anti corruption international issue6

8/6/2019 Anti Corruption International Issue6

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«Anti-corruption practice as the norm of business life is the task we set asa company that works all over the world».

Dietrich Moeller, President and CAO of Siemens, Russia and Central Asia,

Senior Vice-President of Siemens AG

№ 6CORRUPTIONINTeRNaTIONal

aNTI-



“World Without Corruption”At the beginning o 2011 Interregional Non-Governmental Organization «Committee or Fight-

ing Corruption» and the Russian Noncommercial Partnership «Center or Business Ethics andCorporate Governance» proposed an initiative in a orm o a Program aimed at promoting theTenth Principle o the Global Compact in 2011–2015 – «A WORLD WITHOUT CORRUPTION»,which was supported by the participants o the Russian UN Global Compact Network.

We would like to particularly note that this is a irst initiative o the Russian Federation withinthe UN Global Compact, which was presented to the international community and alliance o theEuropean Networks o the UN Global Compact.

Any commercial and non-proit organization rom any country interested in eliminating corrup-tion may participate in the implementation o this Program, selecting the most comortable ormator their participation.

We expect that such practical initiative o the Russian Network o UN Global Compact will draw a positive response rom the members o the Global Compact worldwide, contribute to the soonestelimination o corruption not only in the individual countries, but globally, will signicantly increasethe UN Global Compact infuence, contribute to social peace and solidarity, will have a positiveimpact on achieving Millennium Development Goals and give a new impulse to the sustained development o humanity .

o mag aess:123007, Russia, Moscow, 2-oy Khoroshevskiy proyezd, building 7/1INGO "Committee or Fighting Corruption"Phone number: +7 (495) 978-64-86E-mail: [email protected]



The CommiTTee for fighTing CorrupTion

«When public money is stolen for private gain, it means fewer resourc-

es 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 land-

fill 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 un-

dermines 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 coun-

try, 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 cor-

ruption. 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 exag-

geration to say that today corruption is a major obstacle in resolving ma-

jor 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,

Te “Anticorruption International” magazine, which you are holding in your hands, continues a project o the “Anti-corruptionist” magazine that has been published by the Inter-regional NGO “Te Committee

or Fighting Corruption” since 2008.

From the very beginning we viewed “Anti-corruptionist” magazine as a publication providing its pages or analysis and exchange o opinions and suggestions in a eld o ghting corruption. Up to now the maga-zine has been oriented mainly to the Russian audience.

However, the corruption knows no national borders. It afects all countries, and can only be counteracted by joint eforts o the governmental and public organizations within the international community.

In 2010 the Committee joined a largest global public initiative - UN Global Compact. One o the most important principles o the UN Global Compact is the 10th principle - ghting corruption.

Nowadays our magazine has become an international orum or the members o the UN Global Compact as well as or other representatives o business and public circles and governmental bodies, where they canexchange anti-corruption activity experiences and express their ideas and suggestions in the above mentioned

eld.

At present the magazine is published only in Russian and English languages, but in the uture we planto publish it in other languages as well, in order to attract a maximum number o participants possible.

Anatoly Golubev,Chairman o the Board o INGO “Committee or Fighting Corruption”.

Chie Editor o “Anticorruption International” magazine

Anti-corruption International№ 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: [email protected]

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




CONTENTS

4 CLEAR BUSINESS CULTURE

Interview with Dr. Dietrich Moeller, President andCAO of Siemens, Russia and Central Asia, SeniorVice-President of Siemens AG

9 PROTECTION OF WHISTLEBLOWERS

REPORTING FACTS OF CORRUPTION

Interview of Anatoly Golubev, the Chairman of the

Board of NGO Committee for Fighting Corruption

14 BUSINESS ETHICS:

TOOLS AND MECHANISMS Matthew Murray, Chairman of the Center for

Business Ethics and Corporate Governance answersthe questions of Anti-corruption International

20 BUSINESS AND CIVIL SOCIETY:

A COALITION AGAINST CORRUPTION Sergey Chernyak, Board member

of NGO Committee for Fighting Corruption

26 «WORLD WITHOUT CORRUPTION» TheRussian Federation UN Global Compact Network

initiative. Program aimed at strengthening theadvancement of UN Global Compact Principle 10(anti-corruption) in 2011-2015

37 WHISTLEBLOWING IN THE FINANCIAL

INDUSTRY: THE RIGHT MEANS TO CURB

ILLICIT FLOWS FROM DEVELOPING

COUNTRIES?

Zora Ledergerber, Alessandra Fontana

42 JOINT FIRST AND SECOND ROUND

EVALUATION COMPLIANCE REPORT

ON THE RUSSIAN FEDERATION Group of States Against Corruption (GRECO)

INTERNATIONAL EXPERIENCE

61 THE UK’S 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)

69 THE US EXPERIENCE ON FIGHTING

CORRUPTION Alexander Sukharenko

74 LEGAL SYSTEMS OF CONFISCATION.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 DumaCommission on Anti-corruption Legislation

4 9 692014




Since 2003, the concern Siemens AG has been a par-

ticipant of UN Global Compact, whose 10th principle es-

tablishes the mandatory character of anti-corruption

business conduct. UN Global Compact was joined by a

number of Siemens subsidiaries in Finland, Spain, Slov-

enia, Argentina, Ukraine. Why did the Siemens subsidiary

in Russia joined the local «Agreement on adherence tocorporate 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 mecha-

nisms developed by our global company, especially in con-

nection with overcoming the consequences of corruption

crisis in our company in 2006–2007.Now we are setting a wider goal. It is important for us

not only to preserve and improve our own corporate anti-

corruption system which, by the way, is now considered

exemplary all over the world, but also possibly assist in the

implementation of anti-corruption standards and prac-

tices in the countries where we work. In Russia, our ef-

forts 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 pre-

pared 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 con-

ditions of Siemens agreement with the World Bank. Thisproject, related to the dissemination of anti-corruption

standards among Russian companies and managers, has

a partner – the International Business Leaders Forum (in-

ternational NGO).

CLEAR BUSINESSCULTURE

Interview with Dr. Dietrich Moeller, President and CAO o Siemens, Russia and Central Asia, Senior Vice-President o Siemens AG




So we are putting great efforts to contribute to the for-

mation of a favorable anti-corruption climate in Russia

and work on it as a part of global Siemens and as an inde-

pendent regional business organization.

Siemens actively joined the efforts on fighting corrup-

tion in the world, including the funding of anti-corruption

initiatives of the civil society institutions. How is par-

ticipation 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 cli-

mate 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 experi-

ence, that it is possible to work successfully and effi-

ciently, without using corruption schemes?

Yes. We know exactly that one can work without cor-

ruption schemes in Russia. The past few years of our activ-

ity here are a direct confirmation to that. Siemens in Rus-

sia 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, devel-

op 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 inter-

nal control; we carry out trainings and teaching programs

for the personnel. We also engage our suppliers and busi-

ness partners in the Compliance program: if they cooper-

ate with Siemens, they have to comply with Code of Con-

duct 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 no-

tion and norms into the company’s 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 – show-

ing 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 Department’s activity includes Russia,

Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmeni-

stan 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 sup-

pliers. In this year alone, we are planning to open four

production facilities where Siemens products and solu-

tions will be localized, and it means that we will enter into

contractual relations with hundreds of local manufactur-

ers 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 practi-cal realization of high corporate ethical standards. I have al-

ready told you about our participation in the Russian Initia-

tive 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 Cham-

ber 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 busi-

ness conduct proved to be efficient in practice. In the fu-ture we are going to use these instruments in our activity

and develop them.




Who does Siemens see as one of the most important and efficient business allies in fighting corruption – gov-

ernmental authorities, business community organiza-

tions, civil society institutions, and why?

Such a large-scale task requires the participation of

all the parties without exception. The state should pro-

vide 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 founda-

tions, 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 withcorruption, 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

Russian economy is the task which state, society and busi-

ness 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-prof-

it organizations in different countries of the world. What

criteria did Siemens use to select projects for anti-cor-

ruption 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 practi-

cally trace the compliance of the results of these initia-

tives with the indicators contained in the applications of

candidate organizations?

