does not allow while fighting against corruption to lean on the mechanisms of democracy that have proven effective in other historical and
cultural conditions. In such countries, a critical mass of people needs to form a civil legal consciousness, and this, as a rule, takes a long time to happen. Third, we have to realize that corruption, like any other social relationships, will not disappear by itself, but can and should be pushed out and replaced by other social relationships those that are not contrary to fundamental cultural values of the society and, thus, contribute to the satisfaction of private interests of people without defiling them and holding back positive socio-economic development. For the international community this implies the need for intensive search for these positive forms of social relations that already exist in each country (even though in rudimentary forms), and rendering all possible assistance for their development and distribution primarily through informing the population of these countries, promoting those forms of relations and creating active public support for the participants of such relations. Certainly, the leading role in implementing this difficult task should be assigned to the world business community. The business community is precisely the social group that suffers from corruption more than any other, by the nature of its activities. The corruption not only constrains the growth of income, but also makes a business depend on the mercy of public officials, undermining its foundation the freedom of individual entrepreneurial activity; this in turn leads to disabled healthy competition and lack of sustainable development. The general strategic interest of the business is, of course, to reduce corruption to the above-mentioned level of lubricant. However, historical experience shows that the business community single-handedly, even with its considerable lobbying capabilities, cannot ensure a radical reduction of corruption level. The business community is incapable of this largely because any direct socio-political activity (and the replacement of one form of public relations by the other requires activity of a socio-political nature) means for an employer a distraction from its core social mission economic development. Such distraction is always a desperate measure for the entrepreneur and is possible only in exceptional circumstances. At the beginning of the First World War in Russia there was a song: Leave your venture get ready to march. It is a pity when successful businessmen have to leave their venture to fight corruption. And the efficiency of their efforts in a non-market sector, without key business motivation profit is often not too high. It is simply not their specialization. So, who can be a reliable strategic ally of the business in fight against corruption? What are the social forces the business should form the coalition with in order to achieve the desired objectives and, at the same time, continue to effectively perform its primary function in the society? Due to a number of historical and socio-psychological reasons, today not the state institute, nor the political parties, nor the fourth power, i.e. the mass media do not have sufficient domestic motives to enter into a stable and effective anti-corruption alliance with the business.
23
In particular, this applies precisely to countries with high level of corruption. It seems that the only independent force with such motivation is a voluntary associations of socially responsible and active individuals, more precisely, those individuals that recognize the fundamental impossibility of eliminating the corruption solely by force those, who are deeply interested in eliminating corruption, but realize that simple replacement of corrupt officials has practically no effect on corruption level and social mechanisms even if it was possible to identify and punish each corrupted official personally. These people are well aware of the common interests of the population and businesses in the area of combating corruption. They realize that corruption money paid by any particular company would inevitably extend to the entire system of national economy, distort the pricing formulas on the market, distort the market itself, and, as a result, inflict a direct damage to any final consumer the individual, including absolute majority of corrupt officials themselves when they leave their offices at the end of the working shift. However, today such clusters of socially responsible entities, even by combining their efforts, acting on their own, are not able to ensure replacement of corrupt public relations by other kind of relations, which contribute to socio-economic development. They alone cannot ensure a positive change of morals in that part of population which had grown accustomed to generally acceptable and therefore ethically acceptable way to solve their private problems by corruption methods. Certainly, these institutions of civil society can have tremendous energy, high morale, moral authority just the thing sometimes the business community is lacking to counter corruption. They often have robust intangible resources, including intellectual, but, for obvious reasons, they are always extremely limited in material resources just what the business community has. Together, these two forces gain a full arsenal of sufficient means for a fundamental breakthrough in the war against corruption. These and some other reasons allow us to consider an anti-corruption alliance of business and civil society institutions not only necessary but also mutually beneficial. Its actual creation is constrained so far only by a lack of communication and a natural concern of businessmen about the effectiveness of their investments. However, establishing of such coalition is historically inevitable, and the sooner it is established, the more chances we have at substantially reducing the level of corruption at both national and global level without any social catastrophes and other great turmoil. At the same time, it must be taken into account that the business community consists of pragmatic, rational people accustomed to balance the costs with particular results. Unless the top managers of the respective companies will see a coherent and integral strategy of proposed coalition, and will be able to verify its feasibility, they will in every way evade the real action, instead offering vogue and not specifically binding declarations of intent.
A strategic program necessary for the deployment of coalition must contain at least general common activities ensuring transfer of the fight against corruption as a form of social relations into practice. And the set of measures under the program for each particular area should not only be attractive to business in the long term (in particular, ensuring the social legitimacy of business that the business desperately needs in those countries where corruption is at its highest), but contribute to daily neutralization of corruption pressure. Such program should be flexible enough to accommodate within its framework any local projects which each participant of the coalition could individually or in partnership with others develop and implement according to their interests and abilities. Based upon these basic provisions of the Interregional Non-Government Organization Committee for Fighting Corruption (Moscow, Russia) in collaboration with Nonprofit Partnership Centre for Business Ethics and Corporate Governance (St. Petersburg, Russia) we developed a Program to promote Tenth Principle of the Global Compact in 20112015's, called World without Corruption. This program was supported by all Russian participants of the Global Compact Network. During the UNGC Working Group on Anti-corruption meeting in Copenhagen, the Program World without Corruption was introduced to the UNGC leaders. This program is the first independent initiative of the Russian Global Compact Network for the time being. First of all, it should be emphasized that participation in positive activities under this Program does not require joining the Global Compact. Any commercial and non-profit organization from any country interested in reducing corruption may participate in implementation of this Program, choosing the comfortable format for their participation. The program offers four major interrelated and complementary vectors of activity to eliminate corruption as a system of social relations. The first of these vectors involves a complex of measures aimed at promoting and distributing within the business community the most effective individual anti-corruption practices. To date, most large companies develop and implement internal corporate policies to ensure the highest ethical standards of business conduct, providing, namely, the special anti-corruption trainings and supervision of personnel, elimination of cooperation with business partners involved in corrupt practices, and the like. PACI Principles and other instructions for development and implementation of relevant activities became widely known. However, these instructions tend to be fairly general, but the devil is known to be in the details. Not all companies, especially medium-sized or small, can engage highly qualified experts in compliance that can properly take into account the specifics of the market segment in which the company operates or plans to work, and cultural and other particulars of the social and cultural environment when developing
24
and formalizing the internal corporate regulations. And if the company decides to develop those regulations without any external help, they will face a lack of information about successful and unsuccessful experience of other market players. Despite a series of declarations of intent to cooperate and share experiences of corporate anti-corruption policies, unfortunately we cannot say that the exchange of good practices, even among the participants of the Global Compact has been established (among other reasons, because of language barriers and lack of sustained effective communications). Also, there is virtually no analytical information enabling to compare the efficiency of such internal policies and to identify its efficient and non-efficient elements that has failed in certain conditions. As a result, many companies are wasting their resources by inventing sometimes a bicycle, and sometimes a perpetum mobile. The objective of the set of measures in the first vector of the Program World without Corruption is to provide maximum practical assistance to all interested companies to promote individual internal corporate anti-corruption policy, which would be effective for each of them. The second vector of the Program is focused on the gradual replacement of the neutral and positive perception of corruption in the public mentality, which is characteristic of countries where its level is particularly high, and on stimulating informed and active opposition to this type of public relations and promotion of all forms of legitimate collective action to reduce corruption. Relevant sections and subsections of the Program include a set of measures on social and legal awareness and education of the population in such countries, as well as measures directly contributing to forming in a public mentality of a more adequate understanding of entrepreneurship as a positive and socially responsible power, a natural ally of ordinary people in the fight against corruption. Under the same vector, the Program suggests some measures for such countries to ensure a transition from the traditional passive individualism to active civil solidarity in the destruction of corruption mechanisms. The third vector of the Program aims at building confidence and direct cooperation between business and society in fighting corruption.
Implementation of the set of measures provided by this part of the Program will help to eliminate undue prejudice and other negative stereotypes of the population (especially of its socially infantile part) toward the business community, and promote awareness of the positive role of business in social development and, thus, ensure rapid social legitimization of entrepreneurship. Within this framework we specified measures of business public support of the activities of social institutions, experts and other professional groups and government agencies aimed at reducing corruption by adjusting the national and local legislation. The last fourth vector of the Program includes a system of measures to engage other participants, in the first place, the media and journalistic community, academic circles, culture and art, in active fight against corruption (in particular, by forming the required motivation). This vector also plans for development and implementation of mechanisms for addressing socio-cultural characteristics of the population in various countries and regions, when developing anti-corruption strategy at the national and international level. There are also plans to develop mechanisms and criteria for the Program members and those organizations that are yet considering joining it, to estimate the expected practical effectiveness of their costs and efforts. As part of activities within this vector of the Programs, an important place is assigned to implementation of the various forms of public encouragement of individuals and organizations (including companies and their leaders, journalists and the media, scholars and academic institutions) whose practical activities most contributed to fighting corruption. The program World without Corruption, as already noted was first presented in Copenhagen in mid-May this year. However, as it was demonstrated y the initial response, it has already aroused great interest from a number of companies participants of the Global Compact from different countries and some national networks of the Global Compact. Some non-member companies had also expressed their interest in participating in the Program. Our NGO Committee for Fighting Corruption is prepared to provide free assistance to organizations (both commercial and non-profit) willing to develop their own anti-corruption projects both within the framework of World without Corruption Program and also outside such a framework, and, subsequently, to become a partner in the implementation of the developed projects on the stipulation that these projects meet the goals of the Program and commit to the spirit of the program. Of course, the Program World without Corruption that we have developed together with the Centre for Business Ethics and Corporate Governance is not a sacred writing, and we are open to discuss any proposals for its refinement, updating and development that do not contradict to the above described fundamental approach.
25
WORLD WITHOUT CORRUPTION

PROGRAMME
STRENGTHENING THE ADVANCEMENT OF GLOBAL COMPACT PRINCIPLE 10 (FIGHTING CORRUPTION) IN 2011-2015 GLOBAL COMPACT NETWORK INITIATIVE IN THE RUSSIAN FEDERATION
26
WORLD WITHOUT CORRUPTION PROGRAMME AIMED AT STRENGHTENING THE ADVANCEMENT OF GLOBAL COMPACT PRINCIPLE 10 IN 2011-2015
PROGRAMME AIMED AT STRENGTHENING THE ADVANCEMENT OF GLOBAL COMPACT PRINCIPLE 10 IN 2011 2015
UN GLOBAL COMPACT NETWORK INITIATIVE IN THE RUSSIAN FEDERATION:
WORLD WITHOUT CORRUPTION
Global compact network in the Russian Federation by putting forward the present initiative offers to all members of the Global compact, national networks of the Global compact, their associations and the world-wide network of UN Global compact in general to join in, approve the submitted programme aimed at stepping up the advancement of Global compact principle 10 in 2011 2015 World without corruption and participate in its actual realization in line with common interests, and as a token of its irrevocable commitment to Global compact Universal principles, genuine endeavour to ensure sustainable development of mankind and achievement of development objectives of the millennium.
The programme designed to ramp up Global compact principle 10 advancement in 2011 2015 World without corruption was hammered out by Interregional non-governmental organization Committee for fighting corruption (Moscow, Russia) coordinator of Global compact network principle 10 in the Russian Federation as well as by the Russian noncommercial partnership Centre for business ethics and corporate governance. The programme related activity was headed by Anatoly Golubev, Chairman of the Board of Interregional non-governmental organization Committee for fighting corruption, the UNGCRussia Steering Committee member.
Doc. #06-01/UNGC-2011 Committee for fighting corruption +7 495 933-76-07, +7 495 978-64-86 antikorupsia@mail.ru A.Golubev, S.Chernyak
13/05/2011
27
CONTENTS
1. RATIONALE ........................................................................................ 2. OBJECTIVES ....................................................................................... 3. MAIN AREAS OF ACTIVITY ................................................................
3.1. Dissemination and promotion of effective practices to counter corruption ................................................................................................ 3.2. Shaping of public intolerance for corruption throughout the globe and collective action advocacy for its reduction ...................... 3.3. Strengthening of collaboration and trust between business and society in the sphere of fighting corruption ................................. 3.4. Consolidation of Global compact local networks, civil society institutions, professional entities and mass media interaction in pursuit for reducing corruption in certain countries and worldwide .........................................................................................
4. EXPECTED RESULTS ............................................................. .........
13/05/2011
28
1.
RATIONALE
The UN Global compact sets as its primary objective to ensure and enhance business social legitimacy. At present over 6000 companies and other entities in more than 130 countries around the globe have become participants of the Global compact. By joining the Global compact, an organization and its leader in person announce its commitment to 10 universal principles and express their confidence that the business practice based on these principles promotes more stability, justice and representativeness of global markets and contributes to formation of prosperous and successful societies. Abiding by the Tenth principle of the Global compact addressing all forms of corruption is to a great extent a preliminary condition paving the way for a successful following of universal principles in the realm of human rights, labour relations and environmental protection. Today corruption is regarded by the international community as one of the biggest obstacles to reaching of the millennium development objectives. A threat to development, democracy and stability in the world as was characterized by UN General Secretary Mr. Ban Ki-moon, stressing that not only does it undermine public state services but also distorts markets, impedes economic growth, entails detrimental consequences for environment and human health. To effectively counter corruption each participating entity of the Global compact should first of all entirely avoid any forms of bribery, develop and implement efficient in-house policy based on the high ethical standards of business conduct. Now within the framework of global initiatives there have been presented Partnership against corruption initiative (PACI) principles and other strategic documents, giving overall guidance to companies on how to work out and put into practice related measures. Introduction of these measures is the first required individual step of Global compact participating organization on the way to overcome corruption; and the paramount goal of both national networks and the entire international Global compact network is to offer practical assistance to such efforts of the participating organizations. The strategic interests of business in the area of corruption counterwork coincide with community targets. Therefore, intensified cooperation of business with civil society institutions, mass media, local communities and other social groups in order to jointly stifle corruption plays an ever more important role. An open and active counteraction against corruption in close partnership with civil society institutions, spreading positive examples of such counteraction to population in various countries through all types of mass media reaffirms social responsibility and legitimacy of business, gives more credit to business community in the eyes of citizens and builds platform for sustainable development. Such active engagement and input on the part of business community are utterly important and should be supported by political forces and non-governmental organizations. It is essential that such challenges care tackled within the framework of the Global compact said the
13/05/2011
29
UN General Secretary Mr. Ban Ki-moon. Thus, one of the key issues of the UN Global compact network is to foster creation of a stable business communitys and civil society institutions coalition against corruption, coordination of efforts as well as help to disseminate as widely as possible the information (on a national and international scale) about success of such collaboration primarily with relation to Global contact participating organizations in different countries. The danger of corruption, specifically the lack of sufficient legal education and poverty of the significant part of mankind consists also of its corrupt impact on public morale. Assistance in anti-corruption legal education of heads of small and medium size businesses, comprising the bulk of business community, distribution of knowledge on basic issues of how to eliminate corruption, anti-corruption conduct advocacy as a chief factor of sustainable development all this is a high duty of each company that joined the Global compact and thus admitted its social responsibility. National and International networks of UN Global compact are called for to encourage individual and collective efforts of its participants in the accomplishment of given initiatives, promote these initiatives on the regional, national and international levels and help support these initiatives by organizational, informational and other resources being at disposal of the participating organizations of the UNGC network. Corruption knows no national boundaries and now poses a global challenge that affects each country to a varying degree. Therefore, its elimination is possible through globally concerted efforts alone by national and transnational business communities and civil society institutions both national and international. Therefore, it is of great importance not only to establish continuous international information exchange about initiatives and best practices, but also generation and coordinated implementation of effective initiatives by the national and other local UNGC networks aimed at opposing corruption and active support for the initiatives by Global compact Office. Within the framework of these initiatives a Programme is offered aimed at stepping up of The tenth Global compact principle advancement in 2011-2015 World without corruption.
13/05/2011
30
2.
OBJECTIVES
The Programmes objectives are to broaden and promote tangible activity aimed at advancement of Tenth principle of Global compact meant primarily for: sharing best practices of anti-corruption conduct in business community that factor in national and industrial specificity, assistance in shaping of public intolerance for corruption and promotion of practical steps to reduce this evil; business social legitimacy improvement, assistance in forming of public perception of business community as socially responsible, drastic and dynamic global force aimed at sustainable development of mankind and committed to high ethical standards, consolidation of cooperation and trust between business and society in various countries and on a global scale; stronger interaction and continuous cooperation among the UNGC networks and participating organizations, establishment of effective business partnerships with public services, civil society institutions, mass media, academia and other organizations in order to reduce corruption in certain countries and globally to reach main objectives of sustainable development, including millennium development goals; better interaction between the Global compact national networks by coming up with new strategic and tangible initiatives and supporting joint actions to promote and implement them, raising the attractiveness to participate in UN Global compact for companies active in national and global markets as well as for non-profit and academic entities, broadening of UN Global compact network.
13/05/2011
31
3.
MAIN AREAS OF ACTIVITY