Siemens acts here within the framework of the agree-

ment with the World Bank of July 2, 2009. Our compa-

ny is mainly concentrated on the projects of two catego-

ries: 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 anti-

corruption groups or programs made by Siemens. When

selecting projects, we pursued the goal of reaching an op-

timal balance by the set of tasks solved, and also distribu-

tion 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.




There are clear goals set for each project, like, for in-

stance, holding different conferences, realization of train-

ing 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 initia-

tive. We will talk about implementing of the best interna-

tional corporate practices in the sphere of adherence to

legal and ethical norms, increasing the level of awareness

about risks and possible real consequences of corruptionfor business, and also the advantages of corruption sup-

pression 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 practi-

cal implementation of anti-corruption standards. We are

also planning to provide the leading business and legal

schools in Russia with training materials on business eth-

ics. We also envisage supporting Russian websites and

publishing materials containing latest information about

international and local legislation, methods of manage-ment, 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 under-

took an obligation to fully get rid of the use of any cor-

ruption schemes. How does Siemens manage to remain a

competitive company – at the expense of reducing its

shareholder’s 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 stra-

tegic 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 port-

folio is practically ideally suitable for the demands of thecountry in modernization of the economy and infrastruc-

ture, in innovations and energy efficient technologies.

As for our anti-corruption standards, they are gradual-

ly becoming the company’s 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 objectof auditing and persecution on the part of Russian law en-

forcement agencies.

What should be done to make all the companies follow

the Siemens way, that is, not just undertake the obliga-

tions to adhere to anti-corruption standards of conducting

business, but also strictly follow them, and also contrib-

ute to anti-corruption initiatives of the civil society in-

stitutions?

This decision should be made on the level of the com-

pany’s 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 op-

posing 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 cor-

porate 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 corrup-

tion risks?

To be clear and consistent in building up their busi-

ness – let everybody know that corruption schemes will

entail an unambiguous reaction using the principle «only

clear business».




PROTECTIONOF WHISTLEBLOWERS

REPORTING FACTSOF CORRUPTION

Interview o Anatoly Golubev, the Chairman o the Board

o NGO Committee or Fighting Corruption

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. Don’t you think that, in this context, the

problem of protecting the whistleblowers comes as a

priority?

The issue of protection for whistleblowers who report-

ed corruption crimes is indeed very complicated and has

multiple aspects. I would like to highlight some of themost important ones from our point of view.

First of all, we must be aware that in most cases a per-

son who publicly reports corruption crime of individual

officials, as a rule, becomes subject to criminal prosecu-

tion. Moreover, criminal cases are often brought for rea-

sons unrelated to the events he reported.

In such situations, without conducting an independ-

ent and professionally competent investigation, it is im-

possible 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 tensof thousands of reports received by our organization with-

in 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




always possible to ensure a fair investigation and jus-

tice 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 Rus-

sian legislation, leaving unacceptably wide choices for the

judges in evaluating evidence and in sentencing. As a re-sult, 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 representa-

tives 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 ti-

tles to major property and assets in Russia – luxury villas

and cars are formally owned by relatives or some nomi-

nees. 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 of-

ficial public service. And even though these officials live

in their own luxurious mansions, and spend hundreds of

thousands, sometimes millions of dollars for entertain-

ment 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 con-

ducted 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 be-come 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 corrup-

tion implemented in recent years by state institutions have

no noticeable effect.

And this is not only due to a reason that these meas-

ures are massively sabotaged by the state appara-

tus across the whole «power vertical». The measures

themselves are mainly of administrative and law-en-

forcement nature – that is, the nature that falls under

the competence of the government itself. But the ad-

ministrative 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 onwhether the social group was chosen correctly, and how

strong is the influence of this group on public mentality of

the entire society.

In today’s 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 situa-

tion, the role of society is non-existent, and people do not

participate in this process.

ITAR-TASS ph oto

ITAR-TASS photo




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 finan-

cial markets.

It is also bad that the national law enforcement agen-

cies are unable, and sometimes unwilling, to conduct pre-

trial 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 tak-

ing into account numerous global and local international

initiatives in this area, it would be appropriate to estab-

lish a UN based specialized center or bureau, as a sin-

gle international specialized body, authorized to devel-

op common international witness protection program.

The units of such international body would be author-

ized to conduct investigations on corruption allegations

against senior officials, including verification of infor-

mation about assets and funds owned by such individu-

als 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 hand-ed over to the national law enforcement services of all

member countries so the actions against such offend-

er could be taken under national laws. This same body

should be entitled to provide the international legal pro-

tection and immunity from prosecution to whistleblow-ers, 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 in-

terpreted 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 bor-

ders, is no longer any internal affair of the country, not

even the subject of exclusive relationship of those coun-

tries 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 notestablish an order which makes such migration extreme-

ly 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 po-

litical, social and cultural rights, as well as damage to the

environment. It is no exaggeration to say that today cor-

ruption is a major obstacle in resolving major problems

of mankind.

It seems that the United States and Russia, as perma-

nent members of UN Security Council, have a perfect op-

portunity to suggest to international community a jointinitiative, 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 finan-

cial flows, as offshore zones.




The Center for Business Ethics and Corporate Govern-

ance 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 nopart». What do you think has changed over the years and

what ways of spreading ethics in business are most effec-

tive?

The core issues facing honest business in Russia today

are the same as those faced by companies in other coun-

tries. And, to say that ethics has played no part is Rus-

sia’s recent economic development is not fair. There are

many ethical Russian companies. The challenge is com-

plex, that is, when you consider all of its historical, cul-

tural political and Economic dimensions. The problem in

Russia – as I see it – is a legal environment characterizedby a combination of over-regulation and under-enforce-

ment. 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 ar-

eas in the law. The gap between over-regulation and un-

der-enforcement thereby creates opportunities for «rent-

seeking» conduct by government officials and «state cap-

ture» by business.

The Center for Business Ethics and Corporate Govern-

ance was founded in St. Petersburg in 2000 to fill gap cre-

ated by over-regulation and under-enforcement. That is,

how can a company operate ethically in this environment?

How can a company benchmark ethical performance? Fi-

nally, how can a company be rewarded for ethical per-

formance? The Center’s 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 achievehigh international standards in all aspects of its per-

formance. Anti-corruption agenda and ethical business

conduct have been identified among key drivers for a

company's successful and long-term sustainable devel-

BUSINESS ETHICS:TOOLS AND

MECHANISMS Matthew Murray, Chairman o the Center or Business Ethics

and Corporate Governance answers the questions o Anti-corruption International

Center For Business Ethicsand Corporate Governance




opment. Conducting business in an honest manner is

one of the prerequisites for any long-term, sustainable

business.

One of the Center’s tasks is to help out Russian com-

panies 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 com-

ply with this law. Recently I met with a major Russian

company, which has created a state-of-the-art systemfor 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 Anti-

Corruption Council of the Russian Federation. The Cent-

er also provides regular updates on anti-corruption leg-islation in Russia to all members and organizations with

which we work.

Specifically, the Center for Business Ethics helps com-

panies operating in Russia minimize the risk of official

corruption with the following tools:

Risk-Mapping: Examine companies’ business proc-•

esses 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: Crea-•

tion and strengthening of enterprise-wide proce-

dures 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 appli-

cable anti-corruption laws, including US Foreign

Corrupt Practices Act.

Optimization of Social Investment and Charitable•

Giving: Design methods to implement social re-

sponsibility programs to meet the aims of compa-nies and stakeholders, including regional govern-

ments.

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 compa-

nies’ business plans and long-term commercial in-

terests

How well developed is your Center’s cooperation with

the civil society and what is the role of NGOs in develop-ment of honest business?

Since being founded in 2000, CFBE has had the privi-

lege to work closely with a number of leading public in-

stitutions and civil society organizations to build an ethi-




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 sig-nificant the potential role in the struggle to reduce cor-

ruption.

Many of those willing to take responsibility for repu-

diating corrupt business methods are found principally

in the grassroots, among Russia’s NGOs as well as small-

to-medium size enterprises (SMEs) and NGOs. Dispro-

portionately injured by extortion practices of officials at

all levels, SMEs have begun taking initiatives and creat-

ing the tools to counter the problem. They have start-

ed forming «integrity pacts» together with other busi-

nesses, NGOs, officials and civil society stakeholders,

For example, the Center helped form the Honest Build-

ers Club in St.Petersburg. This Club consists of 30 lo-

cal 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 be-

ing 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 concretemethods for NGOs to define, measure and monitor a

company’s commitment to end state capture and com-

mit 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 vol-

untary steps. For example, they can follow the best prac-tices for financial reporting and control set forth in the

Russian Corporate Governance Code, including by re-

porting 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 com-

pliance with anti-corruption laws. Watchdogs monitor

interaction between government and business for un-

ethical conduct and procurement practices. Such asso-

ciations 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 im-

portant issues ranging from the environment to cor-

ruption. This dialogue should aim to ensure that gov-

ernment administrative processes at all levels are fair,open, competitive and informed. To reduce administra-

tive obstacles, NGOs work with Congress to establish

regulatory practices that promote efficiency and trans-

parency.




What mechanisms do you think are necessary to de-

velop and improve international cooperation of NGOs that

fight corruption?

To enhance accountability for business practices in glo-

bal 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 oper-

ate 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 in-

termediary organizations dedicated to corporate social

responsibility. We helped support more responsible and

sustainable commerce by promoting joint and collabora-tive learning and action about strategic issues, opportuni-

ties and challenges. Membership includes CSR/Sustain-

ability organizations from around the world who meet in

Davos, Switzerland under the auspices of the World Eco-

nomic Forum on a regular basis to conduct network plan-

ning.

NGOs can also join forces to demand broad report-

ing from companies, designed to show their corporate

governance, business ethics, social responsibility, com-

munity and charity activities that have an impact on

national governance. NGOs can also insist that com-

pany reporting requirements be broadened to includethe 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 sup-

port of public projects.

NGOs are also working with business leaders to form

integrity pacts that help promote transparent public pro-

curement. Integrity pacts can eventually lead to «no-

bribery pledges», under which companies entering a gov-

ernment tender and the officials responsible for choos-

ing the winner commit to participate in the process in

a transparent way. In particular, they pledge not to of-

fer, pay, accept or seek bribes of any kind during the ten-

der. 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 mem-

bers 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 group’s 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 andcivil society leaders in both the United States and Rus-

sia 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




Integrity», led by two US and two Russian organizations:

the Center for Business Ethics & Corporate Governance;

Transparency International Russia; Transparency Interna-

tional USA; and the Sunlight Foundation.

As a co-chair of this US-Russia Working Group, the

American Chamber of Commerce Russia has request-

ed 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 sec-

ond 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 envi-

ronment for whistleblowers both in Russia and globalmarkets.

As results of this C2C process, the Working Group

has launched a robust action plan to increase know-

how and exchange best practices on such issues as e-

governance, procurement reform and open govern-

ment. This process is intended to increase the capac-

ity of citizens, business executives and public officials

to achieve higher standards of institutional integrity

across borders.

Our magazine is carrying out some journalistic inves-

tigation 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 Govern-

ance is leading formation of a multi-stakeholder alliance

to improve performance of the Russian energy market.

By instituting best practices of governance in state pro-

curement 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 alliancewill help Russia reduce carbon emissions and combat cli-

mate change.

Based on incubation with a wide number of stake-

holders, the Center has developed an innovative model

to improve governance at scale in Russia. We have de-

termined to focus our initiative on a single sector criti-

cal to Russia’s modernization – the energy industry. Our

objective is to increase voluntary compliance with anti-

corruption law in state procurement of power systems.

Public and private sector participants will formulate and

implement a new compliance standard to govern pro-

curement. The private sector will be led by major mul-

tinational and Russian companies specializing in power

generation. We act as the «Russian Energy Compliance

Alliance» (RECA).

RECA is aligned with two of Russia’s national pri-

orities. First, it builds civil society’s capacity to coun-

ter the systemic nature of official corruption. Russia

has recently adopted the 2010–11 National Anti-Cor-

ruption Plan (NACP), a set of legislative and adminis-trative initiatives intended to implement governance

reform. Under RECA, the Center seeks to lead civil

society and business to apply the NACP from the «bot-

tom-up» and introduce a new layer of «horizontal ac-

countability».

Second, RECA supports Russia’s objectives both to

cut energy losses 40% by 2020 under its new Energy Effi-

ciency Law and to re-focus on its global responsibility to

mitigate climate change. The Center will facilitate pub-

lic-private partnerships to modernize district heating,

integrate «smart grid» components for electrical trans-

mission and distribution and generate clean energy. Ac-cording 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 ac-

cumulated 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 avail-

able. Primarily, there are the main international conven-

tions, including the UN Convention Against Corruption,

OECD Anti-Bribery Convention, the European Crimi-

nal 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 per-

haps the most effective international mechanism is the

cooperation between national law enforcement authori-

ties of different countries to prosecute cases that occur

across national boundaries. I have recently held severalmeetings with both US and Russian law enforcement of-

ficials to discuss their new programs to share informa-

tion and coordinate investigations of parties suspected

of corruption.




Today it can be certainly said that corruption is a com-

mon problem in all countries, without exception. It has

no national, ideological, religious or ethnic affiliation, and

does not recognize national borders – all countries with-

out exception have some form of corruption. The differ-

ence is only in the level and extent of corruption in the

authority bodies and, therefore, in the level of harm to so-

ciety brought on by corruption.

Already the corruption has been recognized by the in-

ternational 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 distortsmarkets and hampers economic growth, leading to destruc-

tive 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 protectthe environment.

Obviously, realization of these particular facts has led

to a need to add an additional Tenth principle – the prin-

ciple of opposing all forms of corruption – to Nine Uni-

versal 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 anti-

corruption legislation in the countries concerned through

various business associations, and on the other hand, partic-

ipants of the Global Compact develop and implement theirown internal corporate codes of ethical business conduct.

Undoubtedly, the progress in each of these areas is ex-

tremely important. However, it must be stated with re-

gret that the actual results are far from planned – there

BUSINESS ANDCIVIL SOCIETY –

A COALITION AGAINSTCORRUPTION

Sergey Chernyak, Board member o NGO Committee or Fighting Corruption




are no signs of significant reduction of corruption at the

global level.

Moreover, the number of participants in the Global Com-

pact is still very small – as of today it was joined by a little

more than 6,000 commercial organizations from 130 coun-

tries, representing a tiny fraction of the global business com-

munity. For example, in the U.S., there are just over 400 par-

ticipants 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 op-

erating 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 theTen 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 prin-

ciple, observance of which is a prerequisite for success in

promoting all other Universal principles.

This leads to a broader look at the problem of corrup-

tion and mechanisms being developed today aimed at

overcoming it.

There is no doubt that without the improvement of le-

gal 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 coer-

cion, 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 po-

lice 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 thatwith the passing of a new, improved law they all will vol-

untarily 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 be-

cause 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 privateinterests, 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 au-

thorities and their acts (including the actual ability of so-

ciety 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 ex-

amples when corruption had corroded the state and de-

stroyed 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 pov-

erty 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 imita-

tion – a sacrifice to the public of some corrupt official of a

medium level. Such a downgrade of complex and multifac-

eted social problem to the deviant activities of individuals

only contributes to a further spread of corruption, becauseit 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.UN photo




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 eve-

rything 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 prosecu-

tion, for example) of selected corrupt officials only destroys

the civil society, leads to increasing social tensions and con-

tributes to the spread of the most dangerous forms of ex-

tremism in the public mentality. Ultimately, this may resultin 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 en-

suring satisfaction of the interests of real people living in

conditions of a certain socio-economic and political sys-

tem, 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 statecoercion – 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 for-

mal signs such violations should also be classified as cor-

ruption, despite the fact that no material benefit is re-

ceived by the offender. However, any healthy society per-

ceives such actions by the authorities with approval. This

particular form of «corruption» acts as a «lubricant» that

prevents «wedging» of social mechanisms and their turn-

ing against individual – until the moment when overduechanges will be made to relevant regulations.