3.1. Dissemination and promotion of effective practices to counter corruption
3.1.1. Management and provision of international support and encouraging the Global compact network participants that develop and introduce up-to-date corporate code of conduct, effective internal controls: fostering of various forms of partnerships between UN Global compact network participants and national and global non-profit and academic organizations that develop and carry out projects aimed at strengthening of legal and ethical standards in corporate practices and reducing official corruption; assist to exchange of best cases in the development and application of anti-corruption practices among UN Global compact network participants and companies participating in other anti-corruption initiatives; assistance in preparation and translation into worlds languages, publication and distribution of books, brochures, video materials and other informative and campaign materials containing description of the most successful internal company practices developed to combat corruption and various manuals that help develop and adapt anti-corruption mechanisms with respect to companies national and industry aspects and corporate culture differences etc.
3.2. Shaping of public intolerance for corruption throughout the globe and collective action advocacy for its reduction
3.2.1. Assistance in collection, systematization and translation into various languages, publication and spreading the information in media about the UNGC network participants successful initiatives in the sphere of corruption counterwork, showcasing practical capability to continuously tackling this global social challenge. Assisting all forms of social advertising of anti-corruption conduct (with respect to national, cultural, religious, social and other differences of the target audience), demonstrating not only corruptions malignancy but also a real possibility to overcome it. Contribution to raising the awareness of the causes and conditions for corruption origins and assistance for legal education of the world population including the application of legitimate ways to fight corruption. To this end actively support and encourage development, distribution and implementation of specialized educational programmes for various ages,
3.2.2.
3.2.3.
13/05/2011
32
professions, national and cultural, religious and other social groups, publication of training and manuals in different languages. 3.2.4. Supporting manifestations of the global solidarity with individuals who justifiably publicly exposed corruption, render international support to these people and if appropriate, give them legal protection against unjust prosecution. Support of voluntary consumer refusal to use companies products and services that do not seek to abandon corruption ways of doing business. Assistance to motivate government and local authorities to provide their support to positive civic initiatives to oppose corruption in line with national legislation requirements.
3.2.5. 3.2.6.
3.3. Strengthening of collaboration and trust between business and society in the sphere of fighting corruption
3.3.1. 3.3.2. Assistance in the mankinds awareness of business and civil society strategic interests unity in overcoming corruption. Assistance to form a practice of social influence on companies unwilling to cease the application of corrupt ways of business conduct up to the business community refusal to deal with such companies. Encouragement of business community and separate companies involvement in funding of civic initiatives and projects aimed at countering and reducing of corruption levels in different countries. Assistance for public entities, civil society institutions, expert and other professional communities activity to reduce causes of corruption for local and national legislation including business regulation field. Assistance for initiatives of business community, non-profit organizations both national and international to motivate companies engaged in respective markets to adhere to UN Global compact universal principles, including the Tenth principle.
3.3.3.
3.3.4.
3.3.5.
3.4. Consolidation of Global compact local networks, civil society institutions, professional entities and mass media interaction in pursuit for reducing corruption in certain countries and worldwide
3.4.1. Joint arrangement and launching with Offices of Global compact in other countries conferences, workshops, symposia, working meetings etc. so as to render support, coordination and implementation of various initiatives and projects related to the development and performance of unified strategy on implementation of Global compact principle 10 in all systems and fabric of society.
13/05/2011
33
3.4.2.
Support for the establishment on the basis of specialized periodicals devoted to fighting corruption issues (both national and global) working forums for experience sharing, discussion of different actions, practices and initiatives in the sphere of corruption elimination in different countries as well as on the global scale, development of coordinated policy to diminish corruption worldwide by Global compact participants and UNGC partner organizations, participants of other anti-corruption treaties, national and global non-profit entities as well as state authorities. In this respect in particular support for gaining broader audience for specialized international publications, their distribution in different countries in all UN official languages as well as languages of the European Union. Assistance with creation and distribution of electronic versions of specialized periodical publications on matters related to fighting corruption in all UN official languages and languages of the European Union as well in the freely accessible segment of Internet.
3.4.3.
Promotion of national and international tailor-made television programmes devoted to countering corruption, support of initiatives of national and global media companies on free-of-charge placement of video materials as social ads as well as their placement in the public accessible free segment of the Internet. Aid in studying and considering the national and international public opinion while developing strategy to combat corruption of on such pressing subjects as: formation of awareness, strong attitude to any kind of corrupt practice among population in different countries; mass media influence on legal culture of population around the globe and understanding the importance and attractiveness of Global compact universal principles, in particular the Tenth principle; factors determining negative stereotypes about impossibility and uselessness to fight corruption and resources to overcome these stereotypes with representatives of various social groups of population.
3.4.4.
3.4.5.
Assistance for preliminary assessment (sociological expertise) of scheduled activities concerning information and organizing campaign within various initiatives of Global compact participants and evaluation of effectiveness of measures to stimulate interest among target groups of some countries population in relation to Global compact Universal principles and the Tenth principle in particular. Assistance for raising the awareness and educating population not only on signs of corruption and punishment of individuals for it, but also about positive activities of business circles, civil society institutions, state
3.4.6.
13/05/2011
34
authorities aimed at reducing corruption and examples of successful opposition to this evil among global journalist community, printed and electronic media. Support for creation of regular headlines and information blocks in the printed media dedicated to fighting corruption, creation of topic-related TV and radio broadcasts. 3.4.7. Assistance with the arrangement, conduct and broad coverage of national and international contests among journalists and other mass media employees, whose publications and materials deal with fighting corruption. Encourage companies that give financial support to award funds for such contests. Assistance with the arrangement, conduct and broad coverage of national and international research works contests, dedicated to various aspects of corruption fight economic, social, psychological, legal, political science etc. Encouragement for companies that give financial support to award funds for such contests. Assistance with the arrangement, conduct and broad coverage of national and international contests Business against corruption in order to encourage companies that contributed most to promotion of Global compact Tenth principle.
3.4.8.
3.4.9.
13/05/2011
35
4.
EXPECTED RESULTS
The Programmes realization will contribute to reaching the following joint objectives of the organizations that joined the Global compact and announced their unconditional support for all ten Universal principles: Stepping up the individual and collective practical activity of Global compact participants aimed at counteraction of any forms of corruption. Stepping up Global compact participants collaboration, higher level of consolidation of their efforts to reduce corruption in specific countries and worldwide. The growth of active public support for business community, civil society institutions and socially active citizens endeavours to curb corruption. Higher quality and effectiveness in the development and execution of national programmes to reduce corruption in the world on the basis of in-depth and comprehensive study of international experience and its adaptation to specific conditions of these countries. Better mutual understanding and intensification of mutually beneficial international business cooperation underpinned by overall commitment to Global compact ten Universal principles, elimination of negative stereotypes impeding effective international business cooperation. Raising the Global compact authority as a powerful and attractive international initiative, significant widening of its participants and partner organizations that declare their adherence to Universal principles and bare witness of this adherence in a day-to-day practical work to promote the principles in all systems and structures of world community. Raising social legitimacy of business on the national and global scale, consolidation of lasting social peace and partnership, which are the required pre-conditions for sustainable development of mankind, in particular with regard to reaching development objectives of the millennium.
13/05/2011
36
WHISTLEBLOWING IN THE FINANCIAL INDUSTRY: THE RIGHT MEANS TO CURB ILLICIT FLOWS FROM DEVELOPING COUNTRIES?
Zora Ledergerber, (Integrity Line), Alessandra Fontana (CMI U4)
Information provided by insiders can contribute to the goal of reducing illicit capital flight from developing countries. It helps address one of the most difficult aspects in investigating such flows (the secrecy of the banking industry) and makes accepting illicit money a riskier endeavor for banks.
At a time when the issue of whistleblowers in the financial industry has gained international attention, this brief aims to evaluate whether information provided by insiders of the banking sector may contribute to the overall goal of reducing illicit capital flight from
INTRODUCTION
37
developing countries. It has been established that illicit capital flight out of the developing world has a devastating effect on poor countries. Such flows hinder a countrys sustainable development, negatively affect the stability and credibility of a states domestic financial system and institutions, and undermine international efforts to eliminate poverty. Measures addressing illicit capital flight have focused primarily on anti-money laundering, in particular on the identification of politically exposed persons (PEPs) and the reporting of suspicious transactions involving them. However, these measures have been criticized for not achieving a large reduction in the volume of illicit flows.
ITAR-TASS photo
By asking banks to identify their customers and to file suspicious activity reports (SAR) to relevant authorities when there is suspicion of dirty money, anti-money laundering laws are already asking banks to maintain systems of institutionalized whistleblowing. In the following examples, financial institutions both in rich and developing countries are already required to report these transactions to financial intelligence units: A bank employee learns that one of his clients a company based in a developing country moved money from the companys account with the local bank to another account with a foreign bank in a lower tax jurisdiction. The bank employee realizes that money was moved by paying for invoices for goods that were not calculated at market price, and that the inflated invoices must have been forged. A city mayor in a developing country receives USD 1 million in cash for securing a large construction contract for a foreign company. The foreign company establishes a trust in which the mayors children are designated as beneficiaries. A lawyer acts as a trustee and opens a bank account into which the foreign company transfers USD 1 million.
CURRENT REqUIREMENTS IN THE FINANCIAL INDUSTRY
A bank employee becomes aware of the connection between the contract and the money transfer. In a developing country, a drug trafficking organization generates millions of USD in cash every year and moves these assets to a secrecy jurisdiction. An employee of a bank located in this jurisdiction, receiving the money, learns that these assets do not come from legal business activities.
Nonetheless, though banks in all countries are required to report the above transactions, several challenges arise in practice. For one, SAR requirements create some tension between different departments of a financial institution: the compliance unit (responsible for ensuring due diligence and reporting suspicious activity) and the dealmakers in the same bank (who want to complete a profitable business transaction). Whenever compliance staff want to report a suspicious transaction, the success of the dealmaker is in jeopardy. Further conflicts may arise between what the countrys legislation has to say about the limits between employees obligations and loyalty to employers and about his/her duty to report irregularities to an authority external to the company. Finally, labour regulations may also differ between someone who is an employee to those who work as management staff whose jobs are sometimes protected by different labour law provisions. To address some of these issues, extra support to compliance units within banks and to the employees making suspicious activity reports should be provided. For compliance units, such support requires more than proper financial and human resources: it needs backing from the board and management in order for them to do their job properly. Reporting directly to the board and not to the management is also one of the necessary requirements to strengthen these units. For the employees of such institutions, support must come through the right to submit their suspicions without fear of retaliation both internally (for example to a Compliance Officer) and to external authorities. In some cases the circle of those in the know is small and it is easy to deduce who the whistleblower was. This is why
CHALLENGES TO CURRENT REqUIREMENTS
ADDRESSING THE CHALLENGES
ITAR-TASS photo
38
ITAR-TASS photo
it is important that employees can report anonymously, also externally. Appropriate technical tools can help ensure anonymity at least technically although that alone is not sufficient to protect the informant if other elements of protection systems are not functioning. Existing international SAR regulation and compliance requirements for banks are probably not enough in many circumstances and strong regulatory oversight is required to ensure that compliance work is properly implemented.
The United Nations Convention against Corruption (UNCAC) is a good starting point to support whistleblower protection legislation. Articles 6, 13 and 39 recommend ensuring the existence of an independent body (or bodies) that prevent corruption, which are known to the public and have the capacity to receive anonymous reports. It further recommends, in Article 33, enacting appropriate legislation to provide protection for persons reporting those incidents. Even though the UNCAC targets corruption broadly and not specifically in relation to the banking sector, the mechanisms envisaged in the Convention, if effectively implemented, would benefit informants in that sector. The following measures should be considered as enabling steps to implement the principles expressed in UNCAC and promote a culture where bona fide whistleblowers in the financial industry and in other sectors are safely enabled to come forward with concerns. The first two measures are relevant across sectors while the third speaks directly to the financial industry.
WHAT CAN BE DONE TO PROMOTE WHISTLEBLOWING IN THE FINANCIAL INDUSTRY BOTH IN RICH AND DEVELOPING COUNTRIES?
tive transfers, lack of promotion, promotion delay, harassment and other detriments for employees in the public and private sector. The law should provide for a full range of remedies with a focus on the recovery of losses. The informant should have the right to ask for compensation for injury and moral and material damage. This should include compensation for any pain and suffering incurred, compensation for loss of past, present and future earnings and status, mediation and attorney fees. The law shall also consider establishing a fund for compensation in cases of respondent insolvency. Given the existing problems with implementation of laws in developing countries coupled with the fact that vast proportions of funds embezzled and misappropriated in developing countries end up in banks located in the rich world, these laws are particularly necessary in developed countries where whistleblowing is likely to take place. However, this should not work as a disincentive for developing countries to pass such laws. In the case where there is a lack of engagement from the public administration on this issue, actors outside the government can also have an influence on a legislative process. In Lebanon, for example, civil society organizations and the private sector have taken the lead in promoting debates to influence good governance and transparency legislation. With the support of the international donor community, the National Network for the Right of Access to Information, a multi-sectoral group formed in 2008, drafted an excellent whistleblower protection law. The draft law has been submitted to Parliament but not yet been voted upon. In addition, legislation stipulating financial incentives for whistleblowing might encourage those who have in-
An effective legislative framework should protect the whistleblower against any disadvantages suffered as a result of coming forward with information about misdeeds. This includes dismissal, sanctions, salary reduction, puni-
PROMOTE THE ENACTMENT OF LEGISLATION
ITAR-TASS photo
39
formation about wrongdoing to come forward, to some extent reproducing in the opposite direction the incentives found in the financial industry (which reward closing profitable deals regardless of suspicious clients and without proper identification of sources of money). In Malawi, for example, an informant scheme of the Revenue Authority encourages citizens to report suspected cases of tax fraud, evasion and smuggling by rewarding with amounts of USD 1,500 those that provide information leading to the recovery of tax revenue. In Nepal, the Prevention of Corruption Act allows the anti-corruption agency to issue an appropriate reward to the person assisting with inquiries, investigations and the collection of evidence. The United Kingdom and the United States, countries on the receiving end of illicit outflows from developing countries, also offer financial compensation to whistleblowers. In the UK, the Public Interest Disclosure Act envisages compensation for lost and future earnings. The US False Claims Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, a law passed in 2010 as a result of the financial crisis, go further: they allow whistleblowers to keep a portion of the amount recovered by the US government in the case of crimes against the state. Nonetheless, financial incentives should be used sensibly as icing on the cake and not as a basic requirement for whistleblower protection.
relevant investigative or prosecutorial agencies. As with other anti-corruption bodies, a sufficient degree of independence is needed both to ensure that guarantees of protection can be delivered and to ensure that cases of reported corruption are acted upon effectively and not compromised. When the independence of state agencies is compromised, a possibility is to establish support centers operated by representatives of private sector and/or civil society organizations to inform potential whistleblowers about relevant legislation and how it can impact them in case they report wrongdoing outside their companies. This informative role does not exempt the state from its responsibility to inform citizens about the law. Currently, several countries have established independent organizations to assist whistleblowers. In the UK, Public Concern at Work is an independent charity offering free, confidential advice to people concerned about wrongdoing. Another example comes from Azerbaijan, where the local Transparency International chapter operates five regional legal advice centres that provide a mechanism for citizens to pursue corruption complaints. Similar arrangements, organized by NGOs, could be promoted focusing on providing support to informants in the financial sector in countries affected by illicit outflows of money.
Legislative measures are a first step. However, supporting institutions equipped with sufficient capacity and knowhow to handle whistleblowing complaints, from the financial industry or elsewhere, are also needed. If there are no independent bodies to which informants can turn, many potential sources of information about corruption or illicit flows will not voice their concerns. Reporting levels are further affected by the capacity of an agency to process reports, determine which matters should be handled by the investigating authorities, and impose relevant standards. The absence of such procedures increases the risk that reports are lost or filtered before reaching the
SUPPORT THE INTRODUCTION OF AN INDEPENDENT BODY TO RECEIVE COMPLAINTS
As requested by the Financial Action Task Force 40 recommendations, banks and other financial institutions in rich and developing countries should establish internal reporting mechanisms. Employees should be able to address their concerns anonymously to an independent body within the institution, or to an ombudspersons office or other similar external authority. Critical to the success of reporting mechanisms is the awareness of potential whistleblowers that such mechanisms exist. People should know about the different reporting channels available and how to use them. Then, it should be made known that reporting in good faith and on reasonable grounds will not trigger reprisals. Furthermore, easy access to legal advice should be provided to reduce misunderstandings.
ENCOURAGE WHISTLEBLOWING PROCEDURES IN THE FINANCIAL INDUSTRY
ITAR-TASS photo
ITAR-TASS photo
40
Finally, people will be less likely to report if they do not believe that the committee receiving reports will not protect confidentiality of their identity. The best way to protect an informant is to keep his or her identity, as well as the content of their disclosure, confidential for as long as possible and to explicitly allow anonymous reporting. To this end, financial institutions should use dedicated hotlines or electronic whistleblowing systems that similarly assist in receiving and classifying the reports. Although whistleblowing should not be considered the only tool for dealing with illicit flows, enabling individuals in the financial industry to come forward with relevant knowledge is an important measure that can contribute in curbing these flows. Whistleblowing helps address one of the most difficult aspects in investigating such flows: the secrecy of the banking industry that makes initiation of legal proceedings to recover assets very difficult since interested parties first need to know where the assets are before they can begin investigations. Whistleblowing in the financial industry, in rich and developing countries, has the potential to contribute to a reduction of illicit flows over time by making it a riskier endeavour for banks to accept illicit money. In addition, there has been recognition that whistleblowing is often a promising means to detect wrongdoing, in particular with regard to corruption and white collar crimes. Research conducted in 106 countries by the Association of Certified Fraud Examiners indicates that employees are the most common source of disclosure of fraud and wrongdoing and that tips by employees are by far the most prevalent means to detect unwanted activities. That is one of the reasons why over the past five years, many countries have started enacting whistleblower legislation. However, if more individuals are to come forward with their concerns, legislation is not enough and real protection should be ensured. This is an important consideration for not ruling out efforts to nurture the plans for whistleblowing incentives. Because the banks that mostly receive illicit flows from developing countries tend to be located in the developed world and this is where the individual blowing the whistle will require protection.
CONCLUSION
Shooting the messenger It is often not the guilty party who will be dismissed if wrongdoing is exposed but, instead, the person blowing the whistle. Studies note that the most common reaction to whistleblowing is to ignore the message and shoot the messenger A good example of the risks of whistleblowing is that of a banker who blew the whistle on his employer, a Swiss financial institution, in 2007. The information provided to various US authorities set off cascading criminal and civil investigations involving the Swiss financial institution. Within two years, these investigations brought down the banks entire US banking division and compelled intensive negotiations between the American and Swiss governments. The bank admitted to intentionally subverting US tax laws and defrauding the US government a fraud hiding as much as USD 20 billion in secret undeclared accounts and earning the bank up to USD 200 million a year. To avoid criminal prosecution the bank agreed to pay a USD 780 million fine and to turn over names of thousands of American account holders to the US Internal Revenue Service. The whistleblower was sentenced to 40 months in prison, in part because he failed to disclose his own involvement and that of a prominent client in the process. Another famous example is that of an employee at the Central Bank of Kenya (CBK) who helped to expose one of the most complex financial scandals in Kenyan history, the Goldenberg affair. It is said that as much as USD 850 million a fifth of Kenyas gross domestic product-was looted from the countrys Central Bank in the 1990s. The whistleblower, David Munyakei, a clerk at CBK, noticed that a company called Goldenberg International was receiving unusually large sums of money for the alleged export of gold and diamonds. He raised questions and was advised to let the matter drop. Instead, he smuggled out documents and handed them over to opposition members of parliament. The documents revealed illegal transactions between the CBK and Goldenberg International and their disclosure eventually ended the scheme. The courage to disclose these corrupt practices resulted in Munyakeis arrest and dismissal from his position at the CBK. He spent the rest of his life poor and frequently unemployed, until dying in 2006, leaving three daughters and a widow. While these examples demonstrate that whistleblowing is still risky particularly in developing countries, in the case of banks located in rich countries, where the proceeds of corruption tend to be most commonly hidden, whistleblowing in the financial industry is particularly beneficial. It allows detection of criminal money flows and supports rich and developing countries in identifying and eventually repatriating the proceeds of crime. Source: www.u4.no
ITAR-TASS photo
41
JOINT FIRST AND SECOND ROUND EVALUATION COMPLIANCE REPORT ON THE RUSSIAN FEDERATION
Adopted by GRECO at its 49th Plenary Meeting (Strasbourg, 29 November 3 December 2010)
1. GRECO adopted the Joint First and Second Round Evaluation Report on the Russian Federation at its 40th Plenary Meeting (Strasbourg, 15 December 2008). This report (Greco Eval I-II Rep (2008) 2E) was made public by GRECO on 30 April 2009. 2. In accordance with Rule 30.2 of GRECOs Rules of Procedure, the authorities of the Russian Federation submitted their Situation Report (RS-Report) on the measures taken to implement the recommendations on 30 June 2010.
I. INTRODUCTION
3. At its 40th Plenary Meeting (15 December 2008), GRECO selected, in accordance with Rule 31.1 of its Rules of Procedure, Austria and the former Yugoslav Republic of Macedonia to appoint Rapporteurs for the compliance procedure. The Rapporteurs appointed were Mr Christian MANQUET, Head of Unit, Directorate for Penal Legislation, Federal Ministry of Justice on behalf of Austria and Ms Slagjana TASEVA, Professor of Criminal Law, Dean of the Faculty of Law, on behalf of the former Yugoslav Republic of Macedonia. The Rapporteurs were assisted
42
by the GRECO Secretariat in drafting the Compliance Report (RC-Report). 4. The objective of the RC-Report is to assess the measures taken by the authorities of the Russian Federation to comply with the recommendations contained in the Joint First and Second Round Evaluation Report. 5. It was recalled that GRECO in its Joint Evaluation Report addressed 26 recommendations to the Russian Federation. Compliance with these recommendations is dealt with below. Recommendation i. 6. GRECO recommended to establish a comprehensive national anti-corruption strategy, on the basis of the National Anti-corruption Plan (NACP), covering the federal, regional and local levels of the Russian Federation. The strategy should place a strong emphasis on corruption prevention and transparency of public administration and must give proper attention to civil society concerns; it should also cover all public sectors concerned, including the law enforcement, and be accompanied by a realistic and binding timeframe for its implementation. The strategy and the plan of action should be made widely known to ensure a high degree of public awareness of the strategy and the measures to be taken. 7. The authorities of the Russian Federation report in essence that the National anti-corruption Strategy (Strategy) and the National Anti-Corruption Plan (NACP) for 20102011 were adopted through a Presidential Decree of 13 April 2010 (#460). These documents cover the areas in which the authorities intend to combat corruption, including federal, regional and local levels as well in law enforcement. The authorities explain that the Strategy is a general policy document, the provisions of which aim at eliminating the core reasons for corruption in society at large and which take account of the particular demands of the NACP. The Strategy provides for the establishment of a modern legal and organisational basis for the fight against corruption and measures to make sure that legal acts and managerial decisions are executed as intended by the authorities. Prevention of corruption is, according to the authorities, a major principle of the Strategy. The authorities also submit that the Strategy emphasises the importance of providing or the participation of the institutes of civil society in counteracting corruption; enhancing the efficiency of the federal bodies of state power, other state bodies, bodies of state power of the subjects of the Russian Federation and the bodies of local self-government in fighting corruption; improving the system of registering and bookkeeping of state property and evaluating the efficiency of its management and disposal; improving the conditions, procedures and mechanisms of state and municipal tenders; enhancing the quality of professional training of specialists in the sphere of organisation of prevention and immediate counteraction to corruption; increasing the efficiency of the participation of the Russian Federation in
II. ANALYSIS