Second, we must accept that corruption level can be

reduced and gradually lowered to the level of such «lu-

bricant» 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 ac-

countability of officials to the civil society, combined with

excessive state intervention in various aspects of popu-

lation’s 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 andlegal nihilism. This feature of the public mentality of the

population in such countries does not allow while fight-

ing against corruption to lean on the mechanisms of de-

mocracy 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 relation-

ships – those that are not contrary to fundamental cultural

values of the society and, thus, contribute to the satisfac-

tion 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 re-

lations that already exist in each country (even though

in rudimentary forms), and rendering all possible assist-

ance for their development and distribution – primarily

through informing the population of these countries, pro-moting 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 founda-

tion – the freedom of individual entrepreneurial activity;

this in turn leads to disabled healthy competition and lack

of sustainable development. The general strategic interestof 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 be-

cause 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 distrac-

tion from its core social mission – economic development.

Such distraction is always a desperate measure for the entre-

preneur 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 – prof-

it – 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-psychologi-cal 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.




In particular, this applies precisely to countries with high

level of corruption.

It seems that the only independent force with such moti-

vation is a voluntary associations of socially responsible and

active individuals, more precisely, those individuals that rec-

ognize the fundamental impossibility of eliminating the cor-

ruption solely by force – those, who are deeply interested

in eliminating corruption, but realize that simple replace-

ment of corrupt officials has practically no effect on corrup-

tion 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 corrup-

tion. They realize that corruption money paid by any par-

ticular company would inevitably extend to the entire sys-

tem of national economy, distort the pricing formulas on themarket, distort the market itself, and, as a result, inflict a di-

rect damage to any final consumer – the individual, includ-

ing 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 there-

fore ethically acceptable way to solve their private prob-lems 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 fun-

damental breakthrough in the war against corruption.

These and some other reasons allow us to consider an

anti-corruption alliance of business and civil society in-

stitutions 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, es-

tablishing 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 na-

tional 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 compa-nies 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 on-

ly be attractive to business in the long term (in particular,

ensuring the social legitimacy of business that the busi-

ness desperately needs in those countries where corrup-

tion is at its highest), but contribute to daily neutralization

of corruption pressure.

Such program should be flexible enough to accommo-

date within its framework any local projects which each

participant of the coalition could individually or in part-

nership with others develop and implement according to

their interests and abilities.

Based upon these basic provisions of the InterregionalNon-Government Organization «Committee for Fighting

Corruption» (Moscow, Russia) in collaboration with Non-

profit Partnership «Centre for Business Ethics and Corpo-

rate Governance» (St. Petersburg, Russia) we developed a

Program to promote Tenth Principle of the Global Com-

pact in 2011–2015's, called «World without Corruption».

This program was supported by all Russian participants of

the Global Compact Network. During the UNGC Work-

ing Group on Anti-corruption meeting in Copenhagen,

the Program «World without Corruption» was introduced

to the UNGC leaders. This program is the first independ-

ent initiative of the Russian Global Compact Network forthe time being.

First of all, it should be emphasized that participation in

positive activities under this Program does not require join-

ing the Global Compact. Any commercial and non-profit

organization from any country interested in reducing cor-

ruption may participate in implementation of this Program,

choosing the comfortable format for their participation.

The program offers four major interrelated and com-

plementary vectors of activity to eliminate corruption as a

system of social relations.

The first of these vectors involves a complex of meas-

ures aimed at promoting and distributing within the busi-

ness community the most effective individual anti-cor-ruption 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 per-

sonnel, elimination of cooperation with business partners

involved in corrupt practices, and the like. «PACI Princi-

ples» and other instructions for development and imple-

mentation 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, es-

pecially medium-sized or small, can engage highly qualifiedexperts 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 particu-

lars of the social and cultural environment when developing




and formalizing the internal corporate regulations. And if thecompany decides to develop those regulations without any

external help, they will face a lack of information about suc-

cessful and unsuccessful experience of other market players.

Despite a series of declarations of intent to cooperate

and share experiences of corporate anti-corruption poli-

cies, unfortunately we cannot say that the exchange of

good practices, even among the participants of the Global

Compact has been established (among other reasons, be-

cause of language barriers and lack of sustained effective

communications). Also, there is virtually no analytical in-

formation enabling to compare the efficiency of such in-

ternal policies and to identify its efficient and non-efficientelements 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 percep-

tion of corruption in the public mentality, which is char-

acteristic of countries where its level is particularly high,

and on stimulating informed and active opposition to thistype of public relations and promotion of all forms of le-

gitimate collective action to reduce corruption.

Relevant sections and subsections of the Program in-

clude 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 entrepre-

neurship as a positive and socially responsible power, a

natural ally of ordinary people in the fight against corrup-

tion. Under the same vector, the Program suggests some

measures for such countries to ensure a transition from

the traditional passive individualism to active civil solidar-ity in the destruction of corruption mechanisms.

The third vector of the Program aims at building confi-

dence and direct cooperation between business and soci-

ety in fighting corruption.

Implementation of the set of measures provided by this

part of the Program will help to eliminate undue preju-

dice and other negative stereotypes of the population (es-

pecially 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 busi-

ness 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 par-ticular, by forming the required motivation).

This vector also plans for development and implemen-

tation of mechanisms for addressing socio-cultural char-

acteristics of the population in various countries and re-

gions, when developing anti-corruption strategy at the na-

tional and international level.

There are also plans to develop mechanisms and cri-

teria for the Program members and those organizations

that are yet considering joining it, to estimate the expect-

ed 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 institu-

tions) whose practical activities most contributed to fight-

ing 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 re-

sponse, 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 Glo-

bal Compact. Some non-member companies had also ex-

pressed 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 part-

ner in the implementation of the developed projects on the

stipulation that these projects meet the goals of the Pro-

gram 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 «sa-cred writing», and we are open to discuss any propos-

als for its refinement, updating and development that do

not contradict to the above described fundamental ap-

proach.



««WWOORRLLDD WWIITTHHOOUUTT CCOORRRRUUPPTTIIOONN»»

PPRROOGGRRAAMMMMEE STRENGTHENING THE ADVANCEMENT OF

GLOBAL COMPACT PRINCIPLE 10

(FIGHTING CORRUPTION)

IN 2011-2015

GLOBAL COMPACT NETWORK INITIATIVE

IN THE RUSSIAN FEDERATION



«WORLD WITHOUT CORRUPTION»PROGRAMME AIMED AT STRENGHTENING THE ADVANCEMENT

OF GLOBAL COMPACT PRINCIPLE 10 IN 2011-2015

Doc. #06-01/UNGC-2011 Committee for fighting corruption +7 495 933-76-07, +7 495 978-64-86 [email protected] A.Golubev, S.Chernyak 13/05/2011

UN GLOBAL COMPACT NETWORK INITIATIVE IN THE

RUSSIAN FEDERATION:

PROGRAMME AIMED AT STRENGTHENING THE ADVANCEMENT OF

GLOBAL COMPACT PRINCIPLE 10 IN 2011 – 2015

«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 non-commercial 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 UNGC-

Russia Steering Committee member.






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 ......................................................................




PROGRAMME AIMED AT STRENGHTENING THE ADVANCEMENT



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 shouldfirst 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 essentialthat such challenges care tackled within the framework of the Global compact » – said the







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 community’s 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 theGlobal 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 importancenot 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».







2. OBJECTIVES

The Programme’s 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 academicentities, broadening of UN Global compact network.






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.

3.2.5. Support of voluntary consumer refusal to use companies’ products and

services that do not seek to abandon corruption ways of doing business.

3.2.6. Assistance to motivate government and local authorities to provide their

support to positive civic initiatives to oppose corruption in line with national

legislation requirements.

3.3. Strengthening of collaboration and trust between business and

society in the sphere of fighting corruption

3.3.1. Assistance in the mankind’s awareness of business and civil society

strategic interests unity in overcoming corruption.

3.3.2. 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.

3.3.3. Encouragement of business community and separate companies’

involvement in funding of civic initiatives and projects aimed at counteringand reducing of corruption levels in different countries.

3.3.4. 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.

3.3.5. 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.

3.4. 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.







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.

3.4.4. Aid in studying and considering the national and international public opinion

while developing strategy to combat corruption of on such pressingsubjects 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.

3.4.5. 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.

3.4.6. 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







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 institutionsand 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.




Information provided by insiders can contribute to

the goal of reducing illicit capital flight from developingcountries. 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.

INTRODUCTION

At a time when the issue of whistleblowers in thefinancial 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

WHISTLEBLOWINGIN THE FINANCIAL

INDUSTRY: THE RIGHTMEANS TO CURBILLICIT FLOWS

FROM DEVELOPING

COUNTRIES? Zora Ledergerber, (Integrity Line), Alessandra Fontana (CMI – U4)




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 country’s sustainable development, negatively affect

the stability and credibility of a state’s 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.

CURRENT REqUIREMENTS

IN THE FINANCIAL INDUSTRYBy 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 company’s account with the local

bank to another account with a foreign bank in alower 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 mayor’s

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.

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.

CHALLENGES TO CURRENTREqUIREMENTS

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 thedealmakers 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 country’s 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.

ADDRESSING THE CHALLENGESTo 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 withoutfear 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

ITAR-TASS photo

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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.

WHAT CAN BE DONE TO PROMOTE

WHISTLEBLOWING IN THEFINANCIAL INDUSTRY BOTH IN RICHAND DEVELOPING COUNTRIES?

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 specif ically 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.

PROMOTE THE ENACTMENT

OF LEGISLATIONAn effective legislative framework should protect the

whistleblower against any disadvantages suffered as a re-

sult of coming forward with information about misdeeds.

This includes dismissal, sanctions, salary reduction, puni-

tive transfers, lack of promotion, promotion delay, harass-

ment 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 in-

clude 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 islikely to take place.

However, this should not work as a disincentive for de-

veloping countries to pass such laws. In the case where

there is a lack of engagement from the public administra-

tion 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 sec-

tor have taken the lead in promoting debates to influence

good governance and transparency legislation. With the

support of the international donor community, the Na-

tional Network for the Right of Access to Information, a

multi-sectoral group formed in 2008, drafted an excellentwhistleblower protection law. The draft law has been sub-

mitted to Parliament but not yet been voted upon.

In addition, legislation stipulating financial incentives

for whistleblowing might encourage those who have in-

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formation about wrongdoing to come forward, to some

extent reproducing in the opposite direction the incen-

tives found in the financial industry (which reward closing

profitable deals regardless of suspicious clients and with-

out proper identification of sources of money).

In Malawi, for example, an informant scheme of the

Revenue Authority encourages citizens to report suspect-

ed cases of tax fraud, evasion and smuggling by rewarding

with amounts of USD 1,500 those that provide informa-

tion 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 as-

sisting with inquiries, investigations and the collection

of evidence. The United Kingdom and the United States,

countries on the receiving end of illicit outflows from de-

veloping countries, also offer financial compensation toтwhistleblowers. 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.

SUPPORT THE INTRODUCTIONOF AN INDEPENDENT BODYTO RECEIVE COMPLAINTS

Legislative measures are a first step. However, sup-

porting 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 lev-

els are further affected by the capacity of an agency to pro-

cess reports, determine which matters should be handled

by the investigating authorities, and impose relevant stan-

dards.

The absence of such procedures increases the risk

that reports are lost or «filtered» before reaching the

relevant investigative or prosecutorial agencies. As with

other anti-corruption bodies, a sufficient degree of in-

dependence 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 compro-

mised, a possibility is to establish support centers operat-

ed 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. Cur-

rently, several countries have established independent

organizations to assist whistleblowers. In the UK, PublicConcern at Work is an independent charity offering free,

confidential advice to people concerned about wrongdo-

ing. Another example comes from Azerbaijan, where the

local Transparency International chapter operates five re-

gional legal advice centres that provide a mechanism for

citizens to pursue corruption complaints. Similar arrange-

ments, organized by NGOs, could be promoted focusing

on providing support to informants in the financial sector

in countries affected by illicit outflows of money.

ENCOURAGE WHISTLEBLOWING

PROCEDURES IN THE FINANCIALINDUSTRYAs 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 ombudsperson’s 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.

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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.

CONCLUSIONAlthough whistleblowing should not be considered the

only tool for dealing with illicit flows, enabling individu-

als 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 in-

terested parties first need to know where the assets are be-

fore 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 ac-

cept 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 Associa-

tion of Certified Fraud Examiners indicates that employ-

ees 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 protec-

tion should be ensured. This is an important consider-

ation 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 belocated in the developed world and this is where the indi-

vidual blowing the whistle will require protection.

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 bank’s 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 USgovernment – 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 oneof the most complex financial scandals in Kenyan history,

the Goldenberg affair. It is said that as much as USD 850

million – a fifth of Kenya’s gross domestic product-was

looted from the country’s 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 thescheme. The courage to disclose these corrupt practices

resulted in Munyakei’s 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 whistleblow-

ing 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 hid-

den, whistleblowing in the financial industry is partic-

ularly beneficial. It allows detection of criminal money

flows and supports rich and developing countries inidentifying and eventually repatriating the proceeds of

crime.

Source: www.u4.noITAR-TASS photo




I. INTRODUCTION1. GRECO adopted the Joint First and Second Round

Evaluation Report on the Russian Federation at its 40th

Plenary Meeting (Strasbourg, 1–5 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 GRECO’s Rules of Pro-

cedure, the authorities of the Russian Federation submitted

their Situation Report (RS-Report) on the measures taken to

implement the recommendations on 30 June 2010.

3. At its 40th Plenary Meeting (1–5 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 Legisla-tion, 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

JOINT FIRSTAND SECOND

ROUND EVALUATIONCOMPLIANCE REPORTON THE RUSSIAN

FEDERATION

Adopted by GRECO at its 49th Plenary Meeting (Strasbourg, 9 November – 3 December )




by the GRECO Secretariat in drafting the Compliance Re-

port (RC-Report).

4. The objective of the RC-Report is to assess the meas-

ures taken by the authorities of the Russian Federation to

comply with the recommendations contained in the Joint

First and Second Round Evaluation Report.

II. ANALYSIS5. 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 comprehen-

sive national anti-corruption strategy, on the basis of the

National Anti-corruption Plan (NACP), covering the fed-

eral, regional and local levels of the Russian Federation.The strategy should place a strong emphasis on corrup-

tion 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 strat-

egy 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 Strat-

egy (Strategy) and the National Anti-Corruption Plan(NACP) for 2010–2011 were adopted through a Presi-

dential 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 particu-

lar demands of the NACP. The Strategy provides for the

establishment of a modern legal and organisational ba-

sis for the fight against corruption and measures to make

sure that legal acts and managerial decisions are execut-

ed as intended by the authorities. Prevention of corrup-tion 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 partici-

pation of the «institutes of civil society» in counteract-

ing 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 man-

agement and disposal’’; improving the conditions, pro-

cedures and mechanisms of state and municipal tenders;enhancing the quality of professional training of special-

ists in the sphere of organisation of prevention and im-

mediate counteraction to corruption; increasing the ef-

ficiency of the participation of the Russian Federation in

international cooperation against corruption, including

the elaboration of an organisational basis for regional an-

ti-corruption, providing assistance to other states in or-

der to train specialists and to study the causes and rea-

sons 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, dead-

lines and indicators of the expected results. In order to

implement the Law on Combating Corruption of 25 De-

cember 2008 (#273-FZ), the NACP contains a number

of instructions to the Government of the Russian Federa-

tion, 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 Rus-

sian 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 address-

ing the causes of corruption and providing the basis of the

fight against this phenomenon in the future. The adop-

tion of the National Anti-Corruption Plan (NACP) for

2010–2011, including the various measures for counter-acting corruption, is the tool for the implementation of

the Strategy. These complementary instruments are wide

in their approach in addressing various fields of public ad-

ministration at different levels and are aimed at strength-

ening 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 inter-

ests of the regions as well as those of civil society.