international cooperation against corruption, including the elaboration of an organisational basis for regional anti-corruption, providing assistance to other states in order to train specialists and to study the causes and reasons for and consequences of corruption. 8. The authorities furthermore stress that the NACP is an instrument for putting the Strategy into practice by establishing a systematic list of anti-corruption measures, including the executors of the various measures, deadlines and indicators of the expected results. In order to implement the Law on Combating Corruption of 25 December 2008 (#273-FZ), the NACP contains a number of instructions to the Government of the Russian Federation, the Director of the Administration of the President of the Russian Federation, the Chairman of the Presidium of the Presidential Council on Counteracting Corruption, the Prosecutor General, the Ministry of Justice of the Russian Federation, Ministry of Foreign Affairs, Ministry of Finance, Ministry of the Interior, and the Federal Service of Security, indicating specific time limits to realise the relevant measures. 9. GRECO welcomes that the President of the Russian Federation has adopted the National Anti-Corruption Strategy (Strategy) as a general policy document addressing the causes of corruption and providing the basis of the fight against this phenomenon in the future. The adoption of the National Anti-Corruption Plan (NACP) for 20102011, including the various measures for counteracting corruption, is the tool for the implementation of the Strategy. These complementary instruments are wide in their approach in addressing various fields of public administration at different levels and are aimed at strengthening preventive as well as repressive measures against corruption. 10. GRECO concludes that recommendation i has been implemented satisfactorily. Recommendation ii. 11. GRECO recommended that the new Presidential Council on Counteracting Corruption be provided with a broader representation in order to better reflect the interests of the regions as well as those of civil society. 12. The authorities of the Russian Federation report that on 31 March 2010, a Presidential Decree on Making Amendments to the Presidential Council on Counteracting Corruption and to the Presidium of this Council (#396) was adopted, amending the Presidents Decree of 19 May 2008 (#815) in order to widen the composition of the Presidential Council on Counteracting Corruption. The authorities submit that the new composition of the Council now comprises leading public representatives and scientists, including from various regions of Russia (almost all federal constituencies are covered) and several non-governmental organisations. The following representatives have been added to the Presidium of the Council: a member of the Public Chamber of the Russian Federation (the Republic of Sakha-Yakutia); a member of the Public Chamber of the Russian Federation (the Kursk region); the Director of the branch of the Russian Academy
43
of Science, the Institute of Philosophy and Law of the Ural Branch of the Russian Academy of Science (the Sverdlovsk region); a member-correspondent of the Russian Academy of Science, Doctor of Law Sciences; and a Doctor of Economic Sciences. The authorities also submit that by virtue of the Decree of the President of the Russian Federation (#1336), dated 4 November 2010, the Mayor of Moscow was included as a member of the Presidential Council and its Presidium. 13. The authorities furthermore submit that a Working Group on the cooperation with civil society representatives was formed under the Presidium of the Council of Counteracting Corruption, (according to the Minutes, No.3 of a Council meeting of 6 April 2010) with the following representatives: the Head of the Volga region centre for counteracting extremism and corruption; the Chair of the Commission of anti-corruption education and propagation of the Republican Council of anti-corruption policy in the Republic of Tatarstan; a member of the Public Chamber of the Russian Federation; the Chair of the board of the non-profit fund the Institution of democracies and cooperation; the Chair of the Council of the All-Russian public organization Civil Society; the Vice-President of the Court of Auditors (who has also published articles etc concerning corruption); the President of the Fund Center for Political Technologies (who has also published articles etc concerning corruption). 14. GRECO takes note of the information provided and welcomes that the Russian authorities have enlarged the composition of the Presidential Council, which now includes a broader regional representation as well as representatives of various academic disciplines and non-governmental organisations, as defined under the domestic system, ie members of the Public Chamber of the Russian Federation. GRECO furthermore notes that civil society representation is also available to the Council through the Working Group, the aim of which is to provide civil society input to the Council. In the light of the foregoing, GRECO concludes that Russia has dealt with all the components of the current recommendation. Having said that, it appears that the current composition of the Presidential Council or the Working Group could well be complemented with further civil society input from other nongovernmental organisations with an anti-corruption agenda, preferably, also with international experience. In this context, GRECO was informed by the Russian authorities that Transparency International, which is not represented in the Presidential Council nor in the Working Group, is involved in the work of another commission under the Administration of the President of the Russian Federation, dealing with transparency issues. 15. GRECO concludes that recommendation ii has been implemented satisfactorily. Recommendation iii. 16. GRECO recommended to develop systems for monitoring in a comprehensive, objective and ongoing manner the practical impact on the various sectors concerned of the anti-corruption measures introduced, including the
evolution of the levels of corruption in these sectors over time. It should be ensured that civil society is in a position to provide input to, and to make its views known on the outcome of such monitoring 17. The authorities of the Russian Federation report that the Presidium of the Presidential Council on Counteracting Corruption considered it expedient to conduct sociological research in 20102011 in order to monitor the situation concerning corruption in the Russian Federation, to evaluate the existing levels and structures of corruption and the efficiency of the anticorruption measures taken (meeting on 4 March 2010, paragraph 2 Protocol #3). As a consequence, it is foreseen in the NACP 2010 2011 that the Government of the Russian Federation is to conduct sociological research at various layers of society in different regions of the country, which should permit evaluation of the level of corruption in the Russian Federation as a whole and of the efficiency of the anticorruption measures taken, with special consideration given to the views on this issue coming from representatives of the civil society (Subparagraph c paragraph 2 of the NACP 20102011), ie the Working Group on the cooperation with civil society representatives. 18. The authorities furthermore report that the Department on Civil Service Issues and the Control Department of the President of the Russian Federation are entrusted with systematic monitoring of the realisation of anti-corruption measures, which are undertaken within the framework of the activities of the Presidential Council on Counteracting Corruption: The Chairman of this Council is to be informed twice per year on the results of the monitoring conducted. Moreover, the Ministry of Justice has been given a mandate to conduct monitoring of the application of laws in order to study their efficiency in fighting corruption. For this purpose a special division within the Ministry of Justice has been set up: the Department for Draft Laws and Monitoring of their Application (implementation). The authorities state that a first monitoring of the efficiency of the law enforcement agencies has been carried out. Moreover, a joint venture has been established between the Ministry of Justice, the Ministry of Economic Development and the Department of the President of the Russian Federation on the efficiency of anti-corruption measures taken in the various subjects of the Russian Federation. The authorities are currently in the process of finalising the results of a survey based on a questionnaire developed by the Ministry of Justice and Economic Development, addressed to citizens, representatives of political parties, public associations, institutions of the civil society (including lawyers and notaries) and the scientific community. The non-governmental organisation All Russian Social Fund Public Opinion was instrumental in conducting this work, as contracted by the Government. The survey was carried out in 70 constituencies, representing all federal districts of the Russian Federation. According to the authorities, the results of the survey allows for an assessment of the corruption situa-
44
tion in the Russian Federation, in particular, in respect of citizens interaction with public authorities. In addition, the authorities report that it has been decided to also carry out an assessment on corruption issues in the business sector and its interaction with state functions and efficiency concerning public services, law enforcement etc. The authorities also submit that the Ministry of Economic Development is entrusted to regularly conduct monitoring of the implementation of anticorruption measures at departmental level. Finally, the Presidium of the Presidential Council has decided that the Control Department together with the Department of the President of the Russian Federation are to control the implementation of the Presidiums decisions in quarterly reports. 19. GRECO recalls the assessment contained in the Evaluation report (paragraph 59) according to which the implementation of the impressive number of initiatives in the Russian Federation to fight corruption, in particular legal acts and norms established, is difficult to follow and assess and that it would appear that the number of new initiatives to fight corruption continues to be on a large scale, not least in light of the measures foreseen in the NACP. GRECO also reiterates its earlier position that a meaningful evaluation of the real impact of various measures needs different tools and that measures implemented cannot be assessed until they have taken full effect (paragraph 59). GRECO therefore appreciates that the Presidential Council and its Presidium on Counteracting Corruption have established various organisational frameworks for the monitoring of the implementation of anti-corruption measures and their possible impact. It notes in particular that certain State institutions have been involved in this process together with one non-governmental organisation All Russian social fund Public Opinion and that input from the Working Group on the cooperation with civil society representatives under the Presidential Council is foreseen. GRECO wishes to stress in this context that evaluations of measures taken by state organs would benefit from being as independent from the state as possible, in order to be carried out in an unprejudiced way as well as to be trusted by society at large. Such independence can be achieved with a strong component of civil society involvement. GRECO welcomes that a comprehensive monitoring system has been put in place, however, in line with the conclusion regarding Recommendation iii, GRECO encourages the Russian Federation to continue its efforts to make the monitoring as open and sensitive as possible towards input from civil society, in particular through the involvement of representatives who are specialised in anticorruption issues. GRECO notes in this respect that such involvement may take different forms and cooperation and must not necessarily imply full participation in government structures. 20. GRECO concludes that recommendation iii has been partly implemented. Recommendation iv. 21. GRECO recommended to review the system of administrative and criminal procedures in order to firm-
ly establish that cases of corruption are to be treated as criminal offences as a main rule. 22. The authorities of the Russian Federation report that article 1 of the Law on Combating Corruption, adopted on 25 December 2008 (# 273-FZ) defines corruption as abuse of official position, giving a bribe, receiving a bribe, abuse of powers, a commercial graft or any other illegal use of his/her official position by an individual contrary to the legal interests of the society and state in order to receive profit or benefit in the form of money, valuables, other property and services of property nature, other property rights for himself/herself or for the third persons or illegal presenting of such advantage to the above mentioned person by other individuals as well as committing the above mentioned actions on behalf or in the interests of a legal entity. The authorities state that this definition includes the corruption provisions of the specific articles of the Criminal Code, i.e. it enumerates the acts for which criminal liability is established by the laws of the Russian Federation. 23. The authorities furthermore submit that the only type of offence of a corrupt nature for which the laws of the Russian Federation envisage administrative liability is illegal reward (compensation) from a legal entity, according to article 19.28 of the Code of Administrative Offences of the Russian Federation (CAO), and that only a legal entity may become the subject of this offence. This article stipulates administrative liability for illegal transfer, on behalf of or in the interests of a legal entity to the official or to the person who is executing managerial functions in a commercial or any other organisation, of money, securities, other property and illegal rendering of services for the action (or omission), conducted in the interests of the legal entity by an official or by a person who is executing managerial functions in a commercial or any other organisation connected to his/her official position. The authorities submit that according to Article 13 of the Law on Combating Corruption, individuals who commit corruption offences can be brought not only to criminal but also to administrative or civil proceedings and liability for corruption. However, the definition contained in the Law on Combating Corruption first of all assumes the illegal acts for which criminal liability is established, according to the authorities. The pertinent offences of the Criminal Code are abuse of official position (Article 285 CC), giving a bribe (Article 291 CC), receiving a bribe (Article 290 CC), abuse of powers (Article 201 CC) and commercial gift (Article 204 CC), also according to the authorities. They furthermore state that there is no clear cut list of corruption crimes, administrative and disciplinary offences in the legislation, a situation which has led to some uncertainty for the law enforcement in practice. In order to remedy this, a list of corruption offences was established by instructions of the Prosecutor General in 1986 (No. 187/86) and the Ministry of Internal Affairs in 2010 (No2). It contains 38 offences. Furthermore, an unofficial list of administrative corruption offences, contain-
45
ing 11 offences, was drawn up following the adoption of the Law on Combating Corruption. In addition, the authorities have submitted a comprehensive table containing corruption offences of the Criminal Code as compared with administrative corruption offences. Moreover, it is concluded at the end of the table that currently corruption cases are considered mostly as criminal cases. 24. GRECO takes note of the information provided. It recalls the description contained in the Evaluation report (paragraph 46): Administrative offences of a corruptive nature are violations of the law encroaching on the rights of citizens, in particular during preparation for and conduct of elections and referenda (Articles 5.2, 5.55.13, 5.155.25 CAO) and other infringements of officials of public bodies and establishments, officials of commercial and other organisations, petty misappropriation through embezzlement (Article 7.27 CAO); restriction of the freedom of trade (Article 14.9 CAO); misuse of budgetary means (Article 15.14 CAO); use of service information on the market of securities (Article 15.21 CAO); violation of the terms of consideration of applications (requests) for land or water object provision (Article 19.9 CAO). Most of these offences are not contained in the above mentioned table. Furthermore, GRECO recalls that in the analysis of the Evaluation report (paragraph 61) the situation of administrative and criminal law procedures in parallel appears to give the authorities rather wide discretionary powers to decide which procedure to follow in individual cases and there seems to be a grey zone where the two systems overlapwhich affords opportunities for manipulations. It was in the light of these remarks that the current recommendation was adopted. GRECO notes that the authorities have provided valuable explanations in respect of the complexity of the current system and that the documents provided may be of some help to better understand the coexistence of administrative and criminal procedures for dealing with corruption. Moreover, the submitted information may even be used as soft guidelines in order to give priority to criminal proceedings for corruption offences, however, they can not be seen as more than preparations for a review of the system of administrative and criminal procedures. GRECO does not agree that the legal measure reported, ie the general definition of corruption contained in the 2008 Law on Combating Corruption, can have a decisive effect upon the selection of criminal or administrative proceedings. Consequently, the issue raised in the Evaluation report (paragraph 61) that the existence of two parallel procedures in respect of corruption offences affords opportunities for manipulation, for example, to escape the justice process, even if in theory the criminal justice process is to be given priority, remains the same. 25. GRECO concludes that recommendation iv has not been implemented. Recommendation v. 26. GRECO recommended that precise guidelines for the distribution of corruption cases between the various law enforcement agencies/departments be established.
27. The authorities of the Russian Federation report that the Prosecutor Generals Office of the Russian Federation had prepared draft amendments to article 151 of the Federal Code of Criminal Proceedings (CPC), according to which the duty to investigate criminal cases of bribery were to be entrusted to the investigation divisions of the Investigation Committee under the Prosecutor Generals Office of the Russian Federation, except for cases where indications of a crime (corpus delicti), envisaged by article 290 of the Criminal Code of the Russian Federation (receiving a bribe), and article 291 of the Criminal Code of the Russian Federation (giving a bribe), were detected in the course of the investigation of other crimes which had been initiated under other articles of the Criminal Code of the Russian Federation. In such cases further investigations are to be conducted by the investigators of the bodies of the Ministry of the Interior. However, these draft legislative changes had to be postponed and further considered in the light of more recent reforms relating to the investigation bodies, in particular the decision to transfer the Investigation Committee from the Prosecutor Generals Office to become the Investigation Committee of the Russian Federation and thus separated from the Prosecution Service. GRECO was informed, at the time of the adoption of the current report, that the draft Law (4313765) on the Investigative Committee of the Russian Federation and the draft Law (4313725) on amendments to some federal constitutional laws due to the improvements in the activities of the investigative bodies, both had passed the second reading in the State Duma on 29 November 2010. Further changes are expected in respect of the interior bodies and a draft law on the Police is currently before the State Duma. 28. The authorities also refer to a Joint Order of the Prosecutor Generals Office of the Russian Federation and the Ministry of the Interior (adopted on 30 April 2010) which took effect as from 1 January 2010, providing a list of criminal acts which may be attributed to corruption if they comply with a number of different criteria, such as the presence of the relevant elements of the criminally punishable action, the connection of the act with the official position of the offender etc. It is explained that this organisational and distributive instrument is considered necessary in order to establish reliable statistical data and indicators about the detection, investigation and examination of the crimes of this category. 29. GRECO notes that the new legislation concerning the establishment of the Investigative Committee, directly under the executive powers, however, outside the structures of the Prosecution Service, will as a main rule centralise the investigation of crimes (including corruption) in a single institution. Prior to this, the Prosecutor Generals Office had prepared draft legislation on the allocation of corruption cases to the pertinent investigate authority, however, in the light of the very recent reform concerning the Investigation Committee, other draft legislation need further consideration, according to the au-
46
thorities. GRECO wishes to stress that objective criteria needs to be established for the allocation of corruption cases to all pertinent authorities, such as the Prosecution Service, the Police as well as the Federal Security Service (FSB). No final draft amendments to the CPC have yet been approved. Concerning the Joint Agreement between the Prosecutor Generals Office and the Ministry of the Interior, GRECO takes the view that this is more about establishing criteria for statistical purposes which although useful, are not really pertinent for the allocation of corruption cases among law enforcement agencies. However, the recently adopted legislation relating to the Investigation Committee can be expected to have a considerable impact on the allocation of criminal cases, including corruption, to this single body as a main rule. The implementation of this reform as well as the possible need for additional regulations on the distribution of corruption cases is still pending. Moreover, it would appear important to connect further measures in this respect with the measures reported under recommendation vi, in particular as regards the coordinating role given to the Prosecutor Generals Office. 30. GRECO concludes that recommendation v has been partly implemented. Recommendation vi. 31. GRECO recommended to further enhance the coordination between various law enforcement agencies involved in investigations of corruption and to examine the advisability of developing a centralised support mechanism to assist law enforcement agencies in investigating corruption. 32. The authorities of the Russian Federation report that the Federal Law on Combating Corruption of 25 December 2008 (#273-FZ), subparagraph 6 article 5 provides that the Prosecutor General and subordinated prosecutors are to coordinate, within their competence, the activities of the bodies of the Ministry of the Interior, the bodies of Federal Security Service, Customs bodies of the Russian Federation and other law enforcement agencies in combating corruption. Moreover, the National AntiCorruption Plan (NACP) 20102011 includes an order to the Prosecutor General to pay special attention to the possibility of coordination meetings, as stipulated already by article 8 of the Federal Law on Prosecutors Office (1992, #22021), according to which the same kind of coordination is to be carried out by the Prosecutor General and subordinate prosecutors in respect of any crime. 33. The authorities furthermore report that in accordance with an order of the Prosecutor General on Improvement of the Organisation of the Prosecutors Supervision over the Execution of Laws on Combating Corruption of 1 October 2008 (Order #196), permanent interdepartmental working groups have been established in the prosecutors offices of the subjects of the Russian Federation, prosecutors offices of cities and districts, military and other specialised prosecutors offices: The representatives of law enforcement agencies (Ministry of the Interior) and controlling and supervisory bodies are also
members of these groups. Furthermore, on 6 February 2009, the Prosecutor General adopted and put into operation a statistical report (Order #31), containing data on the supervision of the execution of laws on combating corruption and on the results of investigation of corruption cases. According to the report, in 2009 the bodies of the Prosecutors Office conducted in total 3 724 coordination meetings between directors of law enforcement bodies in relation to corruption cases and 4 367 questions were examined; 4 521 interdepartmental meetings on these issues were conducted and 4 634 operative meetings were held with participation of directors of Prosecutors Offices and law enforcement bodies. Moreover, 2 321 joint measures were taken in order to prevent and reveal corruption crimes. 34. The authorities also state that in accordance with a decision by directors of law enforcement bodies in September 2008 (Order #1), the Academy of the Prosecutor Generals Office (as coordinator) jointly with the educational institutions of the Ministry of the Interior, the Federal Security Service, Federal Service of Control over Drugs and the Federal Customs Service are examining questions relating to the fight against corruption and, in that context, are elaborating proposals to better coordinate the investigation of corruption in line with the defined main directions provided for in the NACP. The authorities stress that as a result of the law and the NACP, the directors of the Prosecutors offices of all levels are to conduct coordination meetings regularly with law enforcement agencies on the most acute issues of application and enforcement of laws. On 6 October 2009, the Prosecutor Generals Office conducted a coordination meeting between the directors of law enforcement bodies of the Russian Federation, at which the participants discussed the execution of the NACP, inter alia, the status of cooperation and interaction between the bodies of the Prosecutors Office and other law enforcement agencies in the investigation of crime. The meeting concluded, inter alia, that additional measures on coordination were to be taken. 35. In relation to the second half of the recommendation, the Russian authorities report that within the framework of the above interdepartmental working groups coordinated by the Office of the Prosecutor General of the Russian Federation, subordinate prosecutors inform the Prosecutor Generals Office on the results of their work regularly (every quarter). This interdepartmental exchange of operative information about anti-corruption actions, comprising bodies of state power and administration, bodies of local self-government as well as specialised institutions is centralised through the Prosecutor Generals Office of the Russian Federation. Furthermore the NACP contains instructions to the Prosecutor General to inform the Presidential Council on Counteracting Corruption annually about the results of this coordinating work. 36. GRECO takes note of the initiatives launched in order to enhance the coordination between the various
47
law enforcement agencies in Russia. GRECO is pleased to learn that the National Anti-Corruption Plan (NACP), as a starting point, contains clear instructions to this end and that the Prosecutor Generals Office plays a key role for the coordination. Several regulations and instructions have been issued and a number of meetings between the agencies concerned have also been held. GRECO appreciates that this process, considering the size of the country and the vast number of law enforcement agencies concerned, is an immense task which will take a long time to fully materialise. Nevertheless, the established structures need to be evaluated once they have been operational for some time. At the current stage, GRECO considers that the measures reported have the potential of enhancing the coordination between various law enforcement bodies. It also follows from the information provided that the authorities have not only examined the advisability of developing a centralised support mechanism, but also entered into a centralised structure for reporting, which in the future may possibly be transformed into a support mechanism for the law enforcement agencies. However, these measures need to be fine-tuned in the light of the recent establishment of the Investigation Committee, see recommendation v. 37. GRECO concludes that recommendation vi has been implemented satisfactorily. Recommendation vii. 38. GRECO recommended that the operational independence of law enforcement agencies and their investigative staff be strengthened and governed by appropriate checks and balances under the Rule of Law and that the material conditions of law enforcement personnel be reconsidered in this context. 39. The authorities of the Russian Federation stress that the operative independence of investigative bodies and their investigative staff was provided for according to a reform, launched at the end of 2007, the essence of which was to separate the investigation from the supervision over investigation, as conducted by the bodies of the Prosecutors Office at the time. The amendments, made by Federal Law #87-FZ, of 5 June 2007, to the Code of Criminal Procedure and to the Federal Law on the Prosecutors Office of the Russian Federation, which entered into force on 7 September 2007, provides for the establishment of separate divisions of the investigation bodies, which are independent in their organisation, structure, staffing and in respect of decisions about procedure, from the bodies of the Prosecutors Offices and other law enforcement agencies. The supervisory function was instead given to the Investigation Committees under the Prosecutors Offices. (However, the Investigation Committee was in 2010 separated from the Prosecution Service, according to the authorities, see recommendation v). The authorities furthermore explain that a similar structure was established for the Investigation Committees under the Ministry of the Interior of the Russian Federation which were formed according to Order #1422 of the President of the Russian Federation On the Measure of Enhance-
ment of the Organisation of Preliminary Investigation in the System of the Ministry of the Interior of the Russian Federation, dated 23 November 1998. To improve the functional independence of the bodies of preliminary investigation, the Head of the Investigation Committee under the Ministry of the Interior was upgraded to Deputy Minister of Interior (1998). 40. As regards measures taken following the adoption of the Evaluation report, the authorities stress that discussions about raising the salaries and housing benefits for militia staff in order to increase their independence has been discussed within in 2009/2010. Subsequently, in accordance with an order of the President of the Russian Federation on reforming the Ministry of the Interior (Order of 18 February 2010, #208), the Government is entrusted with considering additional budget allowances to the Ministry of the Interior of the Russian Federation to increase the salaries of the employees and to form a specialised housing fund within the framework of the execution of the Federal Budget for 2010. 41. GRECO recalls that the main reasons for this recommendation (Evaluation report, paragraph 144) were that it considered that in a rigid hierarchical system where there is a low level of operational independence of the individual law enforcement personnel, there is always a risk of improper influence from within the system. Therefore, GRECO concluded that strict hierarchical control within the system, aimed at preventing improper influence, needs to be balanced with an appropriate level of operational independence for those who carry out corruption investigations and their agencies and linked to that, a sufficient degree of personal accountability. What has been reported by the Russian authorities concerns, inter alia, organisational structures of the investigative committees as supervisory organs in respect of the operational investigative departments. The system of investigation committees was already in place well before the on-site visit to Russia and its organisation is also reflected in the Evaluation report. The steps taken as a result of the current recommendation concern the material conditions of law enforcement personnel, such as salaries and benefits connected to their positions. GRECO acknowledges that low salaries and poor working conditions may have a negative impact on the independence of law enforcement personnel, and that improvements in this respect could assist in creating more independent law enforcement agents. However, the reforms launched are still in the preparatory stages. Furthermore, GRECO notes that no action has apparently been taken in respect of the organisation and procedures of the work within the law enforcement agencies which would strengthen the operational independence of the personnel carrying out investigative tasks, nor about their accountability. GRECO therefore urges the Russian authorities to rigorously pursue the work to improve the operational independence and accountability of law enforcement personnel. Also these measures need
48