12. The authorities of the Russian Federation reportthat on 31 March 2010, a Presidential Decree «on Mak-

ing Amendments to the Presidential Council on Counter-

acting Corruption and to the Presidium of this Council»

(#396) was adopted, amending the President’s 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 sever-

al non-governmental organisations. The following repre-

sentatives have been added to the Presidium of the Coun-cil: a member of the Public Chamber of the Russian Fed-

eration (the Republic of Sakha-Yakutia); a member of the

Public Chamber of the Russian Federation (the Kursk re-

gion); the Director of the branch of the Russian Academy




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 Acad-

emy 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 Feder-

ation (#1336), dated 4 November 2010, the Mayor of Mos-

cow was included as a member of the Presidential Council

and its Presidium.

13. The authorities furthermore submit that a Work-

ing Group on the cooperation with civil society repre-

sentatives was formed under the Presidium of the Coun-

cil of Counteracting Corruption, (according to the Min-

utes, 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; theChair of the Commission of anti-corruption education

and propagation of the Republican Council of anti-cor-

ruption 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 de-

mocracies 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 Presi-

dent of the Fund «Center for Political Technologies» (who

has also published articles etc concerning corruption).

14. GRECO takes note of the information provided andwelcomes that the Russian authorities have enlarged the

composition of the Presidential Council, which now in-

cludes a broader regional representation as well as repre-

sentatives of various academic disciplines and non-gov-

ernmental 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 so-

ciety input to the Council. In the light of the foregoing,

GRECO concludes that Russia has dealt with all the com-

ponents of the current recommendation. Having said that,

it appears that the current composition of the Presiden-tial Council or the Working Group could well be comple-

mented with further civil society input from other non-

governmental organisations with an anti-corruption agen-

da, preferably, also with international experience. In this

context, GRECO was informed by the Russian authorities

that Transparency International, which is not represent-

ed 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 mon-

itoring 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


that the Presidium of the Presidential Council on Coun-

teracting Corruption considered it expedient to conduct

sociological research in 2010–2011 in order to monitor

the situation concerning corruption in the Russian Feder-

ation, to evaluate the existing levels and structures of cor-

ruption 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 permitevaluation of the level of corruption in the Russian Fed-

eration as a whole and of the efficiency of the anticorrup-

tion 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

2010–2011), ie the Working Group on the cooperation

with civil society representatives.

18. The authorities furthermore report that the De-

partment on Civil Service Issues and the Control Depart-

ment of the President of the Russian Federation are en-

trusted with systematic monitoring of the realisation of

anti-corruption measures, which are undertaken withinthe framework of the activities of the Presidential Coun-

cil 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 «De-

partment for Draft Laws and Monitoring of their Applica-

tion (implementation)». The authorities state that a first

monitoring of the efficiency of the law enforcement agen-

cies has been carried out. Moreover, a joint venture has

been established between the Ministry of Justice, the Min-istry 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, represent-

atives of political parties, public associations, institutions

of the civil society (including lawyers and notaries) and

the scientific community. The non-governmental organi-

sation «All Russian Social Fund «Public Opinion» was in-

strumental in conducting this work, as contracted by theGovernment. The survey was carried out in 70 constit-

uencies, 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-




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 car-

ry out an assessment on corruption issues in the business

sector and its interaction with state functions and effi-

ciency concerning public services, law enforcement etc.

The authorities also submit that the Ministry of Economic

Development is entrusted to regularly conduct monitor-

ing of the implementation of anticorruption measures at

departmental level. Finally, the Presidium of the Presiden-

tial Council has decided that the Control Department to-

gether with the Department of the President of the Rus-

sian Federation are to control the implementation of the

Presidium’s decisions in quarterly reports.

19. GRECO recalls the assessment contained in the

Evaluation report (paragraph 59) according to which theimplementation of the impressive number of initiatives

in the Russian Federation to fight corruption, in partic-

ular legal acts and norms established, is difficult to fol-

low 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 vari-

ous measures needs different tools and that measures im-

plemented cannot be assessed until they have taken full

effect (paragraph 59). GRECO therefore appreciates that

the Presidential Council and its Presidium on Counter-acting Corruption have established various organisation-

al 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-gov-

ernmental 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 un-

prejudiced way as well as to be trusted by society at large.Such independence can be achieved with a strong com-

ponent of civil society involvement. GRECO welcomes

that a comprehensive monitoring system has been put in

place, however, in line with the conclusion regarding Rec-

ommendation iii, GRECO encourages the Russian Fed-

eration to continue its efforts to make the monitoring as

open and sensitive as possible towards input from civil so-

ciety, in particular through the involvement of representa-

tives who are specialised in anticorruption issues. GRECO

notes in this respect that such involvement may take dif-

ferent 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 ad-

ministrative and criminal procedures in order to firm-

ly establish that cases of corruption are to be treated as

criminal offences as a main rule.


that article 1 of the Law on Combating Corruption»,

adopted on 25 December 2008 (# 273-FZ) defines cor-

ruption as «abuse of official position, giving a bribe, re-

ceiving a bribe, abuse of powers, a commercial graft or

any other illegal use of his/her official position by an in-

dividual 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 thatthis 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, ac-

cording to article 19.28 of the Code of Administrative Of-

fences 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 of-

ficial or to the person who is executing managerial func-

tions 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 exe-

cuting 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 cor-

ruption 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 Crimi-

nal Code are abuse of official position (Article 285 CC),

giving a bribe (Article 291 CC), receiving a bribe (Arti-

cle 290 CC), abuse of powers (Article 201 CC) and com-

mercial gift (Article 204 CC), also according to the au-

thorities. They furthermore state that there is no clear

cut list of corruption crimes, administrative and discipli-

nary 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 wasestablished 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 un-

official list of administrative corruption offences, contain-




ing 11 offences, was drawn up following the adoption of

the Law on Combating Corruption. In addition, the au-

thorities have submitted a comprehensive table contain-

ing corruption offences of the Criminal Code as compared

with administrative corruption offences. Moreover, it is

concluded at the end of the table that currently «corrup-

tion cases are considered mostly as criminal cases».

24. GRECO takes note of the information provided.

It recalls the description contained in the Evaluation re-

port (paragraph 46): «Administrative offences of a cor-

ruptive 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, 5.5–5.13,

5.15–5.25 CAO) and other infringements of officials of

public bodies and establishments, officials of commercial

and other organisations, petty misappropriation throughembezzlement (Article 7.27 CAO); restriction of the free-

dom 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 ad-

ministrative and criminal law procedures in parallel «ap-

pears to give the authorities rather wide discretionary

powers to decide which procedure to follow in individualcases and there seems to be a grey zone where the two

systems overlap»…»which affords opportunities for ma-

nipulations». It was in the light of these remarks that the

current recommendation was adopted. GRECO notes that

the authorities have provided valuable explanations in re-

spect of the complexity of the current system and that the

documents provided may be of some help to better under-

stand the coexistence of administrative and criminal pro-

cedures for dealing with corruption. Moreover, the sub-

mitted information may even be used as soft guidelines

in order to give priority to criminal proceedings for cor-

ruption offences, however, they can not be seen as more

than preparations for a review of the system of adminis-trative 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 manipula-

tion, 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 notbeen implemented. Recommendation v.