to be fine-tuned in light of the recent establishment of the Investigation Committee, see recommendation v. 42. GRECO concludes that recommendation vii has been partly implemented. Recommendation viii. 43. GRECO recommended to establish a recruitment procedure for prosecutors at all levels based on objective criteria. 44. The authorities of the Russian Federation refer to Article 40 of the Federal Law on Prosecutors Office of the Russian Federation of 17 January 1992 (#22021), which sets a list of requirements of candidates to become prosecutors based on objective criteria, such as: higher education (bachelor, specialist or master degree in law from university) which has state accreditation; the candidate must not be a citizen of a foreign state; there must be no decisions of the court about the incapacity of the person or limited capacity or about deprivation of the right to hold state positions in civil service; the person must not be convicted of an offence and must not have any disease that will impede him in executing his official duties. The authorities add that the objective nature of the above mentioned requirements is preconditioned by the examination of official documents or data, submitted by authorised state bodies or officials. Conclusions that the candidate has the necessary professional and moral qualities may also be made on the basis of objective and unbiased information, received from authorised state bodies or official persons as well as through psychological tests. The authorities add that in order to implement this particular recommendation, on 9 November 2009, the Prosecutor General of the Federation of Russia adopted an instruction that the personal qualifications of all employees and applicants were to be registered by the human resources departments of the prosecutorial bodies and institutions (Order #983-k). The list of documents to be submitted by the candidate during recruitment to the bodies and institutions of prosecution service has also been defined in the document. The authorities add that in order to form highly qualified prosecutors, the Prosecutor General has issued an order in 2010 (No. 316) on the organisation of retraining of prosecution personnel and it also follows from this order that re-training will, as a rule, be a requirement for candidates to be nominated to posts. Furthermore, the authorities state that competitive procedures already apply in the selection of candidates in the anti-corruption structures and will follow generally in respect of all positions in the future. 45. GRECO notes that the background to the current recommendation, as described in the Evaluation report (paragraph 145) was that prosecutors in the Russian Federation were not recruited on a competitive basis and that some assistant prosecutors at city or district level were recruited among students who had not even finished their university studies. GRECO was of the opinion that this situation merited to be carefully assessed in order to ensure that only qualified persons, based on objective criteria, enter the prosecution service. GRECO notes that the
Russian authorities, with reference to the 1992 Law on the Prosecutors Office, have taken some general measures to provide for recruitment/promotion of qualified persons through recruitment based on objective criteria as well as adopted rules clarifying which documents an applicant must submit and that these are to be filed and registered by the authorities. These measures appear to be necessary safeguards for an objective recruitment and control thereof. GRECO accepts that these measures at least go in the right direction to remedy the situation described in the Evaluation report that not fully qualified persons enter the prosecution service. 46. GRECO concludes that recommendation viii has been dealt with in a satisfactory manner. Recommendation ix. 47. GRECO recommended that the principle of judicial independence, as provided for in the Russian Constitution and legislation, be strengthened further in practice, in particular, in respect of recruitment/promotion procedures and the exercise of judicial functions. 48. The authorities of the Russian Federation make reference to the Law on the Status of Judges in the Russian Federation of 1992 (#31321), which contains a number of safeguards in order to provide for the independence of judicial power, inter alia, in respect of the appointment of judges; the public announcement of judges positions; the selection is based on competition between candidates; appointment following application of the candidate and upon the approval of the qualification panel of judges, which consists of judges and representatives of the public; and the right to appeal against an appointment. The authorities also refer to the independence of judges in their functions which is pronounced in the Law on the Status of Judges and subject to sanctions. Furthermore, the authorities stress that judges are provided with material benefits and social welfare, corresponding to the status of judges and for the purpose of securing judges independence. 49. In addition, the authorities report some novelties in legislation as a result of the adoption of the Law on Combating Corruption and the Law of 25 December 2008 (# 274-FZ) on Making Amendments to Separate Legislative Acts. The latter law contains, inter alia, changes to the 1992 Law on the Status of Judges, inter alia, making more specific the requirements applying to judges, such as rules to prevent conflicts of interest (article 3) and qualification requirements of candidates to the position of a judge (article 4), the order of the selection of candidates for the position of a judge (article 5), the order of judges authority (empowering) (article 6), the order of submission of data on the income of judges and their property (article 8.1). Moreover, according to Law #157FZ of 17 July 2009, also amending the Law on the Status of Judges, the initial appointment limitation (3 years) of the federal judges does no longer exist. This amendment thus establishes that the initial appointment of such judges is without any time limit in order to widen the application of the principle of more secure employment of judges as a
49
guarantee for their independence. Moreover, in respect of the judges to the Supreme Court and the the High Commercial Court, these are appointed by the Council of Federation (Parliament), as before, following nominations by the President of the Russian Federation, as before, however, the President is now to be consulted by the Chairpersons of these Courts (and not by the Presidential Commission, as before). 50. The authorities furthermore report that the Federal Constitutional Law on Disciplinary Judicial Panel was adopted on 9 November 2009 (#4-FKZ) envisaging the creation of a special body the Disciplinary Judicial Panel which consists only of judges of the Supreme Court and the High Arbitration Court of the Russian Federation (three judges each The Disciplinary Judicial Panel is a judicial body which examines the cases of complaints against decisions of the High Qualification Panel of Judges of the Russian Federation and qualification panels of judges of the subjects of the Russian Federation about early termination as a result of misconduct. Upon examination of complaints and applications, the Disciplinary Judicial Panel adopts a motivated final decision either to uphold or to quash the decision of the Qualification Panel of Judges. On 4 February 2010, the Plenum of the Supreme Court and the High Arbitration Court adopted rules of procedure of the Disciplinary Judicial Panel (#3/2). 51. Finally, the Russian authorities report that the President of the Federation, according to an Instruction of 31 December 2008 (#Pr-2801) addressed a number of measures concerning the Judicial system, including the updating of the Federal Law on Justice. This followed a call from the Constitutional Court of 25 January 2001 concerning reimbursement of damage caused by the State through illegal action by a court (a judge) according to the Civil Code. The level of salaries paid to court employees was also to be raised. 52. GRECO recalls the statement in the Evaluation report: Despite the establishment of a Constitutional and legislative framework of the judiciary and safeguards aiming at providing for the independence of judges, there appears to be a common understanding in Russia among officials and civil society representatives that the judiciary is broadly affected by undue influence and corruption (paragraph 147). It is also stated in the Evaluation report that it is not sufficient that the Constitution and legislation provides for independence of the Judiciary, but that these principles must be rigorously implemented in practice (paragraph 148). The Evaluation report focuses in particular on the process of appointment of judges, where the Executive branch appears to be over influential, for a number of reasons as explained in the report (paragraph 149). Another area of concern was that the establishment of judicial practice was not free of influence from outside the judiciary; the Plenum of the Supreme Court, which among other things, establishes judicial practice, is not only composed of Supreme Court judges, but also representatives of the Prosecutor General and the Ministry
of Justice (however, with no voting rights, as noted in the Evaluation report). 53. GRECO takes note of what has been reported by the Russian authorities and justified in new legislation submitted. It welcomes that the three-year limit for the initial employment of judges has been abolished, as a measure to strengthen the independence of judges. GRECO also notes that the Disciplinary Panels of Judges are composed only of representatives from the Supreme Court and the High Arbitration Court. Furthermore, GRECO takes note of legal changes concerning the appointment procedure of judges according to which it appears that the influence from the Executive branch in respect of the appointment of judges to the Supreme Court and the Supreme Commercial Court has been slightly reduced, but not all the issues signalled in Article 149 of the Evaluation report have been addressed. Furthermore, in respect of the establishment of judicial practice (paragraph 150) nothing new has been presented that could be seen as strengthening of judicial independence. GRECO encourages the Russian authorities to address the remaining issues in future reform initiatives. 54. GRECO concludes that recommendation ix has been partly implemented. Recommendation x. 55. GRECO recommended that systematic introductory and in-service ethics training is provided to judges of all levels and ranks in light of the Code of Judicial Ethics and other pertinent norms. 56. The authorities of the Russian Federation report that within the framework of a Resolution of May 2007 (#27) concerning disciplinary liability of judges, the Plenum of the Supreme Court of the Russian Federation has provided explanations to courts on the issues of the ethics of judges and recommended the Russian Academy of Justice to prepare the training course Ethics for Judges for in-service training and advanced training of judges and employees of court administrations. In 20082009, the Academy of Justice elaborated educational and thematic training which include courses for judges and administrative personnel of courts. The training comprises lectures on the topics of ethics of judges and other related subjects. In 2009, 2618 judges of the regular courts participated in the training at the Academys Moscow branch of the faculty of advanced training. The training is organised every year. Furthermore, in 2009, the High Arbitration Court of the Russian Federation conducted training for judges of arbitration courts on anti-corruption issues. New editions of educational programmes for training were elaborated taking into account the specialisation of judges (company law, securities, bankruptcy, international private law, property law, contract law, tax law, administrative law etc). Training was also carried out on the issues connected to the legal amendments and changes, introduced to the Law on the Status of Judges, in connection with the adoption of the Law on Combating Corruption (2008), on issues of observance by judges of the standards of arbitration proceedings and the Code of Ethics for
50
Judges etc. The authorities add that the High Arbitration Court constantly conducts activities on issues, concerning observance, by the judges of the Code of Ethics for Judges, maintenance of high standards of ethical behaviour while administering justice. In 2009/2010 the training and qualification programmes involved 1140 judges in total, carried out during 9 sessions, covering issues, such as judicial ethics, the status of judges, in the light of amended/new legislation, anti-corruption measures and disciplinary liability. 57. Furthermore, the Russian authorities submit that the working group of the Council of Judges of the Russian Federation has drafted a new Code of Ethics for Judges on the basis of various international instruments, such as the European Charter on the Statute for Judges and the Council of Europe Recommendation No. R (94) 12 of the Committee of Ministers on the independence, efficiency and role of judges. The draft text contains general provisions concerning the subject matter and the application of the Code, it defines the requirements of the conduct of judges, principles and rules of professional conduct of a judge as well as principles and rules of judges in extra-judicial activities. The closing provisions establish the rule about the liability of judges and some definitions of the terms used in the Code are presented. The Council of Judges decided in a Resolution of 3 December 2009 (#253) to forward the draft Code to the President of the Russian Federation, the Constitutional Court, the Supreme Court, the High Arbitration Court and to councils of judges of the subjects of the Russian Federation for wide public discussion in order to present an amended text of the draft for examination by the VIIIth All- Russian Union of Judges in 2012 (held once every four years). 58. GRECO notes that the Russian authorities have not only established the basis for regular training of judges and other staff of various types of courts, but have also entered into a process of redrafting the Code of Ethics for Judges, inter alia, following the model of relevant Council of Europe standards. GRECO wishes to stress that the work of other Committees of the Council of Europe, such as the European Commission for the Efficiency of Justice (CEPEJ) and the Consultative Council of European Judges (CCJE) is particularly important in this respect. GRECO notes that the training carried out has included pertinent topics in line with the recommendation and involved a considerable number of judges. 59. GRECO concludes that recommendation x has been implemented satisfactorily. Recommendation xi. 60. GRECO recommended to reduce the categories of persons enjoying immunity from prosecution to the minimum required in a democratic society. 61. The authorities of the Russian Federation recapitulate that the categories of persons who are subject to a special order of prosecution in criminal cases, are listed in article 447 of the Criminal Procedure Code of the Russian Federation and include: members of the Federation Council of the Federal Assembly of the Russian Federation,
deputies of the State Duma of the Federal Assembly of the Russian Federation; judges of the Constitutional Court of the Russian Federation, judges of the federal court of general jurisdiction or federal arbitration court, judges of peace (magistrates) and judges of the Constitutional (Charter) court of a subject of the Russian Federation, the jurors or laymen for the period when they are administering justice; the Chairman of the Audit Chamber of the Russian Federation, his deputies and auditors of the Audit Chamber of the Russian Federation, Commissioner of Human Rights in the Russian Federation (Ombudsman), the former President of the Russian Federation, prosecutors, the Chairman of the Investigation Committee under the Prosecutors Office of the Russian Federation, directors of investigation bodies, investigators, barristers, members of the election commission and the commission of the referendum with the right to a decisive vote, registered candidates to the deputies to the State Duma, registered candidates to the deputies of the Legislative (representative) body of the state power of the subject of the Russian Federation. The decision to initiate a criminal case concerning the persons or arraigning such a person as an accused, if the criminal case was initiated in respect of other persons or on the fact of commission of an act, containing the signs of a crime, is to be adopted in the order, established by article 448 of the Code of Criminal Procedure (CPC) (Initiation of a criminal case). 62. The authorities submit that amendments have been made to article 448 CPC through Federal Law on amendments to separate legal acts (#280-FZ), according to which certain categories of officials prosecutors, heads of the investigation bodies, investigators, barristers (court lawyers), deputies of a legislative (representative) body of state power of a subject of the Russian Federation have lost their immunity. The only privilege which has remained with these officials, ensuring their independence and protection from ungrounded accusations of criminal liability due to the fact that they execute their procedural powers, is the special requirement that proceedings against them can only be initiated by the head of the senior territorial investigation body of the Investigation Committee. Thus, the decision about initiation of a criminal case or arraignment as an accused in respect of the deputy of the legislative (representative) body of state power of a subject of the Russian Federation is to be adopted by the head of the Investigation body of the Investigation Committee of the Russian Federation for the subject of the Russian Federation; in respect of a barrister the decision will be made by the head of the Investigation body of the Investigation Committee of the Russian Federation for the subject of the Russian Federation; in respect of a prosecutor the decision is to be made by the head of the Investigation body of the Investigation Committee of the Russian Federation. 63. The authorities also submit that the Ministry of Justice has elaborated a draft law on amendments to paragraph 1 of article 447 CPC. According to the draft, the following categories of persons would also be deprived of
51
their immunity from prosecution: lawyers, parliamentary candidates, candidate deputies of constituent elements, members of electoral commissions, members of referendum commissions. The draft legislation is currently being considered by the Government and the President of the Russian Federation. 64. GRECO recalls that the Constitution and different federal laws establish a comprehensive system of immunities from criminal proceedings and that articles 447452 CPC regulate the special proceedings for lifting immunities. These regulations concern a large number of categories of officials. From what has been reported now, it appears that the initiation of criminal proceedings against prosecutors, heads of investigation bodies, investigators, lawyers and deputies of a legislative (representative) body of state power of a subject of the Russian Federation is no longer subject to permission by a special authority; however, criminal proceedings can only be initiated by a special public official. Furthermore, the Government is in the process of changing the relevant procedures for more categories of officials as well as candidate deputies as provided for in article 447 CPC. GRECO takes the view that the developments reported go in the right direction. However, GRECO recalls paragraph 176 of the Evaluation report which stresses that the scope of immunities appears to be wider than ever before in Russian legislation in the light of which the current recommendation, which calls for a reduction of categories of persons enjoying immunity from prosecution to a minimum required in a democratic society, is to be interpreted. GRECO is of the firm opinion that further efforts are required in order to fully comply with the recommendation and notes that draft legislation is being considered to this end. GRECO maintains its position that the number of officials enjoying immunity in Russia remains very high and would strongly encourage the authorities to continue their efforts to reduce the categories of persons that enjoy immunity. 65. GRECO concludes that recommendation xi has been partly implemented. Recommendation xii. 66. GRECO recommended that the legal provisions underlying the current procedures for lifting immunity be thoroughly revised with a view to their simplification and to establish guidelines for their application by law enforcement officials and judges. 67. The authorities of the Russian Federation reiterate that the various categories of persons to whom the special order of conduct of criminal cases is applied, are listed in article 447 CPC and that the decision to initiate a criminal case against such a person or to arraign such a person as an accused is to be done in the order established by article 448 CPC. This article has been amended through the Federal Law #280-FZ and, as a result, the procedure of initiation of a criminal case and the procedure of arraignment as an accused were significantly simplified in respect of a number of persons who have special legal status. To make a decision to initiate a criminal case
against deputies of the State Duma of the Federal Assembly of the Russian Federation, members of the Federation Council of the Federal Assembly of the Russian Federation, judges of the Constitutional Court of the Russian Federation, judges of the Supreme Court of the Russian Federation, judges of the High Arbitration Court of the Russian Federation, judges of the courts of the subjects of the Russian Federation, it is no longer required to obtain the conclusions of a Panel, consisting of three judges of the Supreme Court about the presence of the necessary signs of a crime. The authorities indicate that following the amendments, it is enough to obtain consent of the State Duma of the Federal Assembly of the Russian Federation, the Federation Council of the Federal Assembly of the Russian Federation, the Constitutional Court of the Russian Federation, the High Qualification Panel of judges of the Russian Federation regarding the respective categories of officials. 68. The authorities add that the Supreme Court of the Russian Federation has put together a compendium (June 2010) on the practice of the application of provisions of chapter 52 CPC concerning Particularities of Proceedings in Criminal Cases against Certain Categories of Persons, which discusses procedural problems encountered in a large number of practical cases. Based on this analysis the Investigation Committee under the Prosecutor Generals Office of the Russian Federation has adopted methodical Guidelines on Carrying Out Criminal Prosecution as to Specific Categories of Persons subject to Criminal Proceedings. (Both these documents have been submitted to GRECO.) 69. GRECO takes note of the information provided which indicates that the procedure for lifting immunity as described in the Evaluation report (paragraphs 177179) has been simplified in respect of a number of officials. Moreover, the information submitted also indicates that the Investigation Committees now have guidelines at their disposal based on the analysis provided by the Supreme Court of the Russian Federation. The GET, welcomes the achievements made and is of the opinion that although further measures in this area might be desirable, in particular in the context of measures foreseen in relation to recommendation xi the authorities have complied with the requirements of the current recommendation. 70. GRECO concludes that recommendation xii has been implemented satisfactorily. Recommendation xiii. 71. GRECO recommended to establish specific and objective criteria to be applied by Parliament, the Constitutional Court or a qualification board of judges when deciding on requests for the lifting of immunities and to ensure that decisions concerning immunity are free from political considerations and are based only on the merits of the request submitted. 72. The authorities of the Russian Federation report that the High Qualification Panel of Judges as well as the Constitutional Court, the Supreme Court and the High Arbitration Court have prepared guidelines, defining the
52
criteria by which the qualification panels of judges and courts must be governed when they take decisions on the applications for initiation of criminal cases against judges. (The texts have been submitted to GRECO.) As far as members of Parliament are concerned, the authorities refer to article 98 of the Constitution, articles 19 and 20 of the Federal Law on the Status of the member of the Federation Council of the Federal Assembly of the Russian Federation and the deputy of the State Duma of the Federal Assembly of the Russian Federation (#3-FZ). Moreover, they submit that a decision of the Constitutional Court of 19 May 2009 describing the legal nature etc of parliamentary immunity: the immunity cannot be regarded as the personal privilege of the deputy exempting him from liability for criminal and administrative offensesthe parliamentary immunity involves adequate protection of the deputy in the exercise by him of proper parliamentary activities (implementation of the parliamentary rights, performance of parliamentary duties) that leads to the generally accepted rule in legal state, pursuant to which the deputy is not responsible for the actions of the mandate, including after the expiration of the terms of his powers. At all events, the deputy cannot be held criminally or administratively liable for opinions expressed, speech in Parliament or a position expressed when voting, development and submission of the action documents, necessary contacts with state authorities and officials thereof, as well as other actions arising from the deputys status. At the same time, by virtue of a general legal principle of non-abuse of the right of immunity it cannot justify exemption for publicly insulting, calumniation and other incompatible with the mission of the institution and the deputys status offenses under federal law 73. GRECO takes note of the information provided, which indicates that guidelines have been established, containing objective criteria to be taken into account in relation to the lifting of judges immunity. GRECO also notes that the decision of the Constitutional Court concerning parliamentary immunity describes the content and fundamental basis of such immunity. However, the current recommendation calls for criteria to be applied by Parliament when deciding on requests for the lifting of immunity to ensure that such decisions are free from political considerations and are based only on the merits of these requests. Such criteria are not included in the decision of the Constitutional Court. They yet need to be established, preferably by Parliament itself. 74. GRECO concludes that recommendation xiii has been partly implemented. Recommendation xiv. 75. GRECO recommended that Article 104.13 of the Criminal Code be amended in order to provide for confiscation of the proceeds from corruption in respect of all corruption offences of the Criminal Code as well as other offences which may be connected with corruption and to provide for efficient seizure in such cases and that the introduction of in rem confiscation under the criminal legislation be considered.
76. The authorities of the Russian Federation report that draft legislation is under preparation within the Ministry of Justice aimed at amending article 104 and related articles of the Criminal Code (CC) in line with international requirements for confiscation and seizure, in particular, to widen considerably the scope of criminal offences in relation to which confiscation and seizure can be applied. The authorities have added that a draft law (Article 174 CC), widening the scope of criminal offences in relation to which confiscation and seizure can be applied is pending before the State Duma since 1 July 2010. Concerning the second part of the recommendation (to consider the introduction of in rem confiscation), the authorities submit that on 1 June 2010, the State Duma of the Federal Assembly of the Russian Federation held a round table, at which the possibility of introducing the notion of confiscation in rem in the criminal legislation was discussed. Some 10 MPs representing the pertinent parliamentary committees, representatives of the Presidential Administration, the Government, the Constitutional Court, the Supreme Court, the Prosecutor Generals Office, law enforcement bodies, scholars, civil society (including Transparency International). The conclusion of the discussion was that in rem confiscation should be considered as a possible option for the future. 77. GRECO takes note of the situation explained by the authorities according to which draft legislation to amend article 104 CC is underway; however, no final draft legislation appears to be available as yet. GRECO wishes to stress that the Evaluation report (paragraph 217) contains a list of shortcomings that the authorities need to take into consideration in this work. Furthermore, it appears that in rem confiscation could possibly be introduced in the criminal legislation; however, no concrete initiatives to this end have yet been taken at Government level, following the round table discussion within the State Duma, in which a number of stakeholders participated. This part of the recommendation has therefore been partly implemented. 78. GRECO concludes that recommendation xiv has been partly implemented. Recommendation xv. 79. GRECO recommended to design training courses and guidelines for those who apply confiscation and interim measures in cases of corruption, and to assess the efficiency of the confiscation regime based on the collection on an on-going basis of appropriate and detailed information and statistics. 80. The authorities of the Russian Federation report that the Academy of the Prosecutor Generals Office (including its branches in Saint Petersburg and Irkutsk Law Institutes and also the Law Institute of the Academy of the Prosecutor Generals Office and the Institute for training and professional upgrading of high-ranking prosecutors), the Ministry of the Interior, the Federal Service for Control over Drugs, the Federal Security Service and the Russian Customs Academy have all developed general and specific training programmes/courses for their respective
53
staff at various levels focusing on the application of measures such as confiscation and seizure. All these training programmes are operational since 2009 (investigators) and 2010 (prosecutors). Moreover, the authorities state that the Scientific Research Institute under the Academy of the Prosecutor Generals Office of the Russian Federation has in 2009 prepared methodical recommendations concerning the application of confiscation as a criminal law measure. The authorities also report that various entities, such as the Academy of Administration of the Ministry of the Interior, the Academy of the Federal Security Service and the North-Western Institute for Improvement of Qualification of the Federal Service for Control over Drugs of Russia, have included issues concerning confiscation of property in the course of corruption crimes in their future studies. 81. The authorities furthermore submit that, on 24 December 2009, the Expert Group against Corruption under the Interdepartmental Working Group for Counteracting Economic Crimes met with representatives of law enforcement agencies to discuss possible adjustments of departmental statistics, including how to report statistics to allow for evaluation of the efficiency of the use of confiscation in relation to corruption offences. The authorities submit that the Ministry of the Interior, which register crime at the pre-trial stage, report statistics on freezing of property and confiscation; the Court Department under the Supreme Court, which registers persons convicted also registers confiscations applied and has issued an order (20 May 2009, Order #97) to the courts of first instance concerning their reporting of criminal offences and measures applied, such as confiscation. Finally, a new form of departmental report of the Federal Service of Court Bailiffs has been established by the Ministry of Justice (1 February 2010, #27) to reflect data about the number of executions conducted for the confiscation of property. 82. GRECO takes note of the information provided and concludes that recommendation xv has been implemented satisfactorily. Recommendation xvi. 83. GRECO recommended to ensure that public administration reforms to fight corruption are applicable to a wide range of public employees/officials and not only to the narrow category of civil servants. 84. The authorities of the Russian Federation refer to the adoption of the Laws on Combating Corruption (#273-FZ) and on Making Amendments to Separate Legal Acts of the Russian Federation in the light of adoption of the Law on Combating Corruption (#274-FZ) and other legislation adopted in the process of the ratification of the UN Convention against Corruption (UNCAC) as well as the Council of Europe Criminal Law Convention on Corruption (ETS 173). These laws have contributed to the spread of the application of various measures to prevent corruption and to establish liability for crimes of corruption for a wide range of state and municipal employees, including those who are not attributed to the category of
civil servant. The legal acts, regulating the order of conduct of different types of services unified the provisions concerning the establishment of relevant rules and limitations for all categories of employees in public administration (state civil servants, municipal employees, law enforcement employees, judges, the military, employees of the Bank of Russia etc). 85. GRECO takes note of the information provided, which makes it clear that broad reform is underway in Russia which goes much beyond the civil service, also covering law enforcement agents, judges and the military. However, the current recommendation was adopted within the framework evaluating the public administration in a more narrow context, as distinct from the law enforcement, the judiciary or the military. GRECO recalls that according to the Evaluation report a precise definition of the concept of civil servant was missing in Russia; however, it was made clear that not all public employees are civil servants. The current recommendation was issued in order to ensure that the administrative reforms often pronounced as civil service reforms apply as widely as possible so as make sure that public employees often at lower ranks with no mandate to take decisions, such as secretaries, assistants etc are also covered by the administrative reforms implemented in the public administration/ civil service. The Russian authorities have added, at the time of the adoption of the current report, that there is a declared intention to also cover the aforementioned categories of staff in the context of the ongoing reforms. 86. GRECO concludes that recommendation xvi has been partly implemented. Recommendation xvii. 87. GRECO recommended that comprehensive and precise legislation on the access to public information is adopted as a matter of priority and that adequate measures for the implementation of such legislation throughout the public administration, including proper supervision of the implementation, be provided following the adoption. 88. The authorities of the Russian Federation report that the Federal Law On Providing Access to Information on the Activities of State Bodies and Bodies of Local Self-Government, dated 9 February 2009 (#8-FZ), entered into force on 1 January 2010. Moreover, to ensure transparency of the judicial power, the Federal Law on Providing Access to Information on the Activities of Courts, dated 22 December 2008, entered into force on 1 July 2010. According to the Russian authorities, these laws, which establish the requirements of access to information, are built on the main principles of: transparency and availability of information, except for the cases envisaged by the Federal Law, where information is secret for various reasons. To execute the requirements of the new legislation, the state bodies, local self-government bodies and courts are to define the appropriate structural divisions or authorised officials and establish their rights and obligations by mandates and/or other acts, regulating the activities of the above mentioned bodies in order to or-
54
ganise access to information about their activities. The laws provide for possibilities to appeal against decisions not to provide access to information, within the hierarchy of the administration and, ultimately, to a court of law. The authorities furthermore submit that several authorities have, currently, started to draw up internal regulations for the application of the law and also to provide training to staff concerned. However, this is not the case in all institutions. Finally, the authorities have developed a number of IT tools, such as web pages of various public authorities and departments, including the judiciary, in order to provide for easy access to public information. 89. GRECO welcomes the progress reported. The adoption of federal legislation on access to information held by public authorities, following several attempts to this end over more than a decade, must be considered as an important achievement in the Russian Federation. Having said that, GRECO wishes to stress that it has not carried out an in-depth assessment of the new legislation within the framework of the current compliance procedure and that it therefore is not in a position to form a legal opinion on its content. GRECO cannot disregard the crucial importance of making this new fundamental legislation work in practice. The adoption of the legislation would need to be followed by a phase of implementation, which is likely to call for massive training of staff throughout the public administration at all levels, and would benefit from a coordinated plan of action on a broad scale to provide for uniform implementation and application of the law throughout the Russian Federation. It appears that the authorities have started to implement such measures on a broad scale. GRECO takes the view that a variety of them could possibly be included in Russias extensive anticorruption reforms, or in the National Anti-corruption Plan (NACP), as a long term measure. 90. GRECO concludes that recommendation xvii has been partly implemented. Recommendation xviii. 91. GRECO recommended to pursue efforts to improve procedures of administrative and judicial appeals against acts and decisions of public administration and to consider, as a long term objective, the establishment of a specialised administrative court system. 92. The authorities of the Russian Federation claim that this recommendation has been realised to a large extent for the following reasons. The Federal Code of Administrative Offences envisages the possibility of appeal against decisions of the administrative bodies. The Federal Arbitration Proceedings Code and the Federal Civil Proceedings Code establish the procedures of appeal of administrative decisions, concerning the rights of individuals and legal entities. The absence of special laws on administrative courts and administrative procedures does not, according to the authorities, impede the protection of infringed rights of individuals and legal entities in courts of general jurisdiction or arbitration courts as this protection is conducted in compliance with all principles of ad-
ministrative justice, including those which provide for the right of individuals to appeal the judicial act in the superior (higher) court instances. In view of this, the Supreme Court of the Russian Federation has initiated organisational changes and reforms in the system of courts of general jurisdiction, which aim at improving the procedures of court appeal of actions and decisions of the bodies of state administration. For example, 10 February 2009 (#2) the Plenum of the Supreme Court adopted a Resolution on the practice of examination by courts of cases of appeal against decisions, actions (inaction, omission to act) of the bodies of state power, bodies of local self-government, officials, state and municipal employees. This Resolution deals with both judicial and administrative appeals against acts and decisions of administrative authorities, inter alia, which acts that can be subject to appeal, and other relevant procedural aspects concerning the manner in which such cases are to be dealt with. Half of the appeals dealt with by the Supreme Court in 2010 concern administrative acts or decisions. The authorities furthermore state that the realisation of procedures of administrative and court appeal of actions and decisions of state bodies are not limited only to court appeal; most federal bodies of state power have adopted administrative mechanisms which envisage pre-trial (administrative) examinations of complaints, for example within the tax administration, which reportedly are expeditious and cost effective. Finally, a round table on the role and place of administrative justice was organised by the State Duma in December 2009 and that a draft law on federal administrative justice is under consideration within the State Duma. 93. GRECO recalls the situation concerning administrative complaints as it was described in the Evaluation report: Article 46 of the Constitution provides that everyone must be guaranteed protection of his or her rights and liberties in a court of law and that decisions and actions (or inaction) of state organs, organs of self-government, public associations and officials can be appealed in a court of law (paragraph 246). The legislation of the Russian Federation also provides for the possibility to appeal administrative decisions in court and it is possible to make administrative appeals against certain decisions of certain authorities, for example, in respect of the federal Bailiff s office and criminal justice authorities, according to the Criminal Procedure Code. However, there is no general administrative appeal procedure in place against administrative decisions. The GET was informed that draft legislation on uniform administrative procedures, on the creation of administrative courts and judicial administrative procedures was under consideration by the State Duma. The information gathered by the GET during the visit suggested that the prospects for adoption of such legislation are not very clear (paragraph 247). 94. GRECO takes note of the information submitted by the authorities, which does not indicate any major change to the situation as assessed in the Evaluation report. There is still no general administrative appeal procedure legis-
55
lation in place and administrative appeals are still being dealt with by the ordinary courts: a system that was considered insufficient according to the Evaluation report (paragraph 286). The new elements reported a resolution by the Supreme Court and some initiatives by the State Duma confirms an awareness of the need for reform in this area. Although no substantial legal reforms in the area of administrative justice have been considered, the measures taken represent some progress. 95. GRECO concludes that recommendation xviii has been partly implemented. Recommendation xix. 96. GRECO recommended that the authorities take determined measures to ensure that recruitment to the civil service in practice is based on the principles contained in pertinent legislation (e.g. announcement of vacant posts, fair competition between candidates and avoidance of conflicting interests) and that these principles be applied, as appropriate, also in respect of other types of employment in the public administration. 97. The authorities of the Russian Federation report that with the adoption of the Federal Law on Combating against Corruption (25 December 2008, #273-FZ), the notion of conflict of interests at civil and municipal service was introduced (article 10). This notion refers to situations where the personal interest (direct or indirect) of a state or municipal employee influences or may influence the execution of official duties which may entail damage to the rights and lawful interests of the citizens, organisations and public bodies. The law (article 11) establishes the order of prevention and settlement of such conflicts of interest in state and municipal services. With reference to this legislation, in conjunction with the requirements for announcing vacant posts publicly and the rules on competitive recruitment to the state service, as provided for by the Federal Law on State Civil Service (2004, #79-FZ) and the Order of the President of the Russian Federation on Competition to a Vacant Position of State Civil Service (2005, #112) as well as the Federal Law on Municipal Service (2007, #25-FZ), the authorities stress that there are instruments in place to implement the latter legislation in practice. To ensure that recruitment to the state service and the municipal service is carried out according to the law, the bodies of prosecution conduct checks on a regular basis. In 2009, the prosecutors revealed 263 715 violations of the laws on state and municipal service and on counteraction corruption (in 2008208 284). 98. GRECO takes note of the information provided. As a starting point, GRECO recalls that the provisions concerning recruitment to the civil service as such were not challenged in the Evaluation report (paragraph 287), but rather their implementation in practice. GRECO notes in this respect that the Law on Combating Corruption provides for further regulations in respect of officials conduct during recruitment in order to prevent conflicts of interest. Apparently, a supervisory role in the implementation of these laws is performed by the Prosecution Service.
The data on detected cases of violation of these laws illustrates the scale of the problems in the functioning of the system. On the one hand, GRECO takes the view that what has been reported by the authorities indicates the taking of general measures that may deal to some extent with the problem of recruitment and possibly other difficulties relating to the implementation of the legislation as intended. On the other hand, GRECO is far from convinced that yet more legislation with rules against conflicts of interest in combination with repressive measures as those described, are sufficient in order to develop a new culture within public administration as foreseen in the legislation. Other efforts, such as long term awareness raising and educational measures, preferably carried out within the public administration/civil service itself, would appear more appropriate in relation to the problems described. 99. GRECO concludes that recommendation xix has been partly implemented. Recommendation xx. 100. GRECO recommended to review the current measures designed to prevent conflicts of interest in order to clarify their scope of application in respect of public officials and their relatives, to remedy the shortcomings identified and to ensure that the necessary measures are fully implemented in practice. 101. The authorities of the Russian Federation clarify that the provisions on prevention and settlement of conflicts of interest, established by the Laws on Combating Corruption and on State Civil Service, also cover situations of conflicting interests when public employees, while they are executing their official duties obtain advantages for themselves and for third persons, including relatives. Furthermore, the specialised subdivisions of the prosecution service for supervision of execution of laws on combating corruption conduct regular checks on their execution, regulating the issues of detection and prevention of the conflict of interests (as developed under recommendation xix). The results of this supervision, are included in a Report to the Presidential Council on Counteracting Corruption. 102. The authorities furthermore submit that the State Legal Department of the President of the Russian Federation has prepared draft Presidential decrees on the Commission for Observance of the Requirements and Standards to the Service Conduct of Federal Civil Servants and Management of the Conflict of Interests and on Measures for Realisation of Separate Provisions of the Law on Combating Corruption. The former draft Order, which was adopted as a Presidential Decree on 1 July 2010, envisages that observance of the conduct of persons holding positions in the Federal state civil service and the settlement of such conflicts of interest, are to be examined by special commissions. The latter draft Order specifies the application of article 12 of the Law on Combating Corruption and foresees, in particular, that officials holding specific positions of Federal state service, within 2 years of their dismissal have the right to hold positions in the pri-
56
vate sector (of a certain category) only upon the consent of the relevant commission. The implementation of the Presidential decree was considered by the Presidential Council on Counteracting Corruption and it has been decided to give the Ministry of Health and Social Development the responsibility for a quarterly monitoring of the work of the commissions as well as various authorities at district and local levels, while the Department of the President of the Russian Federation is to assess and analyse the results. 103. The authorities also state that it is also planned to establish human resources services in federal state bodies, in order to prepare the activities of the planned commissions. Provisions on the division of the HR department for prevention of corruption and other offences of a federal state body were adopted by the Deputy Chairman of the Government of the Russian Federation and the Director of the Administration of the Government on 18 February 2010 (#647p-P16). 104. GRECO takes note of the information provided in respect of recommendation xx as well as relevant parts of the measures reported under recommendation xix. It follows that the Russian authorities are preparing a number of measures in order to strengthen the implementation of the regulations in place to prevent and detect situations of conflicts of interest. The establishment of special commissions with supervisory functions appears to be particularly interesting as a proactive complement to the static provisions in place. However, these reforms are not yet fully implemented in practice and their possible impact in practice can obviously not be assessed at this stage. 105. GRECO concludes that recommendation xx has been partly implemented. Recommendation xxi. 106. GRECO recommended to eliminate the practice of accepting substantial gifts of any form in the public administration and to consider abolishing the legal justification for such gifts as contained in Article 575 of the Civil Code. 107. The authorities of the Russian Federation report that on 28 May 2010, the Ministry of Health and Social Development of the Russian Federation submitted a draft Federal Law on Making Amendments to Separate Legal Acts to the Government, envisaging amendments to article 575 of the Civil Code (prohibition of gifts over a certain value) and to a large number of other laws with corresponding provisions. The draft text establishes that it would be prohibited to provide gifts to persons who hold federal state positions, state positions in the subjects of the Russian Federation; municipal positions, state employees and civil servants, municipal employees and employees of the Bank of Russia. Moreover, according to the draft law, gifts which are received for protocol reasons are considered to be public property. The authorities also submit that the ban on receipt of gifts is to be reflected in various codes of ethics. 108. GRECO welcomes the intentions reported to legislate against the long standing practice in Russia of of-
fering and receiving gifts in certain situations in a variety of different fields of the public sector. If such legislation were to be adopted, GRECO considers it necessary to follow this up with intensive awareness campaigns for the larger public as making and receiving gifts appears to be deep-rooted in Russian society. Having said that, relevant draft legislation is currently under consideration with the Government. 109. GRECO concludes that recommendation xxi has been partly implemented. Recommendation xxii. 110. GRECO recommended to introduce clear rules/ guidelines requiring public employees/officials to report suspicions of corruption, to introduce specific protection of those who report suspicions of corruption in public administration in good faith (whistleblowers) from adverse consequences and to provide systematic training to all staff concerned. 111. The authorities of the Russian Federation report that the duty of state and municipal employees to inform the representative of the employer, the bodies of prosecution or other state bodies about all cases of approaches to them by any persons in order to influence them to commit corruption offences is established by article 9 of the Law on Combating Corruption (2008, #273- FZ). This is a duty of the public employee and failure to comply with it constitutes an offence which leads to disciplinary and/or criminal sanctions. The authorities submit that, currently, the overall majority of federal bodies of state power, such as federal ministries, the Prosecutor Generals Office and a number of law enforcement agencies have adopted and issued their own detailed regulations in this respect, while other agencies are in the process of doing so. The process is under the control of the Prosecutor Generals Office. The authorities also submit that the Ministry of Health and Social Development in cooperation with the Ministry of Finance, the Ministry of Economic Development, the Ministry of Regions of Russia and the Ministry of Justice, has elaborated methodical recommendations on the order of notification of the representative of the employer about the facts to be addressed when a state or municipal official has been influenced to commit corruption offences, in accordance with part 5 of article 9 of the Law on Combating Corruption. 112. The authorities furthermore indicate that according to part 4 of article 9 of the Law on Combating Corruption, a state (civil servant) or municipal employee, who notifies the representative of the employer, is to be under the protection of the state according to the laws of the Russian Federation. In addition to this, the Prosecutor Generals Office has prepared a draft Federal Law on Making Amendments to separate and specific legal acts in order to protect persons who voluntarily report suspicions of corruption in the sphere of state administration. Amendments to this end are to be made to the Federal Labour Code and to the Federal Law on State Protection of Victims, Witnesses and other Participants of Criminal Proceedings (2004, #119-FZ). Moreover, the draft law en-
57
visages guarantees of protection for commercial and other organisations fromungrounded prosecution for reporting facts relating to corruption. 113. The Russian authorities report that a large number of training activities on combating corruption have taken place and that it is planned to include the issues of reporting corruption (part 5 of article 9 of the Law on Combating Corruption) in this training as from 2010. The following institutions are to provide such training: the Ministry of the Interior and its Academy of Administration, the Federal Security Service and the Federal Service of Control over Drugs for law enforcement personnel, the Institute of advanced training for top personnel at the Academy of the Prosecutors Office for staff at the prosecution offices and investigation committees. Moreover, professors and lecturers of the Academy of the Prosecutor Generals Office systematically participate in different events for advanced training of employees of the central administration of the Prosecutors Office and prosecutors offices of the subjects of the Russian Federation as well as investigation divisions of the Investigation Committee under the Prosecutor Generals Office. The Institute of advanced training of the Academy of Prosecutor Generals Office has elaborated and published the training programme Prosecutors supervision over execution of laws on combating corruption and a book of methodical materials is being prepared (available by the 3rd quarter of 2010) etc. The authorities finally submit that on 29 June 2009 the Order of the President of the Russian Federation on the organisation of advanced training of federal state employees (civil servants) whose official duties include the combat against corruption was adopted ( 435-rp). According to the Order, the Federal State Educational Institution of Higher Professional Training (Russian Academy of State Civil Service) is to be the executor of the order. By the end of 2010, advanced training for some 500 federal state employees (civil servants) will have taken place. Furthermore, it is planned that this training will take place on a regular basis. 114. GRECO takes note of the information provided. Concerning the first part of the recommendation, relating to the reporting of suspicions of corruption, it appears that such a requirement is limited to situations where the public official himself/herself has been subject to an offer or the like that may amount to corruption. The authorities have not indicated any general rules/guidelines for reporting all forms of corruption a public official comes across. GRECO therefore encourages the Russian authorities to broaden the scope of what should be reported. Turning to the second part of the recommendation, protection of those who report situations of corruption (whistleblowers), GRECO is pleased to note that general rules to this end appear in the Law on Combating Corruption and that further regulations are to be included in other pertinent laws, such as the Labour Code. Thirdly, GRECO notes that the authorities are in the process of developing the details of the training of public officials following the
adoption of the Law on Combating Corruption. It seems that until now, the focus has been to train the staff of the various law enforcement agencies. Considering the vast number of civil servants/public employees in the Russian Federation, GRECO considers it of utmost importance that massive prevention orientated training be established for these categories of staff. In this respect, GRECO notes that broader training of civil servants and public employees appears to be at the planning stage and that a rather limited number of public officials are concerned (some 500 staff ). GRECO is pleased that the authorities intend to give further weight to such training on a regular basis. 115. GRECO concludes that recommendation xxii has been partly implemented. Recommendation xxiii. 116. GRECO recommended to elaborate and promulgate a model code of conduct/ethics for public employees/ officials, including civil servants, which can be adjusted in light of the particular needs pertaining to different sections of public administration, and to ensure its implementation in practice, including offering adequate training to all staff concerned. 117. The authorities of the Russian Federation report that, on 16 July 2009, the President of the Russian Federation signed an updated edition of the Order on Adoption of General Principles of Service Conduct of State Employees (2002, #885) in which the general principles of service conduct of state employees (civil servants) are contained. These principles are binding. Furthermore, the authorities submit that the Ministry of Health and Social Development has developed a Model Code of Ethics and Conduct for Public Employees (Civil Servants), which has been drafted on the basis of the provisions of the United Nations International Code of Conduct for Public Officials, General Assembly Resolution 51/59 of 1997 and the Council of Europe Recommendation No. R (2000) 10 of the Committee of Ministers to member States on codes of conduct for public officials. The draft model code has been submitted for consideration and approval to the Presidium of the Presidential Council on Counteracting Corruption, after which it will be forwarded to the state bodies as a model for their own codes of ethics (conduct). The text of the Draft model code has been submitted to GRECO. The authorities also refer to codes of conduct which are already in force in particular parts of the public sector. 118. GRECO takes note of the information provided that the 2002 Presidential Order on General Principles of Service Conduct of State Employees have been updated in 2009 and that the drafting of a model code of ethics based on international standards is in its final stages. GRECO welcomes this process, which clearly will need to be followed up with an implementation phase, once the model code is adopted. 119. GRECO concludes that recommendation xxiii has been partly implemented. Recommendation xxiv. 120. GRECO recommended to adopt the necessary legislative measures in order to establish liability of legal
58
persons for corruption offences and to provide effective, proportionate and dissuasive sanctions in these cases, including monetary sanctions, in compliance with the requirements of the Criminal Law Convention on Corruption (ETS 173). 121. The authorities of the Russian Federation report that in the light of the ratifications of the United Nations Convention against Corruption (UNCAC) and the Council of Europe Criminal Law Convention on Corruption (ETS 173) as well as the adoption of the Law on Combating Corruption (2008, #273-FZ), the Russian Federation has adopted the Federal Law on Making amendments to specific separate legislative acts of the Russian Federation which, inter alia, has amended the Code of Administrative Offences (CAO) of the Russian Federation. As a result, article 19.28 on Illegal Remuneration on behalf of a legal entity, was introduced to this Code to establish administrative liability, inter alia, for corruption offences, and illegal transfer of money, securities or other property. Furthermore, article 19.28 CAO establishes sanctions in the form of administrative fines of up to three times the amount transferred, three times the value of the securities, other property and services of property nature rendered, but not less than one million roubles (EUR 24,000) in addition to confiscation of the transferred money, securities and other property. The authorities have added that there are cases in Russia where a natural person (eg a manager of a corporation) has been convicted for giving a bribe according to Article 291 CC and the corporation has been convicted for the illegal reward (gratification), according to Article 19.28 CAO for the same action. 122. GRECO recalls the wording of Article 18 of the Criminal Law Convention on Corruption which stipulates that legal persons can be held liable for the criminal offences of active bribery, trading in influence and money laundering established in accordance with this Convention. The criminal offences of corruption are contained in the Russian Criminal Code (CC) and according to Article 19 CC only physical persons can be subject to liability under the Criminal Code. GRECO is well aware that the Criminal Law Convention does not impose an obligation to establish criminal liability; however, the Convention obliges states to establish some form of liability for criminal offences of corruption. In Russia there are both administrative offences of corruption under the CAO and criminal offences of corruption under the CC. GRECO acknowledges that there is administrative liability for legal persons in respect of illegalities under the CAO; however, what has been indicated by the Russian authorities does not link this liability to the particular corruption offences provided for under the Criminal Code. Another problem is that administrative liability for administrative offences, as established under Article 19.28 CAO, may well be applicable in situations where a criminal corruption offence is also applicable. However, these are two different offences (even if they concern the same action) and the elements of the administrative cor-
ruption offence are not the same as the elements of the criminal law corruption offences; for example, an offer of a bribe, which is to be criminalised as bribery according to the Convention, would not be covered by Article 19.28 CAO, as the latter provision is limited to situations of illegal transfer of money, securities and functions and does not cover an offer. To conclude, it follows that the amendment made to the Code of Administrative Offences, namely the introduction of an administrative offence in respect of legal persons in Article 19.28 CAO does not comply with the requirements of Article 18 of the Criminal Law Convention which requires some form of liability for legal persons in respect of active bribery, trading in influence and money laundering established in accordance with the Convention. 123. GRECO concludes that recommendation xxiv has not been implemented. Recommendation xxv. 124. GRECO recommended to provide special training and/or establish suitable guidelines for the tax authorities concerning the detection of corruption offences and their reporting obligation under the law. 125. The authorities of the Russian Federation report that, on 31 December 2009, the Director of the Federal Tax Service adopted guidelines for the detection of corruption related crimes committed within the tax authorities (Order #MM-74/737@). The Guidelines contain measures to be taken against perpetrators with references to pertinent legislation. They also contain preventive measures in respect of offences etc. Moreover, on 19 January 2010, the Director of the Federal Tax Service adopted a programme to fight corruption in tax bodies (Order #MM-74/12@) to implement measures of anti-corruption policy, for example, prevention of conflicts of interest and to notify the law enforcement agencies about the signs of corruption in tax bodies. The authorities furthermore report that advanced training of civil servants of the Federal Tax Service is conducted according to educational programmes within the framework of the state order for professional training and re-training of federal state civil servants within the 2010 Federal budget, and that additional professional anti-corruption training of civil servants is planned for 2010 in the educational institutions under the Federal Tax Service. 126. GRECO takes note of the information provided and welcomes the progress reported, which is in line with the requirements of the recommendation. The authorities are encouraged to organise professional training of tax officials on a regular basis. 127. GRECO concludes that recommendation xxv has been implemented satisfactorily. Recommendation xxvi. 128. GRECO recommended to encourage auditors and other advisory and legal professions to report suspicions of corruption to the appropriate authorities. 129. The authorities report that the Prosecutor Generals Office of the Russian Federation has adopted measures to activate cooperation with professional associations of auditors, lawyers and notaries in the field
59
of combating corruption, in particular, concerning the provision of information to the competent law enforcement agencies about details of corruption offences they come across in carrying out their duties. Following a meeting (19 November 2009) between representatives of the Prosecutor Generals Office and Notary Chambers of the subjects of the Russian Federation, the Prosecutor General has adopted a Resolution containing provisions which oblige the notaries public to inform competent state bodies about corrupt acts they observe. Furthermore, the Audit Chamber of Russia has elaborated guidelines concerning reporting of money laundering and financing of terrorism for the training auditors. On 30 November 2009, the Council of the Audit Chamber of Russia adopted a decision to include provisions, which obligate the auditors to inform law enforcement agencies on details of corruption offences. Moreover, upon the initiative of the Prosecutor Generals Office, the Ministry of Finance of the Russian Federation sent an information letter to self-governed organisations of auditors (24 March 2010) on the possibility of awarding auditors if they inform the competent authorities about suspicions of corruption and on the organisation of pertinent training for private sector auditors. The authorities furthermore submit that the Federal Chamber of Lawyers (Barristers) has expressed its readiness to participate in the realisation of such activities. 130. GRECO takes note of the information provided, which for natural reasons is more substantial in respect of measures taken or underway within the public sector. The measures reported in respect of the auditors or legal professions of the private sector are more vague, however, the recommendation does not require more than to encourage representatives of these free professions. 131. GRECO concludes that recommendation xxvi has been dealt with in a satisfactory manner. 132. In view of the above, GRECO concludes that the Russian Federation has implemented satisfactorily or dealt with in a satisfactory manner just over a third of the 26 recommendations contained in the Joint First and Second Round Evaluation Report. Recommendations i, ii, vi, x, xii, xv and xxv have been implemented satisfactorily and recommendations viii and xxvi have been dealt with in a satisfactory manner. Recommendations iii, v, vii, ix, xi, xiii, xiv, xvi, xvii, xviii and xix-xxiii have been partly implemented. Recommendations iv and xxiv have not been implemented. 133. The Russian Federation received a vast number of recommendations in the Joint First and Second Evaluation Round. Some of the recommendations require fundamental measures, including the creation of a clear basis for the National anti-corruption policy, far-going legislative reforms and organisational changes in public administration, law enforcement, the judiciary as well as in rela-