26. GRECO recommended that precise guidelines for

the distribution of corruption cases between the various

law enforcement agencies/departments be established.


that the Prosecutor General’s Office of the Russian Feder-

ation 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 General’s

Office of the Russian Federation, except for cases where

indications of a crime (corpus delicti), envisaged by ar-

ticle 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 in-

vestigations 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 Prosecu-

tor General’s Office to become the Investigation Commit-

tee 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

(431376–5) on the «Investigative Committee of the Rus-

sian Federation» and the draft Law (431372–5) on amend-

ments to some federal constitutional laws due to the im-provements 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 re-

spect 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 General’s 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 of-ficial 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 examina-

tion 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 struc-

tures of the Prosecution Service, will – as a main rule –

centralise the investigation of crimes (including corrup-

tion) in a single institution. Prior to this, the Prosecutor

General’s Office had prepared draft legislation on the al-location of corruption cases to the pertinent investigate

authority, however, in the light of the very recent reform

concerning the Investigation Committee, other draft leg-

islation need further consideration, according to the au-




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 Serv-

ice (FSB). No final draft amendments to the CPC have yet

been approved. Concerning the Joint Agreement between

the Prosecutor General’s Office and the Ministry of the

Interior, GRECO takes the view that this is more about es-

tablishing criteria for statistical purposes which although

useful, are not really pertinent for the allocation of cor-

ruption cases among law enforcement agencies. However,

the recently adopted legislation relating to the Investiga-

tion Committee can be expected to have a considerable

impact on the allocation of criminal cases, including cor-

ruption, to this single body as a main rule. The implemen-

tation of this reform as well as the possible need for addi-tional regulations on the distribution of corruption cases

is still pending. Moreover, it would appear important to

connect further measures in this respect with the meas-

ures reported under recommendation vi, in particular

as regards the coordinating role given to the Prosecutor

General’s Office.

30. GRECO concludes that recommendation v has

been partly implemented. Recommendation vi.

31. GRECO recommended to further enhance the co-

ordination between various law enforcement agencies in-

volved in investigations of corruption and to examine the

advisability of developing a centralised support mecha-nism to assist law enforcement agencies in investigating

corruption.


that the Federal Law on Combating Corruption» of 25 De-

cember 2008 (#273-FZ), subparagraph 6 article 5 pro-

vides that the Prosecutor General and subordinated pros-

ecutors 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 Anti-

Corruption Plan (NACP) 2010–2011 includes an order to

the Prosecutor General to pay special attention to the pos-sibility of coordination meetings, as stipulated already by

article 8 of the Federal Law on Prosecutor’s Office (1992,

#2202–1), according to which the same kind of coordina-

tion is to be carried out by the Prosecutor General and

subordinate prosecutors in respect of any crime.

33. The authorities furthermore report that in accord-

ance with an order of the Prosecutor General «on Im-

provement of the Organisation of the Prosecutor’s Su-

pervision over the Execution of Laws on Combating Cor-

ruption» of 1 October 2008 (Order #196), permanent

interdepartmental working groups have been established

in the prosecutor’s offices of the subjects of the RussianFederation, prosecutors’ offices of cities and districts, mil-

itary and other specialised prosecutors’ offices: The rep-

resentatives 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 opera-

tion a statistical report (Order #31), containing data on the

supervision of the execution of laws on combating cor-

ruption and on the results of investigation of corruption

cases. According to the report, in 2009 the bodies of the

Prosecutor’s Office conducted in total 3 724 coordination

meetings between directors of law enforcement bodies in

relation to corruption cases and 4 367 questions were ex-

amined; 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 meas-

ures» were taken in order to prevent and reveal corrup-

tion crimes.

34. The authorities also state that in accordance witha decision by directors of law enforcement bodies in Sep-

tember 2008 (Order #1), the Academy of the Prosecutor

General’s Office (as coordinator) jointly with the educa-

tional institutions of the Ministry of the Interior, the Feder-

al 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 con-

text, are elaborating proposals to better coordinate the in-

vestigation of corruption in line with the defined main di-

rections provided for in the NACP. The authorities stress

that as a result of the law and the NACP, the directors of

the Prosecutor’s offices of all levels are to conduct coordi-nation meetings regularly with law enforcement agencies

on the most acute issues of application and enforcement

of laws. On 6 October 2009, the Prosecutor General’s Of-

fice conducted a coordination meeting between the direc-

tors 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 Prosecutor’s Office and other

law enforcement agencies in the investigation of crime.

The meeting concluded, inter alia, that additional meas-

ures on coordination were to be taken.

35. In relation to the second half of the recommenda-

tion, the Russian authorities report that within the frame-work of the above interdepartmental working groups co-

ordinated by the Office of the Prosecutor General of the

Russian Federation, subordinate prosecutors inform the

Prosecutor General’s Office on the results of their work

regularly (every quarter). This interdepartmental ex-

change of operative information about anti-corruption

actions, comprising bodies of state power and adminis-

tration, bodies of local self-government as well as spe-

cialised institutions is centralised through the Prosecutor

General’s Office of the Russian Federation. Furthermore

the NACP contains instructions to the Prosecutor Gen-

eral to inform the Presidential Council on CounteractingCorruption annually about the results of this coordinat-

ing work.

36. GRECO takes note of the initiatives launched in

order to enhance the coordination between the various




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 General’s 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 appre-

ciates that this process, considering the size of the coun-

try and the vast number of law enforcement agencies con-

cerned, 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 bod-

ies. It also follows from the information provided that theauthorities have not only examined the advisability of de-

veloping a centralised support mechanism, but also en-

tered 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 inde-

pendence of law enforcement agencies and their investi-gative 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 re-

considered 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 supervi-

sion over investigation, as conducted by the bodies of the

Prosecutor’s 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 Pros-ecutor’s Office of the Russian Federation, which entered

into force on 7 September 2007, provides for the estab-

lishment 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 Prosecutor’s Offices and other law en-

forcement agencies. The supervisory function was instead

given to the Investigation Committees under the Prosecu-

tors’ Offices. (However, the Investigation Committee was

in 2010 separated from the Prosecution Service, accord-

ing to the authorities, see recommendation v). The au-

thorities furthermore explain that a similar structure wasestablished 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 in-

vestigation, the Head of the Investigation Committee un-

der 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 dis-

cussions 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 Rus-

sian Federation on reforming the Ministry of the Interior

(Order of 18 February 2010, #208), the Government is en-

trusted with considering additional budget allowances tothe Ministry of the Interior of the Russian Federation to

increase the salaries of the employees and to form a spe-

cialised housing fund within the framework of the execu-

tion 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 sys-

tem where there is a low level of operational independ-

ence of the individual law enforcement personnel, there

is always a risk of improper influence from within the

system. Therefore, GRECO concluded that strict hier-

archical control within the system, aimed at preventingimproper influence, needs to be balanced with an appro-

priate level of operational independence for those who

carry out corruption investigations and their agencies

and linked to that, a sufficient degree of personal ac-

countability. What has been reported by the Russian au-

thorities concerns, inter alia, organisational structures of

the investigative committees as supervisory organs in re-

spect of the operational investigative departments. The

system of investigation committees was already in place

well before the on-site visit to Russia and its organisa-

tion is also reflected in the Evaluation report. The steps

taken as a result of the current recommendation con-

cern the material conditions of law enforcement person-nel, such as salaries and benefits connected to their posi-

tions. 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 appar-

ently been taken in respect of the organisation and pro-

cedures of the work within the law enforcement agencies

which would strengthen the operational independence

of the personnel carrying out investigative tasks, norabout their accountability. GRECO therefore urges the

Russian authorities to rigorously pursue the work to im-

prove the operational independence and accountability

of law enforcement personnel. Also these measures need




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 Prosecutor’s Office of

the Russian Federation» of 17 January 1992 (#2202–1),

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 candi-

date must not be a citizen of a foreign state; there must be

no decisions of the court about the incapacity of the per-son 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 dis-

ease 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 exami-

nation of official documents or data, submitted by author-

ised state bodies or officials. Conclusions that the candi-

date 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 of-

ficial persons as well as through psychological tests. Theauthorities add that in order to implement this particular

recommendation, on 9 November 2009, the Prosecutor

General of the Federation of Russia adopted an instruc-

tion 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 insti-

tutions of prosecution service has also been defined in the

document. The authorities add that in order to form high-

ly qualified prosecutors, the Prosecutor General has is-

sued an order in 2010 (No. 316) on the organisation of re-

training of prosecution personnel and it also follows fromthis 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 ap-

ply in the selection of candidates in the anti-corruption

structures and will follow generally in respect of all posi-

tions 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 Fed-

eration were not recruited on a competitive basis and that

some assistant prosecutors at city or district level were re-

cruited among students who had not even finished theiruniversity studies. GRECO was of the opinion that this

situation merited to be carefully assessed in order to en-

sure that only qualified persons, based on objective crite-

ria, 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 neces-

sary 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. Recommenda-

tion ix.