III. CONCLUSIONS
tion to civil society. It goes without saying that this is an immense task to accomplish in only 18 months. GRECO is therefore pleased that the Russian authorities have addressed a large majority of the recommendations even if only just over a third of them could be considered as implemented in full. The adoption of a National Anti-Corruption Strategy and the accompanying National AntiCorruption Plan 2010/2011 for the implementation of the strategy are obviously an important achievement and so is the adoption of general legislation on access to documents and information in various fields of public administration. Having said that, it cannot be disregarded that a large majority of the recommendations need further attention by the authorities and areas such as criminal immunity of public officials and the independence of the judiciary appear particularly critical matters in this respect. GRECO notes that several recommendations require legislative reforms which have been instigated but are not yet completed and that many recommendations are about implementing legal norms, rather than adopting new legislation or rules. Moreover, GRECO notes that the prosecutorial authorities play a crucial role within the whole reform process, not only in respect of their leading position in relation to typical tasks of the law enforcement agencies, but also as a supervisory and controlling mechanism in respect of the civil service. GRECO also notes that most of the training referred to is aimed at the staff of the law enforcement authorities, most notably the prosecution authorities and the representatives of the law enforcement agencies. Such an approach conveys the message that a rather strong repressive approach to the fight against corruption prevails in Russia. GRECO wishes to stress that more emphasis needs to be placed on preventive measures outside the criminal justice sector, such as training of employees of the civil service. The adoption of the legislation concerning access to official documents, for example, would require guidelines and massive training of public employees in all fields of public administration, at central, regional and local levels in order to be effective in practice. Furthermore, existing monitoring mechanisms relating to the fight against corruption, in particular concerning the assessment of the impact of anticorruption measures introduced in various sectors, would benefit from being complemented with more input from civil society representatives, such as international non-governmental organisations with an anti-corruption agenda. 134. GRECO invites the Head of the delegation of the Russian Federation to submit additional information regarding the implementation of recommendations by 30 June 2012. 135. Finally, GRECO invites the authorities of the Russian Federation to authorise, as soon as possible, the publication of the report, to translate the report into the national language and to make this translation public. Source: www.coe.int
60
THE UKS FIGHT AGAINST BRIBERY THE BRIBERY ACT 2010 COMES INTO FORCE ON 1 JULY 2011
John Hull, Marc Hansen, Dan Smith (Latham & Watkins, London), and Kseniya Elfimova (Solicitor)
In 2010 the UK upped its game in the fight against bribery and corruption. On 8 April 2010, the Bribery Act 2010 (the Act) was approved by the government and received Royal assent1. However the Act has not yet come into force the government has announced that it will come into force on 1 July 2011. In the meantime, there are many issues for the UK and other states to consider in relation to the new legislation and its effect. This article examines the UKs progress to date in its fight against bribery and corruption, highlights the key offences under the Act and discusses some of the Acts noteworthy features which commercial organisations and individuals should consider to reduce the risk that they or someone associated with them will commit an offence under the Act in the future.
1
See http://www.opsi.gov.uk/acts/acts2010/pdf/ukpga_20100023_en.pdf
To date, the UK has relied upon antiquated, piecemeal anti-corruption laws, such as the Public Bodies Corrupt Practices Act 1889 and the Prevention of Corruption Acts 1906 and 1916. For the last 15 years there have been repeated calls for the overhaul of the outdated and fragmented old system. The way the UK previously handled its fight against bribery and corruption, both in the letter of law and enforcement efforts, has been criticised by organisations such as the Organisation for Economic Cooperation and Development (OECD) and Transparency International (TI). In order to tackle the problem, several organisations produced reports and recommendations, calling for new
HISTORIC DEVELOPMENT OF BRIBERY AND CORRUPTION LEGISLATION IN THE UK
61
John Hull
legislation to be introduced. Examples of such reports include the 1995 government-sponsored Nolan Committee Report on Standards in Public Life, 1998 and 2007 Law Commission proposals for reform and the 2007 Law Commission Consultation Paper on the issue. The legislature responded with Joint Committee reports and draft Bills between 1998 and 2003. Numerous guidelines and codes of conduct were also produced, e.g. the Serious Fraud Office (SFO) Corporate Voluntary Disclosure Guidelines (Approach of the Serious Fraud Office to Dealing with Overseas Corruption, July, 2009). One of the main shortcomings of the old legislation was its lack of clarity as to its applicability to foreign bribery. Foreign bribery was first comprehensively covered only in 2001 by the Anti-Terrorism, Crime and Security Act 2001 (ATCSA), which extended the jurisdiction of the courts in England, Wales and Northern Ireland to bribery by UK nationals and companies taking place wholly outside the UK. The ATCSA also made it clear that domestic bribery law applies to the bribery of foreign public officials. This provided jurisdiction to prosecute offences committed abroad by UK nationals and companies incorporated under UK law, even if no part of the offence took place in the UK. However, the passing of the ATCSA did not have the intended effect. By June 2008, not a single prosecution for bribery and corruption committed overseas was brought, and for this the SFO was heavily criticised. Following this
Marc Hansen
criticism, by October 2008, two prosecutions followed, as well as a civil settlement between the SFO and Balfour Beatty for 2.25 million as part of a foreign bribery investigation. Further, in November 2008, the Law Commission announced the proposed reforms, which in turn resulted in the Bribery Act 2010.
To create a full picture, it is useful to consider a few statistics and reports relating to the UK and its progress in addressing problems of bribery and corruption. On the international level, the UK has been repeatedly asked to assist other states in their investigations of foreign bribery and corruption as part of the Mutual Legal Assistance regime. For example, between April 1999 and March 2002, the SFO was asked to provide assistance to other countries in 14 cases of corruption, including 1 instance in Russia and 1 in Ukraine2. As to domestic investigations, the SFO historically only mentioned corruption as part of individual cases in its an2 See SFO Annual Report 20012002 at http://www.sfo.gov.uk/aboutus/annual-reportsaccounts/annual-reports/annual-report-20012002/ key-facts-and-figures.aspx.
DOMESTIC AND INTERNATIONAL PERCEPTION OF THE UK IN TACKLING BRIBERY AND CORRUPTION
62
Dan Smith
nual reports, and not as a separate case type category. It was not until its 20012002 annual report that corruption first appeared as a separate case category. It was also in February 2002 that the ATCSA came into force in the UK, bringing the UK closer to the requirements of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions3 (OECD Anti-Bribery Convention), to which the UK is a signatory. During 20052006, the SFO stated in its annual report that it had formed a team with responsibility for maintaining the register of all allegations of bribery or corruption of overseas officials by British persons and companies, as well as assessing and progressing the allegations, where merited. During this period, it was Germany that made the largest number of requests for mutual legal assistance. Despite these efforts, TIs 2005 Progress Report on the enforcement of the OECD Anti-Bribery Convention criticised the UK, stating it was one of the countries where no foreign bribery cases had been brought (with only 4 investigations). It also said that in the UK there was no centralisation or adequate coordination of the law and enforcement, and no prosecutions. TI also opined that the UK government needed substantial improvement in its efforts
3 See http://www.oecd.org/document/21/0,3343,en_2649_34859_20 17813_1_1_1_1,00.html.
Kseniya Elfimova
to build public awareness of the issue and that the use of corporate compliance programs, accounting and auditing requirements may need to be strengthened. TIs comments may have had an effect. In its 2007 2008 annual report, the SFO stated that they were actively investigating overseas corruption and that almost a third of their cases under investigation fell into this category. Further, in 2007 there was one reported case of domestic bribery by foreign companies (although subsequent figures in relation to such bribery have not been reported to date). In its 20082009 annual report, the SFO dedicated a large section to its commitment to fight against corruption. In 2008, TI considered firms headquartered in the UK as the fifth least likely (jointly with Germany and Japan) to engage in bribery when doing business abroad, out of 22 countries in TIs Bribe Payers Index, up from sixth place in 2006. It was, perhaps, concerning that despite its top 5 ranking in 2008, a separate statistic in the 2008 Bribe Payers Index (which was not taken into consideration in the ranking) said that 58% of survey participants thought that the UKs efforts in the fight against corruption were either ineffective or very ineffective. As this was a new statistic for the 2008 Bribe Payers Index (and no subsequent reports have been produced), it is unclear how this figure may have changed with time. Between 2005 and 2008, the UKs efforts in relation to foreign bribery prosecutions and investigations increased,
63
25 20 15 10 5 0
Prosecutions Investigations
2005
2006
2007
2008
Fig 1. Foreign bribery prosecutions and investigations in the UK 20052008. Source TI Progress Reports on OECD Anti-Bribery Convention as set out in Fig. 1. However, despite the increase in investigations and prosecutions, this placed the UK only in the moderate enforcement of the OECD Anti-Bribery Convention group of countries in TIs Progress Report 2009. Separately from the Bribe Payers Index, TI has also been publishing an annual Corruption Perception Index (CPI), which, since 1995 through to the latest figure of 2010, illustrates that UKs standing has been broadly consistent over the years (see Fig.2). Fig. 2 shows that until 2008 the UK ranked in the top 15 of the countries considered in the survey, as compared to a much more fluctuated and lower rating of countries such as Russia and Ukraine. In 2008, 2009 and 2010, the UKs ranking fell to 16, 17 and 20 respectively. Whilst this indicates an increased perception of corruption in the UK (relative to other countries) during the last three years, it is possible that this change may have resulted not from an actual increase in instances of bribery and corruption, but instead may be explained by the rise in the public awareness and con160 cern over the issue. 150
Rank
that the Act will come into force on 1 July 2011. In anticipation of this, commercial organisations and individuals around the world, and especially those with dealings in the UK, should be aware of the Act and its provisions. Once the Act comes into force it will replace the fragmented offences under existing law and will provide a more effective legal framework to combat bribery in both public and private sectors. It creates two general offences covering the offering, promising or giving of an advantage, and requesting, agreeing to receive or accepting an advantage, together with a discrete offence of bribery of a foreign public official. Both general offences apply to behaviour taking place either inside the UK, or outside it, provided certain linking requirements are satisfied, such a person having a close connection with the UK. Significantly, the Act creates a new strict liability offence for commercial organisations who fail to prevent bribery, unless they can prove their procedures for prevention are adequate. In doing so, one of the Acts aims is to help tackle the threat that bribery poses to economic progress and development around the world. As every commercial organisation faces the risk either that its representatives will be bribed, or that they will attempt to bribe others, the provisions of the Act need to be considered in detail and every commercial organisation should review its internal anti-bribery measures and consider what steps it should take to protect itself from investigations or even prosecution. Under the Act it is an offence for a person to offer, promise or give a financial or other advantage to another person (whether directly or through a third party), intending that this will induce someone (not necessarily the per152 149 134 118 134 154
GENERAL OFFENCE ONE: BRIBING
143 128 128 113 121 99
147
In order to address the rising criticism of the UK system and to bring the UK in line with the leaders in the struggle against bribery and corruption, on 8 April 2010 the Act became law. The Act is far-reaching, with worldwide scope, and its potential defences are still unclear whilst its sanctions include unlimited fines. The Act closely follows the requirements of the OECD Anti-Bribery Convention in creating a separate offence of bribery of a foreign public official. It also brings bribery offences into purely private transactions (provided other elements are satisfied). Although the Act has been passed, it has not yet come into force. The UK government has announced
THE BRIBERY ACT 2010
140 130 120 110 100 90 80 70 60 50 40 30 20 10 14 13 13 13 13 12 47 49 76 70 83 77 88 83 83 81 86 74 87 95
20 16 17
11 11 12 12 10 10 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year Russia Ukraine United Kingdom
Fig 2. TIs Corruption Perceptions Index (CPI) for the UK, Russia and Ukraine for the period 19952010. Source TIs annual CPI records
64
son being bribed) to perform improperly a relevant function or activity, or to reward someone for improper performance. It is an offence if the person giving the bribe knows that the acceptance of the advantage would in itself constitute the improper performance (by that person or another) of a function or activity.
It is an offence to agree to receive or accept a financial or other advantage, (1) intending that, in consequence, a relevant function or activity should be performed improperly or (2) where this in itself constitutes improper performance or (3) as a reward for improper performance. A person will also be guilty of an offence if (4) he or a third person at his request or with his assent or acquiescence performs improperly (whether or not the third person knows or believes the performance is improper) in anticipation of a request, agreement to receive or acceptance of a financial or other advantage. In cases (2)-(4) it does not matter whether the receiver knows or believes the performance is improper.
GENERAL OFFENCE TWO: BEING BRIBED
The functions or activities that may be affected by a proscribed bribe encompass a very wide range of behaviour. They include not only public functions, but also selected private functions, i.e. any activity either connected with a business, trade or profession, performed in the course of a persons employment, or performed by or on behalf of a body of persons. The explanatory notes to the Bribery Bill made it clear that the purpose of this definition
FUNCTIONS OR ACTIVITIES AND THEIR IMPROPER PERFORMANCE
is to ensure that the law applies equally to public and private functions without discriminating between the two. Functions or activities include behaviour anywhere in the world, even if it is unconnected with the UK. Furthermore, where the functions or activities performed are not subject to laws of the UK, any local custom or practice is to be disregarded, unless it is permitted or required by the written law (either judicial or legislative) of the country or territory concerned. For example, this means that facilitation payments, being simply customary or apparently officially tolerated, are not permitted under the Act. The government representatives have recognised that this will pose a challenge to many organisations operating abroad who have to deal with everyday petty bribing practices, but the Act is underlined by a zero tolerance stance, wanting to challenge the problems head on. That said, there is no requirement under the Act that every instance of a breach, such as a facilitation payment, be prosecuted and much will be left to the prosecutorial discretion whether to bring criminal proceedings in any given case. There is further concern that some corporate hospitality practices might now constitute offences under the Act. However, the then Parliamentary Under-Secretary of State for Justice stated during the parliamentary debates preceding the passing of the Act that to the extent that reasonable hospitality is a normal part of business, [the government is] not seeking to discourage such practices. She further stated that if a case involving corporate hospitality came to the attention of the investigating and prosecuting authorities the public interest might not be best served by a prosecution unless the hospitality was excessive or unreasonable4. Finally, the UK Ministry of Justice (the MOJ) published a guidance about commer-
4 See Column 109 of the Hansard from 23 March 2010 http://www. publications.parliament.uk/pa/cm200910/cmpublic/bribery/100323/ ITAR-TASS photo am/100323s01.htm
65
cial organisations preventing bribery (see further below), which recognises corporate hospitality as an established and important part of doing business, and the MOJ does not intend reasonable and proportionate expenditure to be prohibited or prosecuted. Following this, it is clear there is no intention to impose a blanket ban on all corporate hospitality activity and that prosecutorial discretion would apply in each individual case. It is also notable that not all types of functions and activities are caught by the Act. The Act limits its application to functions or activities which are expected to be performed in good faith, impartially, or by a person in a position of trust who is expected to act in a particular way. Improper performance is where the performance is in breach of the relevant expectation.
The Act provides for a specific offence of bribery of a foreign public official, although to some extent this can be seen as a species of General Offence One. In essence, it is an offence to bribe a foreign public official with the intention to influence the official and to obtain or retain business or a business advantage. The bribery constitutes an offer, promise or giving of financial or other advantage to the official or to another at the officials request, assent or acquiescence, where the official is neither permitted nor required by the relevant written law to be so influenced.
OFFENCE THREE: BRIBERY OF A FOREIGN PUBLIC OFFICIAL
ITAR-TASS photo
Where any of the above three offences are committed by a body corporate with the consent or connivance of a senior officer (not necessarily a director) of that body corporate, or a person purporting to act in that capacity, both the senior officer and the corporate body will be guilty of the same offence. However, where the body corporate commits the offence outside the UK, the senior officer will only be guilty if the senior officer has a close connection with the UK.
OFFENCE FOUR: SENIOR OFFICER CONNIVANCE
The territorial application of the general offences is very wide. The Act will apply if any act or omission which forms part of the offence takes place in the UK or if any act or omission outside the UK would form an offence if done or made in the UK and the person has a close connection with the UK. A person has a close connection if they were, at the relevant time, among other things, a British citizen, an individual ordinarily resident in the UK, or a body incorporated under the law of any part of the United Kingdom.
TERRITORIAL APPLICATION GENERAL OFFENCES
Section 7 of the Act introduces a new offence targeted specifically at commercial organisations, which is of a dif-
OFFENCE FIVE: CORPORATE FAILURE TO PREVENT BRIBERY
ferent nature to the offences set out above (Section 7 Offence). A relevant commercial organisation is guilty of an offence if a person associated with the organisation bribes another person intending to obtain or retain for the organisation business or a business advantage. This is the case even if the associated person has no close connection with the UK (i.e. even where the associated person has not committed a free-standing offence purely because the associated person does not fall within the Acts territorial application). Relevant commercial organisations are either UK corporate bodies or partnerships carrying on business anywhere in the world or foreign corporate bodies or partnerships carrying on business in the UK. A person will be associated with an organisation if he performs services for or on behalf of the organisation. His precise capacity does not matter and he may be the organisations employee, agent or subsidiary. The Section 7 Offence is a strict liability offence which means that liability does not depend on proof of the organisations state of mind. However, the Act provides for one defence, namely that the organisation had in place adequate procedures designed to prevent persons associated with the organisation from undertaking [the bribery]. The Act does not specify what would constitute adequate procedures. However, the Act obliges the Secretary of State to publish guidance about procedures that relevant commercial organisations can put in place to prevent persons associated with them from bribing for the purposes of the adequate procedures defence.
66
ITAR-TASS photo
The guidance was long awaited. Originally, it was expected that the Secretary of State would publish guidance about procedures (as section 9(1) of the Act requires) in September or October 2010. The basis for this was an expectation that the Act would come into force before the end of 2010, coupled with an assurance to Parliament by the then Minister of Justice Jack Straw that the guidance would be published at least three months prior to the Act coming into force. However, on 20 July 2010 the government announced that in September 2010 it would launch a short consultation exercise on the guidance about procedures which commercial organisations can put in place to prevent bribery on their behalf. The consultation began on 14 September 2010, when the government published the draft guidance on adequate procedures. The draft guidance included a number of questions about the contents of the guidance, and, between 14 September 2010 and 8 October 2010, a public consultation was conducted in relation to the draft guidance. As part of this consultation, the public had the opportunity to comment in relation to the principles set out in the draft guidance. The public consultation also included a series of awareness-raising events designed to ensure widespread awareness of the changes the Act makes to the current law. The commitment to a consultation process was a welcome development, which gave industry a further opportunity to contribute to the process of developing the guidance about procedures. The awareness-raising events were also welcomed. The government deliberated the responses received in relation to the draft guidance for several months.
On 31 January 2010, a spokesman for the UK Ministry of Justice (MoJ) confirmed that publication of the MoJs guidance on adequate procedures was being delayed, contrary to the MoJs previous indication that the guidance would be published early in 2011, widely interpreted as before the end of January. The delay is widely perceived to have been caused by pressure from industry (most notably the Confederation of British Industry) and from UK press expressing concerns at the scope of the offences and at the alleged competitive disadvantage to UK businesses when competing with those outside the application of the Bribery Act. The final guidance was published on 30 March 2011. Accordingly, the government announced that the Act would come into force some three months later, on 1 July 2011, to allow businesses an adequate familiarisation period before the Act commences. It is important to bear in mind that, because of the way the Act has been drafted, the final guidance on adequate procedures does not provide safe harbours for relevant commercial organisations. Further, whilst the guidance is a useful reference guide as to the meaning of adequate procedures, what will constitute adequate procedures will be a matter for the English Courts, and the guidance will not necessarily bind them. The final guidance about procedures is neither prescriptive nor exhaustive to enable all organisations to assess the adequacy of their procedures with absolute certainty. Therefore, organisations may still need to consider their position carefully before knowing what, if any, changes they should make to their procedures.
Under the Section 7 Offence the territorial application is exceptionally wide, although its full extent is unclear. It is currently not clear what brings non-UK commercial organisations within the jurisdiction of the Section 7 Offence. What we do know is that any relevant commercial organisation could be subject to the offence and this definition includes bodies corporate or partnerships, wherever incorporated, which carry on a business, or part of a business, in any part of the UK. The uncertainty arises as carrying on business is not defined, save that it includes a trade or profession. The authors of this article have not found a specific general definition, and it may well be that an ordinary meaning will be given to this. This lack of definition has been raised prior to the passing of the Act, but the Act deliberately left this undefined, meaning that cases will be considered on their specific facts and not on a defined framework. It has been argued that activities such as listing GDRs or other securities (e.g. notes) on the London Stock Exchange would fall within carrying on business. The guidance on adequate procedures, published on 30 March 2011 (see above) offers some help by stating that the Section 7 Offence would apply only to those relevant commercial organisations that have a demonstrable business presence in the UK, and a
TERRITORIAL APPLICATION SECTION 7 OFFENCE
67
mere listing will not be enough. How this measure of demonstrable business presence will be applied in practice remains to be clarified by future case law. An individual committing an offence can be liable to imprisonment for up to 10 years. Both individuals and other persons can be liable to an unlimited fine.
SANCTIONS
The Act raises a number of difficult legal and practical issues which will require careful consideration by commercial organisations and individuals. The following issues are particularly noteworthy: 1. Offences can arise from purely private transactions. It is not necessary to find a public or governmental element. 2. Offences have a very wide geographical scope a UK citizen, resident or corporate entity appears sufficient to trigger application of the law, with even wider provisions for the Section 7 Offence for anyone carrying on business in the UK. 3. Foreign customs which are not permitted or required by written law however legitimate they may be cannot be taken into account. 4. The definition of relevant functions and activities (and in particular, concepts of good faith, impartiality and positions of trust) are imprecisely drafted, and unless the official guidance assists, the Act will require careful review of many forms of corporate conduct. 5. Significantly, the Act distinguishes itself from other English law on related topics (such as the Enterprise Act 2002 and the conspiracy to defraud) by not containing a dishonesty test. This is likely to significantly facilitate prosecutions. Also, many offences do not even require improper performance: for almost all, it is enough to offer, or agree to receive, the bribe. Last, many offences do not even require awareness of impropriety. 6. It is possible for a corporate body to commit the general offences. 7. There are severe personal consequences for senior officers where offences occur with their consent or connivance. 8. The Section 7 Offence requires no corporate act, and the burden of proving the adequate procedures defence is on the commercial organisation. This may be a difficult burden to meet in many cases. Whilst the coming into force of the Act is awaited on 1 July 2011, progress is being made in the UK in the arena of fighting against bribery and corruption, which has been internationally noted. The latest annual report from the SFO for 20092010, published in July 2010, showed that 26% of cases accepted
WHAT DOES THE ACT MEAN FOR INDIVIDUAL AND COMMERCIAL PERSONS?
for investigation by the SFO related to corruption and bribery, second only to corporate services fraud cases at 27%. The TI Progress Report 2009 on the Enforcement of the OECD Anti-Bribery Convention noted that in 2008 the UK concluded 4 cases. These included the UKs first foreign bribery case against CBRN Ltd, reaching a civil settlement with Balfour Beatty Plc and a Financial Services Authority fine on Aon Ltd for failure to have effective systems and controls in place to counter the risks of bribery and corruption associated with making payments to overseas firms and individuals. However, there is still a lot of work to be done. For example, although the TI Progress Report 2010, published in July 2010, recognised the Act as a crucial step, it noted it was regrettable that the entry into force of the law has been delayed, urging that there should be no further delay and expressing concern that consultations may weaken the provisions of the law. The report, in line with earlier reports, concluded that the UK had no enforcement measures and no effective anti-bribery compliance programmes relating to foreign bribery enforcement. That said, in comparison to the other OECD Anti-Bribery Convention signatories, the UK is equal to or just behind only the US and Finland, these three being the only countries ticking yes in 6 out of 8 various compliance criteria specified, with the rest of countries satisfying 5 or fewer criteria. The report further states that, at the date of publication, the UK had 3 pending cases and 24 investigations, with 2 cases concluded in 2009 and 3 cases concluded to date of publication in 2010. This includes the first conviction of a UK company for bribery of politicians, ministers and public officials in Ghana, Angola, Madagascar, Mozambique, Bangladesh and Jamaica. The settlement between the SFO and BAE Systems (involving the highest fine to date) was approved by the UK courts in December 2010. It is widely hoped that once the Act comes into force, the statistics and number of successful prosecutions relating to bribery and corruption will drastically improve, following one of the Acts aims to bring about a new era of strict enforcement against bribery, and foreign bribery in particular. It is expected that the new regime will reform the law and bring forward a new consolidated scheme of bribery offences to cover bribery both in the UK and abroad5. As the UK moves forward in its pursuit of conquering problems of corruption and bribery, the Act will be of significant concern for businesses, in particular those with large international reach. Not only is there a risk of the commercial organisation committing an offence, there is also obvious reputational damage and business disruption in cases where those associated with it are involved in bribery. Commercial organisations should review the Act carefully and ensure their worldwide internal systems and controls are adequate.
5
CONCLUSION
POISED FOR ACTION
See the Bribery Act 2010, Explanatory Notes
68
THE US EXPERIENCE ON FIGHTING CORRUPTION

Alexander Sukharenko (Russia, Vladivostok)
Despite being of a minor scale compared to Russia (as evidenced by the annual ratings of Transparency International), corruption remains a serious problem for the United States. Suffice it to say that in the last 2 years about 1,6 thousand US officials at the federal, state and local levels have been convicted of corruption offenses. Another 3,2 thousand corruption cases are currently being investigated or reviewed. Fighting corruption is the main professional specialization of some 700 FBI agents across the country. These figures were cited in March at a congressional hearing by the FBI Assistant Director Kevin Perkins. In the US, criminal liability for corruption is prescribed by the Chapter 11 of the Title 18 of the United States Code, titled Bribery, unlawful gain and conflict of interests. An Article 201 (b) (1) (Bribery of public officials and evidence) in the Chapter 11 of Title 18 of the USC provides for criminal penalty for offering, promising and giving bribes to a public official in exchange for committing an illegal act. In Russia, the legislation prescribes penalty for bribery only. According to the Article 201 of the Title 18 of the United States Code, the bribe can be of any value, in monetary or non-monetary form. In Russia, a bribe given in a non-material form is currently not considered punishable. Paragraph (b) (2) in the Article 201 of the Title 18 of the USC provides for the liability of a public official who directly or indirectly demands a bribe, seeks, receives, accepts or agrees to receive or accept any valuable asset, personally or for the benefit of any other person or entity, in exchange for any unlawful act or omission in his public duties. Punishment for bribery, as described in Article 201 of the Title 18 of the USC is provided in a form of a fine, in the amount equal to bribe amount multiplied by three, or imprisonment for a period of up to 15 years. Both penalties can be combined, as decided by the court. Paragraph (c) of the Article 201 of the Title 18 of the USC provides for punishment for the above listed acts even if they are aimed at encouraging an official to commit lawful, legal acts, i.e., for giving and receiving gratitude. The penalty includes a fine in the amount which is determined by the court, or imprisonment for a period of up to 2 years, or
69
combination of both. In the US, public official is entitled to receive remuneration for his work only from the Government. The US legislation recognizes as criminal offense the receipt of money by an official or employee from another person and payment of such compensations to individuals and organizations, i.e. bribery in general, without regard to any particular act or omission thereof, committed by an official or employee (Article 209 of the Title 18 of the USC). A violation of this rule is punishable by up to 5 years in prison, or a fine equal to the amount received, or a combination of both (Article 216 of the Title 18 of the USC). Another rule in the US legislation implies a criminal liability for banking management executives for giving loans or cash gifts to inspector or his assistant who audits the bank, or has the right to audit it (Article 212 of the Title 18 of the USC). Moreover, in order to hold the person responsible it is not necessary to prove that an
auditor has taken any action for the benefit of the bank. This criminal offense is punishable by imprisonment for a period not exceeding one year, or a fine in the amount of the loan or gift. The same penalty and disqualification is prescribed for the auditor who accepted a loan or a gift from the bank he audited, or may audit (Article 213 of the Title 18 of the US). A special rule applies to bribery of employees of the federal banking system with an aim to receive a state loan (Article 215 of the Title 18 of the USC). This Article provides for a fine of up to USD 1 million, or three times the value of object given, offered, promised, solicited, demanded, accepted or agreed to accept. The Article also provides for imprisonment for up to 30 years, or the combination of the two penalties. If the value of the bribe did not exceed one thousand dollars, an imprisonment period cannot exceed one year. On October 17th, 1990, the US President had signed an Order N 12731 which established common principles
70
of ethical conduct for government members and public officials. In their essence, these principles contain rather specific legal and ethical requirements for senior public officials and odinary public officers. According to this document, the public service should be viewed as a line of work excluding any personal or other financial interests, impeding honest implementation of duties. Public officials must not engage in financial transactions which imply the use of inside government information or use such information for personal purposes. Public officials are strictly forbidden to accept gifts from any person or group of persons asking them to commit any official acts, carrying out any general business together, or engaged in the activities regulated by the authority where such public official is employed. They are also forbidden to accept gifts from persons whose interests are largely dependent on these officials performing their duties. Public officials are obliged to report to the appropriate authorities all cases of fraud, abuse and corruption. The Order traditionally limits the opportunities to earn additional income on top of basic (career) salary. Officials appointed by the President of the United States cannot earn any other income during their service and from any activities or services that go beyond the immediate line of duty. The tax reporting procedure for American public officials is regulated, in addition to the above mentioned Order, by the USA Act on Ethical Conduct for Public Officials, 1978. An Executive Order strictly requires all employees in the White House and other executive agencies ( 100.735 24) no later than 90 days from the date of this Order entry into force, to provide the Heads of their departments with the following information: a) List of all corporations, companies, firms and other forms of business, organizations, non-profit, educational and other institutions which the employee directly or through his wife, minor children or other members of his family is currently engaged with in any activities. The term activities in this case means any continuing financial interest or any communication with officials of these organizations, regardless of the capacity in which he acts. b) n official is required to provide a list of all of his personal creditors, the creditors of his wife, young children and others family members living with him. c) Information about immovable property owned by all of the above listed individuals. d) Information about his continuing business, financial and other interests. This information is checked by a specially appointed individuals or groups of individuals in any public office or department, or the commissions, which, if necessary, may seek additional information, call for an interview the officials themselves, and conduct an investigation. If any violations committed by a public official are discovered, the consequences may come in the form of one of the following remedies:
ITAR-TASS photo
partial or full disqualification; downgrading; an advice to end conflicting financial ties. The public officials under the threat of punishment are forbidden from using their official position representing anyone's interests in cases against the United States (Article 205 of Chapter 11 of the Title 18 of the USC). In addition, Article 207 of Chapter 11 of the Title 18 of the United States Code prohibits former officials to engage in matters on someone else's side against the USA. They are forbidden any contacts with former colleagues (any communication to or appearance before any officer or employee) aimed at influencing them in someone's favor. These restrictions are implied for a period of 1 to 2 years. Article 208 of Chapter 11 of the Title 18 of the USC provides that an official should not participate in the review of the case, in which he, his spouse, minor child, senior partner, an organization in which he serves as an officer, director, board member, senior partner or employee, or any person or organization with which he is in a contractual relationship or has any arrangement concerning future employment, have a financial interest. This is due to the fact that the personal interest of an official may enter into conflict with the public interest and hinder an impartial review of the case. An official must in advance, before accepting the case for review, notify his boss that there is a conflict of interests. The senior official then passes the case to another official or gives a written order to his subordinate to accept a case, if he finds that the personal interest is so insignificant that it does not affect the impartial review of the case. The official who violates this rule shall be punished with imprisonment for a term of 5 years. Public officials must declare their financial interests in special questionnaires. Providing false information in the questionnaire in order to conceal a conflict of interest is in itself a criminal offense under Article 1001 of the Title 18 of the USC. In addition, the US legislation prohibits transactions between any persons related to recruitment to the federal public service. The legislation recognizes as a criminal offense the demand or acceptance of money or valuable
71
assets for assistance with recruitment to the public service (Article 211 of the Title 18 of the USC). A perpetrator shall be punished by imprisonment for 1 year, or a fine in the amount of demanded or accepted bribe, or combination of both types of punishment. An exception is made for special recruitment agencies that are granted permission to participate in recruitment for public service. A US Attorney General, in addition to the designated punishment in a criminal case, may file a civil suit with the US District Court, demanding to recover from the offender a fine of up to USD 50 thousand. Penalty may be greater or equal to the amount that the offender has received (gave) or intend to get (give) for bribery (Article 216 (b) of Chapter 11 of the Title 18 of the USC). In 1995, the US president signed a new, stricter law on disclosure of lobbying activities (Lobbying Disclosure Act), which entered into force on January 1, 1996. It covers lobbying not only in Congress but in the executive agencies, introduces many new definitions, and lists 19 types of acts that do not fall under the term lobbying. Penalties for violation of the law have been increased five times, but the violators would not face imprisonment. The new law introduced a provision stating that all foreign lobbyists representing commercial interests should be registered along with their American counterparts, and foreign agents, subject to the Law on Foreign Agents Registration (1938), are now only those agents, whose aim is to promote the influence of a foreign state (employees of embassies, international organizations, etc.). This occurred due to the globalization of business in the world, resulting in increased influence of foreign lobbies in the US The proposed new law was also justified by the fact that before only one out of five lobbyists chose to register, while others preferred not to announce their activities, instead positioning themselves as experts, consultants, informants, etc. The procedure for registration and reporting is regulated by the Lobbying Disclosure Act. In the United States, legislation recognizes as criminal offense not only the actions of current officials, but also candidates for public offices, who offer to use their influence or appoint any person to public or private office in exchange for support for their candidates in elections (Article 599 of the Title 18 of the USC). The US law also
ITAR-TASS photo
punishes a promise of public offices or the state contract to any person in exchange for support in the elections to any political office (Article 600 of the Title 18 of the USC). In order to encourage state employees to detect cases of corruption in organizations where they serve, and report them to competent persons, the United States legislators adopted the Act on the protection of whistleblowers (The Whistleblower Protection Act). An official pursuing his subordinate for reporting of the offense in an organization is subject to disciplinary action initiated by the Special Board (Special Council), investigating the fact of persecution. As practice shows, the informant gets 15 to 30% of the value of material damage determined based on his report, and is protected from persecution. Witness protection measures help to investigate corruption cases and prosecute high-ranking officials. To affect these measures, two legal acts were passed at the federal level: Federal Witness Security Program and Emergency Witness Assistance Program. The fighting against corruption is aided by the fact that the US legislation actually does not grant immunity which would allow officials to avoid punishment for corrupt practices. Any official, including the President, can be prosecuted, although in a special procedure, after he is removed from the office. According to the Article II (Section 4) of the US Constitution, the Congress may remove from office, using impeachment procedure, not only the President, but any civil public officer of the United States. Each House of Congress, upon the decision of the two-thirds of its members, may revoke his status from any member of the Congress for committing corrupt acts (Section 5 of the Article II of the US Constitution). The Select Committee on Ethics of the Senate and the Committee on Standards of Conduct of the House of Representatives are elected for the investigation of corruption in the chambers of Congress by an ad hoc committee on ethics. Bribery of officials of private organizations (commercial bribery) is officially prohibited by the provisions of criminal law only in 37 states. However, in other states, cases of commercial bribery may lead to criminal proceedings for fraud. Federal authorities initiate a criminal proceeding for commercial bribery only if it was implemented using federal mail or telegraph. Laws on Postal Service and Telegraph are included in Articles 1341, 1343 and 1346 of the Title 18 of the USC. Some of the states impose criminal responsibility for union leaders for accepting a bribe for the conclusion of a collective agreement, determining the size of employer social security contributions, or preventing a strike. The US legislators were the first in the world to pass a law banning bribery of foreign public officials in the course of commercial activities, the so-called Foreign Corrupt Practices Act of 1977. Today, this Act applies to companies and US citizens, wherever they commit bribery. The Act also applies to
72
ITAR-TASS photo
foreign companies and foreign nationals, if they commit bribery in the United States, notwithstanding the fact that the bribery is committed directly or through an intermediary. The responsibility for this offense applies not only for an accomplished act of transferring a bribe, but also for the offer, or a promise of a bribe to officials or a third party to which an official directs. The Act views as a criminal offense only those payments aimed at motivating the official to commit unlawful acts or omissions. Payments intended to accelerate the production of lawful action, the so-called incentive payment (facilitating payments) are not considered a crime. The Act applies to the bribery of a foreign official, foreign political party, party official or a candidate for political office abroad. A foreign official, in turn, is any officer or employee of a foreign government, as well as public international organization. The Act only applies to international business activities, and does not cover bribery in the public interests (espionage, political bribery). Under this Act, bribery of foreign public officials is punishable by a fine of up to USD 2 million, imposed on the company. Simultaneously, persons engaged in bribery are punished by a fine of up to 100 thousand dollars, or imprisonment for up to 5 years. The amount of fine may be higher. If a bribe is considered major, then, in accordance with the Alternative Fines Act, the court may impose a fine in an amount equal to double benefit that the defendant hoped to obtain through bribery. A fine imposed on an individual cannot be paid by his employer. For other violations of the Act on Foreign Corrupt Practices, not involving direct bribery, the company or its official may be fined for up to 10 thousand dollars in civil law suit by the Attorney General of the United States. A claim for compensation for damage caused to a competitor through the bribery of foreign officials may be filed in court by a private company. For nearly 30 years after the entry into force in 1977, the Act was seldom applied. However, starting in 2005, the number of investigations conducted by the Department of Justice, the Securities and Exchange Commission (SEC) and Federal Bureau of Investigation
(FBI), has increased from approximately 5 per year to 40 only in 2009. The above listed agencies have created special units to apply the FCPA, which are investigating more than 140 criminal cases involving US and foreign companies and individuals. Gaining even more attention of business leaders around the world, US officials are increasingly conducting investigations in respect of individual employees, managers, directors and agents. In 20082009, 10 people were sentenced to prison terms of up to 7 years and at least 19 people are currently awaiting sentencing for violations of the Act provisions. This Act is actually working. In March 2010, the US Justice Department has accused the German automaker Daimler of corruption. According to investigators, the company has been accused of corrupt practices in the period from 1998 to 2008, and violated the laws of at least 22 countries, including Russia. The Daimler clients in Russia included MIA, MOD, Special Purpose Garage FSO, Enterprise Dorinvest and Machinoimport, officials of the Moscow Government, the Administration of the New Urengoy and Ufa. In total, during the period from 2000 to 2005, sales of Mercedes in Russia totaled USD 1.4 billion, out of which USD 64.6 million was earned on contracts with government officials. Bribes and payments were made to public officials through the accounts of offshore companies or directly passed to company representatives. In April, prosecutors and auto concern has reached an agreement for the amicable settlement of the charges. As a result, concern admitted the fact of corruption and was fined USD 180 million, while its Russian representative office was fined USD 27.36 milion. In November of this year, Commission on the Securities and Exchange Commission (SEC) has accused the 7 oil suppliers and shipping companies of bribing customs officials in more than 10 countries, including Russia. Among them Panalpina and its customers Royal Dutch Shell, Pride International, Tidewater, Transocean, GlobalSantaFe, and Noble. The SEC report stated that Panalpina is accused of bribing customs officials to Nigeria, Angola, Brazil, Kazakhstan and Russia in 2002 2007. All the companies pleaded guilty and are willing to pay a total of USD 236 million for their illegal actions. Of them, about USD 80 million is the return of illegally obtained income, the rest- penalties. The US authorities also suspected of corruption a US company Diebold, manufacturer of ATMs. The Securities and Exchange Commission (SEC) believes that the Russian office of the company bribed public officials within the period from 2005 to 2008. The reason for the investigation being suspicious transactions made by the Russian subsidiary Diebold Self-Service CIS, which were detected in July 2010 by the Diebold parent company. In this regard, Diebold has initiated an internal investigation and began collecting information on the activities of its Russian office. Preliminary results of an investigation were voluntarily handed by the company to the Ministry of Justice and the SEC.
73
Regulations of the United Kingdome, USA, Germany, Austria, Switzerland, Netherlands and Japan legal systems on confiscation of funds and assets obtained as a result of crime
State Duma Security Committee, State Duma Commission on Anti-corruption Legislation
LEGAL SYSTEMS OF CONFISCATION
To begin with, we have to note the existence of significant differences between methods and approaches of various law systems when it comes to confiscation of funds and assets obtained by illegal means. While some law systems enforce so called property-based system, others rely on the value-based system, and the rest use the combination thereof. The property-based system provides for the confiscation of assets which was allegedly used to facilitate the crime, and (or) crime proceeds. The value-based system prescribes determination of the value of proceeds and instruments of crime followed by the confiscation of an equivalent value. In the combination of these systems, crime proceeds and instruments are confiscated while simultaneously determining the value of income received from the criminal
activities (used, destroyed or concealed by the offender) and confiscation of equivalent value. Other differences concern the list of criminal offences that invoke confiscation, requirement for precedential conviction of the offender1, used standards of proof (in criminal or civil proceedings)2, and issue of legitimacy of the third party assets confiscation, under particular conditions.
1 In some countries, the confiscation is allowed without conviction, if the alleged offender absconds for a certain period of time, and the civil proceeding has yielded the evidence that the assets obtained represent the proceeds of crime activities or can be recognized as crime instruments (means). Other countries allow the confiscation to take place upon a decision made by the civil or administrative court. 2 Furthermore, in some countries the legislation provides for discretional right to transfer the burden of proof, thus the accused party is obliged to prove the legitimacy of property origins.
74
The legislation in many countries allows to transfer the burden of proof from the law enforcement authorities (courts) to accused individual (alleged or charged offender) when it comes to crime proceeds. The results of the poll organized by the UN demonstrate that, according to the current legislation of Algeria, Afghanistan, Bahrain, Belarus, Bulgaria, Brazil, Honduras, Greece, Indonesia, Spain, Italy, Colombia, Mauritius, Madagascar, Malaysia (only in case of crimes related to drugs), Malta, Morocco, Mexico, Myanmar, Namibia, Norway, United Republic of Tanzania, Poland, Portugal, Thailand, Tunisia, Turkey, Uzbekistan, the Philippines, Czech Republic, Switzerland (in cases of crime by a criminal group), Ecuador and the Republic of South Africa, the burden of proof of legitimacy of the alleged proceeds of crime or other assets subject to confiscation may be placed on the individual who committed the offense. The legislation in different countries contains comparable norms on possibility of detection and confiscation of property in order to use it as evidence in criminal proceedings (material evidence). Such property objects include: crime instruments; objects intended to be used to facilitate the crime and (or) carrying the vestiges of crime or obtained as criminal proceeds; income received from criminal activities; objects received in return for assets obtained by criminal means. The legislation in most of the countries provides for permanent deprivation of (convicted) individual of certain assets, namely: crime instruments; objects intended to be used to facilitate the crime or crime proceeds; funds and assets, obtained as a result of crime, used or intended for committing the crime; income received as a result of criminal activities; objects prohibited for free circulation, and, in some cases, other assets and funds, total value of which can compensate the damage from committed crimes. Such deprivation is effected through the confiscation. With all considered variety of law systems and regulation specifics of confiscation institutes in different countries, we can emphasize two types of grounds for confiscation: substantive grounds (generally, criminal, but in many countries including civil), according to which the confiscation is a criminal punishment measure or other measure of criminal law; procedural grounds, substantiating the confiscation of objects and documents (material evidence), regulated by the norms of criminal procedure legislation. The list of objects covered by the term material evidence is a combination of tangible assets which may be obtained as a result of committed crime. Funds and assets obtained by criminal means, income from criminal activities, for instance, cannot always be detected during the crime investigation, whereby they will not be recognized as material evidence. Often it is impossible to recognize, as material evidence, the income received as a result of using the property obtained by criminal means, which is legalized and transformed into different types of property. In such cases, and in many similar ones, when confiscation is classified as a criminal punishment measure, with
the aim to compensate for the damage caused, the legislation of various countries allows to confiscate any other assets of equivalent value, which may not be recognized as a material evidence (for example, if the legal title to such asset was obtained prior to committing the crime). Considering the specific criminal proceeding aspect of the legal control of material evidence, measures applied to them are defined as special confiscation. General confiscation is used as a punishment measure for committed crime or as other measures of criminal law, as opposed to special confiscation. Prior to permanent deprivation of property, and in order to temporarily seize the property and gain a control over it, law enforcement authorities use security measures allowing seizures, searches, forfeiture, arrest, and assets freezing. Specifically, the arrest, seizure and forfeiture mean temporary restriction to give, transfer, divest or relocate the assets, or temporary title to such assets, or temporary execution of control over such assets, according to the order of the court or other appropriate authority. Criminal procedure for implementation of protective measures is the same for cash funds and assets obtained by illegal means as well as for other objects (e.g. documents) which may be used as proof during criminal proceeding. In addition, often, legal regulation of protective measures is closely linked to confiscation issues at the level of legal regulations.
The UK legislation does not include confiscation in the system of criminal punishments or to the list of punishments provided by the sanctions of appropriate clauses of substantive law. Confiscation of cash funds and assets in English law is attributed to category of supplementary criminal procedural measures, since it is only applied to committed crimes of increased danger, which in the UK are classified as serious crimes implicating arrest of a suspect before the court proceeding and crimes, implicating arrest of a suspect before the court proceeding. Primarily, the legislator considers as such crimes related to illegal drug trafficking and laundering of income received as a result thereof.
CONFISCATION IN THE UNITED KINGDOME LEGISLATION
ITAR-TASS photo
75
The supplementary nature of confiscation is also supported by the fact that ) norms, regulating confiscation procedure, are contained not in the criminal, but in procedural and delegated legislation; b) whereas main sanctions (imprisonment and fine) have alternative nature, i.. the legislation provides for the possibility of their substitution, the confiscation, on the other hand, has an absolutely definite nature; c) confiscation following the committed crime is viewed by the court separately and only after rendering the judgement of conviction3, d) confiscation, in its essence, is used not only for deprivation of convicted offender of certain types of assets, but also for reimbursement of damage caused by this crime to the state. According to the UK legislation, procedures of detection and seizure of assets (funds) are identical, notwithstanding the investigating process (implemented autonomously by the national law enforcement authorities or upon request of other countries). In general, court procedures are necessary in order to facilitate detection, seizure and divestiture (confiscation) of assets. The UK legislation and existing precedent cases imply that arrest and seizure (confiscation) may be applied to: ) instruments of crime; b) assets and funds (part of assets) that were used to facilitate the crime, intended for use in criminal activities or obtained as a result of criminal seizure from lawful possession (violation of legal ownership); c) income (in any form) from criminal activities related to illegal drug trafficking, terrorism and some other serious crimes. Confiscation cannot be applied to all detected assets (property) of the convicted is not allowed. The UK legislation specifies that, after the committed act was recognized as crime, but before the sentencing decision is passed, the judge should define the value of income received by the defendant from criminal activities (for instance, from illegal drug trafficking) subject to confiscation. In order to do so, the investigator provides the judge with the report prepared during the investigation, containing information on all income sources he was able to detect during investigation and particular list of all assets that may be sold. The defendant is provided with the copy of the report and entitled to give explanations on the contents of the report and dispute investigators conclusions during the pleading procedure. The burden of disputing the presumption made by the court is put on the defendant who is obliged to satisfy the court proving that these assets were not obtained as a result of illegal drug trade, and are in fact proceeds of official lawful activity. Upon completion of pleading procedure, the court issues the confiscation order, if the decision about confiscation was passed.
3 This demonstrates one of the fundamental principles of English law, according to which the conviction of guilty individual should precede any material penalties. The British law does not allow, on one hand, adding confiscation decision into sentencing decision, and, on the other hand, criminal court proceedings cannot review any civil claims. Also, the legislation prohibits parallel review (simultaneously in criminal and civil proceeding) of cases and claims that may invoke decisions on confiscation (divestiture) of assets.
The US legislation divides confiscation of crime instruments and income from criminal activities into civil forfeiture (Title 18 of the United States Code 9812, Title 21 of the United States Code 8813) and criminal forfeiture (Title 18 of the United States Code 9824, Title 21 of the United States Code 8535). If the confiscation is theoretically possible according to US substantive law, the US authorities may confiscate the assets in criminal procedure in personam by judicial acts against the defendant, as well as in civil procedure in rem acting against the assets themselves. The first approach is used when the defendant is convicted, and decision cannot be enforced, in case of his death or disappearance. Also, such measures are limited to the assets owned by the defendant and cannot be apply to the assets of the third parties, if they were used to facilitate the crime. As opposed to criminal procedure, the measures within civil procedure do not require a conviction and are not limited to the assets of the offender. Such measures are preferable toward the assets of hiding offender or property of the third parties. Based on a general rule, civil forfeiture is limited to the property directly related to the crime. In some cases, either criminal or civil forfeiture may be applied, but not both at the same time. Therefore, each particular case requires situational and option analysis, so that most efficient approach could be used. But both
CONFISCATION INSTITUTE IN THE US LEGISLATION
ITAR-TASS photo
76
options civil as well as criminal forfeiture imply arrest of corresponding assets until the court procedure takes places in order to ensure preservation of assets for possible confiscation4. Legal standards regulating confiscation related to committed criminal offences contain the institute that is little known in the legislation of other countries forfeiture of any other property. According to the Title 18 of the United States Code 1963(m)2 and Title 21 of the United States Code 853(p)3, if, at the time of conviction, assets subject to confiscation: 1) cannot be detected, or 2) were transferred or sold to the third party, or 3) were taken outside of court jurisdiction, or 4) were significantly reduced in value, or 5) were mixed with other assets that cannot be easily divested, the court may order confiscation of any other property of equivalent value owned by the defendant. A provision about forfeiture of any other property is essential when the defendant transfers criminal proceeds to the bank account in the offshore jurisdiction with the aim to avoid confiscation. In the US, the procedures for detection and asset (funds) protective measures are regulated by the same standards (Title 28 of the United States Code). Measure of procedural enforcement such as arrest of funds and assets can be implemented on the US territory under judicial control only. This type of control can be implemented based on the court order issued by the US federal court. At the same time, it is allowed, as established by the US courts, to implement pre-trial confiscation of documents and assets which can be used as proof (evidence sources), similar to seizure according to the Criminal Procedure Code of the Russian Federation, providing for any seizure of such objects by the law enforcement authorities. As to pre-trial confiscation of funds and assets obtained by criminal means s a method of preservation, it is applied related to a limited number of crimes and, primarily, only after the investigation by the US law enforcement authorities.
4 Civil confiscation institute is also known in the law enforcement practice of the UK, Italy, Germany, Japan, France, Canada and other countries. In particular, Italian legislation specifies a civil forfeiture procedure of preventive nature: the court is entitled to issue an order to arrest the assets owned by any individual if his lifestyle does not correspond to his evident or declared income. In this case, the individual needs to explain the origins and nature of his income. If such person can clearly explain and prove the legitimacy of his title to his assets, then he shall be entitled to keep them. However, if such person cannot provide to authorities the proof of legitimacy of acquisition of assets, then the court may order their confiscation. (National legislation and its correspondence to requirements of campaign against various forms of organized transnational crime; appropriate control principles for adopting legislative and other measures at the national level.) Reference document on preliminary agenda for the UN ministerial world conference on organized transnational crime (Naples, Italy,1994). UN document E/CONF.88/3, 25 August 1994. - P. 14).
The detection and arrest of property subject for confiscation is implemented based on court order issued by the federal judge in the course of complex procedural acts. When assets and funds which could be potentially confiscated are detected, its preservation is ensured by so called pre-conviction confiscation. In order to implement the latter, attorney presents to the federal district court supporting evidence of such necessity, and, after reviewing this evidence, based on attorneys request, the judge issues a presentence court order on confiscation. This measure may be applied: according to the standard of Title 18 of the United States Code 1963 (d)1 when investigating crimes specified by the Racketeer Influenced and Corrupt Organizations Act RICO of 1970. (Title 18 of the United States Code 19611968); according to Title 21 of the United States Code 853() in case of crimes related to illegal drug trafficking (Title 21 of the United States Code, Part 13), as well as offences covered by the Money Laundering Control Act of 1986 (Title 18 of the United States Code 19561957). In all other cases, pre-sentence confiscation is not allowed or may be effected only based on existing judicial precedents. Based on court orders on pre-sentence confiscation, funds are transferred to bank accounts which prohibit any operations with them; the assets are transferred under the administration of court marshals or appointed liquidator. According to provisions of Title 18 of the United States Code 981982 and Rules 7, 31 of the Federal Regulations on Criminal Procedure in the US district courts, the presentence confiscations should be followed by the judicial procedure and review of case of civil or criminal confiscation.
The General Part of a current Criminal Code of the Federal Republic of Germany, Section Three Legal consequences of the offence, Chapter Seven ( 7376) specifies that confiscation can be applied to: ) substantive benefits (including cash funds) obtained as a result of crime; b) objects obtained by illegal means; c) objects acquired in return for assets obtained by illegal means; d) amount of funds corresponding to the value of particular object obtained by illegal means, if the object itself cannot be confiscated be-
CONFISCATION INSTITUTE IN THE LEGISLATION OF GERMANY
ITAR-TASS photo
77
cause it is damaged or destroyed; e) objects used or intended to be used for committing or facilitating the crime. Provisions of the substantive law state that confiscation may be ordered by the court in order to seize the above listed objects and assets notwithstanding the seriousness of committed offence. However, it is hardly ever mentioned among the sanctions contained in the Articles of the Special Part of the Criminal Code of the Federal Republic of Germany. These facts demonstrate that, according to the Criminal Code of the Federal Republic of Germany, confiscation as a criminal law enforcement measure represents a specific type of legal consequences of committed offence (according to the FRG legislation, system of punishments includes primary and additional punishments, as well as additional consequences as a form of criminal law measures that exclude confiscation). According to the Criminal Procedure Code of the Federal Republic of Germany, a review of confiscation cases is one of the special types of judicial proceedings ( 430 440). Proceeding on confiscation can be initiated during the criminal proceeding by the court of first appearance, as well as during independent proceeding based on the request of public prosecutor. The legislation clearly defines a system of measures ensuring confiscation which includes seizure of assets in order to ensure their preservation, and arrest ensuring the potential confiscation of cash funds, monetary penalties or costs ( 111b 111g). Seized property may be returned to its owners if they pay for its value, or it may be transferred to them for temporary use until the end of the trial, under the condition of return upon demand. Seizure of assets and funds aimed at ensuring confiscation of cash funds, penalties and costs ( 111d CPC of the FRG) implies prohibition to implement any operations with such assets and funds. In exceptional cases, seizure may be cancelled upon request from the defendant, if the latter needs the seized property to pay for his defence, his living expenses or living expenses of his family members. Seized and arrested property may be sold before the sentence implying confiscation comes into effect, if there is a risk of damage or significant reduction of value, or its maintenance and keeping expenses represent significant costs or difficulties. In such cases money received as sale proceeds are confiscated instead of this type of property ( 111L CPC of the FRG). If it is detected that movable assets subject to protective measures, were obtained as a result of committed crime, and victim is known they may be returned to the latter, if they are not required for the purposes of criminal proceeding ( 111k CPC of the FRG).
stantive benefits) obtained as a result of committed crime ( 20 of the CC of Austria), and confiscation, as one of the penalties for economic crimes and crimes committed by a group of people ( 20b, 26, 144148, 278 and 279 of the CC of Austria). According to 143 of the Criminal Procedure Code of Austria, confiscation is also applied to objects that are recognized as proof in the criminal proceeding if they are recognized as criminal instruments or were intended to be used as such, as well as to objects prohibited for free circulation and subject to seizure or destruction (e.g, drugs, weapons, illegal printed materials etc.). According to the commentary to above mentioned Article, included in the Criminal Procedure Code, confiscation serves the purpose of preserving the sources of evidence and ensuring the implementation of court sentence on seizure of property or criminal proceeds, or destruction of objects and goods prohibited for free circulation. Article 144 of the Criminal Procedure Code of Austria states that justified presumption that particular objects or assets may be subject to confiscation allows to arrest them or, depending on the case circumstances, take one of these measures to preserve thereof: 1) establish the order of temporary administration over movable property, including cash funds, that will ensure its preservance ( 259 CPC of Austria); 2) issue a court restriction on sale or pledge of movable property; 3) issue a court restriction on transferring to any third party of the titles to bank accounts, legal entities, manufacturing of certain objects or income received as a result of such activities; 4) issue a court decision on sale, debit or pledge of movable property, and on conducting such operations.
CONFISCATION INSTITUTE IN THE LEGISLATION OF SWITzERLAND
According to the standards of the Criminal Code of the Austrian Republic, list of enforcement measures applied after committed offence is recognized as a crime, includes: seizure of unlawful proceeds (any assets and sub-
CONFISCATION IN THE LEGISLATION OF AUSTRIA
Among the criminal law institutes of Switzerland we can distinguish following legal institutes related to confiscation of funds and assets obtained by criminal means. 1). General confiscation or confiscation of funds and assets represents an equivalent of corresponding institute within Russian criminal and criminal penal law. The term confiscation means seizure for the benefit of the state of the product or proceeds of crime, its equivalent value or income obtained as a result of crime. 2). Confiscation of dangerous objects. The law provides the judge with the right to confiscate objects used or intended to be used for facilitating criminal offence or objects created by the criminal offence in cases if such objects represent a threat for people, morality or public order. This is a special form of confiscation that can be issued notwithstanding the prosecution or conviction of a particular offender and it is not recognized as a punishment. 3). Forfeiture to the state benefit of presents and other substantive benefits is implemented by seizure of:
78
ITAR-TASS photo
) gifts and objects given with the aim to motivate for committing a criminal offense or to reward for committing of such offense; b) objects obtained by an individual by criminal means, if their owner cannot be detected within 5 years from the date of public announcement. The other measures, provided by the Criminal Code of Switzerland, cannot be attributed to general or additional punishments. However, they also either by the way of special prevention, try to prevent committing future crimes, or try to divest the offender of unlawful benefits or to reimburse the damage to the victim of the criminal offense. They differ from protective measures because they can be applied independently and are not related to imprisonment. Procedural order of detection, arrest and confiscation is based on standards of criminal procedural legislation. In general, the criminal proceeding of Switzerland and its cantons defines a sound system of measures aimed at implementation of reviewed procedural functions, including following: 1. The actual detection of funds and assets by investigation and implementation of powers given by the court. This is implemented by requesting the information, interviewing witnesses, face-to-face questioning, scheduling and organizing expert evaluations, seizures, searches etc. These measures in their nature and procedural form, just as in most of the countries within European judicial establishment, are applied based on court decisions or under the court instructions. 2. Arrest of documents, objects and valuables that may serve as evidence sources, when they are assigned the status seized for inspection, or arrest of documents, objects and valuables obtained by criminal means. 3. Depending on the needs of law enforcement authorities or courts, any of arrested in such way objects may be procedurally transferred into the category objects and valuables arrested for preserving, which are kept until the final decision is made as a result of investigation or the court proceeding. The funds and assets received as a result of criminal activities that may be subject to confiscation or, whats important, subject to return to the victim of the crime, are
preserved by sequestration. This means temporary suspension of disputed assets by the third party with the purpose of preserving them. 4. The confiscation foresees the implementation, according to the established procedural order, of measures on transferring to the benefit of Swiss Confederation or canton budgets: ) assets and funds related to category products or proceeds of crime, its equivalent value or income received as a result of crime; b) dangerous objects used or intended to be used to commit criminal offense, or objects created by the criminal offense; c) gifts and objects given with the aim to motivate for committing a criminal offense or to reward for committing of such offense, or objects obtained by an individual by criminal means, if their owner cannot be detected within 5 years from the date of public announcement. 5. Along with confiscation, the Swiss legislation also provides for a possibility to return objects or valuables, arrested for preserving, to the individual with a lawful title to them; such option is called restitution. This measure is implemented in cases when there is a product of the criminal offense or illegal act in a form of documents, objects and valuables, unlawfully taken away from the victim.
CONFISCATION INSTITUTE IN THE LEGISLATION OF NETHERLANDS
The Criminal Code of the Kingdome of the Netherlands of 1886 with subsequent changes and amendments in the system of sanctions for committing offenses provides for general and additional punishments, as well as enforcement measures. One of the most significant additional punishments is the confiscation of assets that may be ordered for any offense or as alternative to a primary punishment. However, the legislation does not provide for general confiscation i.e. forfeiture of all assets (property) of the defendant to the benefit of the state. It only allows for confiscation of assets obtained as a result of crime, crime instruments and some others. In addition to primary and additional punishments, the criminal law provides for the use of special criminal judicial measures in the course of criminal prosecution,
ITAR-TASS photo
79
namely, application of enforcement measures including confiscation of illegal income or assets and seizure of obvious crime objects from free circulation. The Criminal Code of Netherlands distinguishes two stages: pre-trial investigation and investigation during the court trial. Thus, the Criminal Procedure Code of the Kingdome of the Netherlands of 1926, currently in effect with changes and amendments, provides for enforcement measures of procedural nature that could be applied in the course of pre-trial investigation to the defendant or other individuals and serve various purposes. The Criminal Procedure Code contains detailed standards on enforcement measures which can be applied at the pre-trial stage of the criminal proceedings. However, greater risk of violation of personal rights as a result of such measure implies stricter conditions and guarantees of its use. The most severe measures (long-term imprisonment, arrest and confiscation, telephone tapping) can be applied only based on court order or instruction. Confiscation preceding the court order is applied to objects that may aid the purpose of investigation or may be a subject to confiscation or seizure in the future, upon the court decision. The Code contains detailed provisions on individuals authorized to confiscate objects and the justification of confiscation. The confiscation can be implemented only if the home of an individual was entered into against his will. It is important to note that complete search of home with aim of confiscation is only allowed based on order of investigating judge or the court (issued in his office). If the situation requires a faster reaction to it, then the order for such search may be issued by other authority. The confiscation cannot apply to documents containing so called privileged data, i.e. information specifically protected by the professional confidentiality standards of lawyers, doctors or professionals who swore to maintain the confidentiality of such data. If the documents may be related to a professional secret of the lawyer, the investigating judge and Chairman of the local Bar Association Division usually make a joint decision on this, together with the attorney. The Criminal Procedure Code is not the only legislative act containing standards of criminal procedure. Enforcement measures related to detection, arrest and ensuring confiscation of funds and assets obtained by illegal means during investigation of criminal cases are contained in many special legislative acts. They define the powers in the course of investigation, including those used when implementing a search and assets arrest. Usually, such powers are wider than those defined by the Criminal Procedure Code. These special legislative acts establish the powers for control and supervision over implementation of enforcement measures.
ITAR-TASS photo
Pursuant to Article 9 of the Criminal Code of Japan, the confiscation represents additional punishment, ordered for committing offences according to a procedure specified in Articles 19 and 192 of the Criminal Code:
CONFISCATION INSTITUTE IN JAPAN LEGISLATION
Article 19. (Confiscation) Confiscation can be applied to the following objects: 1) Object directly involved as element of committed offense; 2) Object used or intended to be used in the course of criminal offense; 3) Object produced or obtained as a result of criminal offense, or received as a reward for committed criminal offense; 4) Object received in return for the object from Item (3) above. 2. These objects can be confiscated only if they do not belong to an individual other than the offender; if the individual other than the offender had acquired such object after the offense has been committed, and knew of its origins, then such object can be confiscated notwithstanding the fact that it does not currently belong to the offender. Article 192. (Obtaining an equivalent value) The amount equivalent to original value may be obtained when part of the object or complete object mentioned in Items (3) or (4) of Paragraph 1 of the preceding Article cannot be confiscated. According to Japan legislation, confiscation may be ordered not only as additional punishment for committed offense, but also in cases of violation of civil law norms. According to the standards of Criminal Procedure Code of Japan, investigating authorities may seize objects and funds subject to confiscation, before the court issues an order on the confiscation with the purpose of ensuring their preservance. When the need to keep the seized objects being used as an evidence sources in the criminal proceeding passes, they are returned to their owners. At the same time, objects obtained by illegal means are returned, based on sufficient grounds, to the victims of such offense. Also, seized objects may be returned to their lawful owner (for instance, bona fide purchaser) in cases when the owner, who lost these objects as a result of the offense, decides to renounce his right to demand restitution. In such cases, the objects may be returned to the lawful owner even if such individual is not currently present on the territory of Japan.
80
www.com-cor.ru www.anti-corruptioner.ru

Anti Corruption International Issue6

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Anti Corruption International Issue6

Uploaded by

Copyright:

Available Formats

aNTICORRUPTION

World Without Corruption

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

4 CLEAR BUSINESS CULTURE

42 JOINT FIRST AND SECOND ROUND

9 PROTECTION OF WHISTLEBLOWERS 14 BUSINESS ETHICS:

61 THE UKS FIGHT AGAINST BRIBERY 69 THE US EXPERIENCE ON FIGHTING

20 BUSINESS AND CIVIL SOCIETY:

74 LEGAL SYSTEMS OF CONFISCATION.

26 WORLD WITHOUT CORRUPTION

37 WHISTLEBLOWING IN THE FINANCIAL

The CommiTTee for fighTing CorrupTion

CLEAR BUSINESS CULTURE

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

PROTECTION OF WHISTLEBLOWERS REPORTING FACTS OF CORRUPTION

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

Center For Business Ethics

BUSINESS ETHICS: TOOLS AND MECHANISMS

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

BUSINESS AND CIVIL SOCIETY A COALITION AGAINST CORRUPTION

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

WORLD WITHOUT CORRUPTION

UN GLOBAL COMPACT NETWORK INITIATIVE IN THE RUSSIAN FEDERATION:

WORLD WITHOUT CORRUPTION

4. EXPECTED RESULTS ............................................................. .........

MAIN AREAS OF ACTIVITY

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

CURRENT REqUIREMENTS IN THE FINANCIAL INDUSTRY

CHALLENGES TO CURRENT REqUIREMENTS

ADDRESSING THE CHALLENGES

The CommiTTee for fighTing CorrupTion

PROMOTE THE ENACTMENT OF LEGISLATION

The CommiTTee for fighTing CorrupTion

SUPPORT THE INTRODUCTION OF AN INDEPENDENT BODY TO RECEIVE COMPLAINTS

ENCOURAGE WHISTLEBLOWING PROCEDURES IN THE FINANCIAL INDUSTRY

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion

The CommiTTee for fighTing CorrupTion