47. GRECO recommended that the principle of judicialindependence, as provided for in the Russian Constitu-

tion and legislation, be strengthened further in practice,

in particular, in respect of recruitment/promotion proce-

dures and the exercise of judicial functions.

48. The authorities of the Russian Federation make ref-

erence to the Law on the Status of Judges in the Russian

Federation of 1992 (#3132–1), 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 andupon 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 au-

thorities 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 authori-

ties 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 novel-

ties in legislation as a result of the adoption of the Law

on Combating Corruption and the Law of 25 Decem-

ber 2008 (# 274-FZ) «on Making Amendments to Sepa-rate 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 judg-

es, such as rules to prevent conflicts of interest (article 3)

and qualification requirements of candidates to the po-

sition 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 #157-

FZ of 17 July 2009, also amending the Law on the Status of

Judges, the initial appointment limitation (3 years) of thefederal 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




guarantee for their independence. Moreover, in respect of

the judges to the Supreme Court and the the High Com-

mercial Court, these are appointed by the Council of Fed-

eration (Parliament), as before, following nominations by

the President of the Russian Federation, as before, how-

ever, the President is now to be consulted by the Chair-

persons of these Courts (and not by the Presidential Com-

mission, 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 Pan-

el – which consists only of judges of the Supreme Court

and the High Arbitration Court of the Russian Federa-

tion (three judges each The Disciplinary Judicial Panel is

a judicial body which examines the cases of complaintsagainst decisions of the High Qualification Panel of Judg-

es of the Russian Federation and qualification panels of

judges of the subjects of the Russian Federation about ear-

ly termination as a result of misconduct. Upon examina-

tion of complaints and applications, the Disciplinary Judi-

cial Panel adopts a motivated final decision either to up-

hold 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 Instructionof 31 December 2008 (#Pr-2801) addressed a number

of measures concerning the Judicial system, includ-

ing the updating of the Federal Law on Justice. This fol-

lowed 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 em-

ployees was also to be raised.

52. GRECO recalls the statement in the Evaluation re-

port: «Despite the establishment of a Constitutional and

legislative framework of the judiciary and safeguards aim-

ing at providing for the independence of judges, there ap-

pears to be a common understanding in Russia among of-ficials 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 legisla-

tion provides for independence of the Judiciary, but that

these principles must be rigorously implemented in prac-

tice (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 outsidethe judiciary; the Plenum of the Supreme Court, which

among other things, establishes judicial practice, is not

only composed of Supreme Court judges, but also rep-

resentatives 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 sub-

mitted. 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 Com-

mercial Court has been slightly reduced, but not all the is-

sues signalled in Article 149 of the Evaluation report havebeen addressed. Furthermore, in respect of the establish-

ment of judicial practice (paragraph 150) nothing new has

been presented that could be seen as strengthening of ju-

dicial independence. GRECO encourages the Russian au-

thorities 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 introduc-

tory 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 re-

port 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 Judg-

es» for in-service training and advanced training of judges

and employees of court administrations. In 2008–2009,

the Academy of Justice elaborated educational and the-

matic training which include courses for judges and ad-

ministrative personnel of courts. The training comprises

lectures on the topics of ethics of judges and other relatedsubjects. In 2009, 2618 judges of the regular courts par-

ticipated in the training at the Academy’s Moscow branch

of the faculty of advanced training. The training is organ-

ised every year. Furthermore, in 2009, the High Arbitra-

tion 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, adminis-

trative law etc). Training was also carried out on the issues

connected to the legal amendments and changes, intro-duced 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 stand-

ards of arbitration proceedings and the Code of Ethics for




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 qual-

ification programmes involved 1140 judges in total, car-

ried 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 li-

ability.

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 Coun-

cil of Europe Recommendation No. R (94) 12 of the Com-mittee 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 ac-

tivities. 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 Arbi-tration 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 Coun-

cil 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 mini-

mum required in a democratic society.

61. The authorities of the Russian Federation recapitu-

late that the categories of persons who are subject to aspecial 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 Coun-

cil 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 adminis-

tering 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 Hu-

man Rights in the Russian Federation (Ombudsman), the

former President of the Russian Federation, prosecutors,

the Chairman of the Investigation Committee under the

Prosecutor’s Office of the Russian Federation, directors of

investigation bodies, investigators, barristers, members of

the election commission and the commission of the refer-endum with the right to a decisive vote, registered candi-

dates to the deputies to the State Duma, registered can-

didates to the deputies of the Legislative (representative)

body of the state power of the subject of the Russian Fed-

eration. The decision to initiate a criminal case concern-

ing the persons or arraigning such a person as an accused,

if the criminal case was initiated in respect of other per-

sons 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 beenmade to article 448 CPC through Federal Law on amend-

ments to separate legal acts (#280-FZ), according to which

certain categories of officials – prosecutors, heads of the

investigation bodies, investigators, barristers (court law-

yers), 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 pro-

tection 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 arraign-

ment as an accused in respect of the deputy of the legis-

lative (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 Federa-

tion; 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 para-

graph 1 of article 447 CPC. According to the draft, the

following categories of persons would also be deprived of




their immunity from prosecution: lawyers, parliamentary

candidates, candidate deputies of constituent elements,

members of electoral commissions, members of referen-

dum 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 dif-

ferent federal laws establish a comprehensive system of

immunities from criminal proceedings and that articles

447–452 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 proceed-

ings against prosecutors, heads of investigation bodies,

investigators, lawyers and deputies of a legislative (repre-

sentative) body of state power of a subject of the RussianFederation is no longer subject to permission by a special

authority; however, criminal proceedings can only be ini-

tiated by a special public official. Furthermore, the Gov-

ernment is in the process of changing the relevant proce-

dures 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 im-

munities appears to be wider than ever before in Russian

legislation» in the light of which the current recommen-

dation, which calls for a reduction of categories of per-sons 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 re-

quired 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 provisionsunderlying the current procedures for lifting immunity be

thoroughly revised with a view to their simplification and

to establish guidelines for their application by law enforce-

ment officials and judges.

67. The authorities of the Russian Federation reiter-

ate 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 estab-

lished by article 448 CPC. This article has been amend-

ed through the Federal Law #280-FZ and, as a result, theprocedure of initiation of a criminal case and the proce-

dure of arraignment as an accused were significantly sim-

plified 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 Assem-

bly of the Russian Federation, members of the Federation

Council of the Federal Assembly of the Russian Federa-

tion, 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 Fed-

eration, 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 Proceed-

ings in Criminal Cases against Certain Categories of Per-

sons», which discusses procedural problems encountered

in a large number of practical cases. Based on this analysis

the Investigation Committee under the Prosecutor Gener-

al’s Office of the Russian Federation has adopted methodi-

cal «Guidelines on Carrying Out Criminal Prosecution asto Specific Categories of Persons subject to Criminal Pro-

ceedings». (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 177–179)

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 par-ticular 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 Con-

stitutional 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




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 judg-

es. (The texts have been submitted to GRECO.) As far as

members of Parliament are concerned, the authorities re-

fer to article 98 of the Constitution, articles 19 and 20 of

the Federal Law «on the Status of the member of the Fed-

eration Council of the Federal Assembly of the Russian

Federation and the deputy of the State Duma of the Fed-

eral Assembly of the Russian Federation» (#3-FZ). Moreo-

ver, they submit that a decision of the Constitutional Court

of 19 May 2009 describing the legal nature etc of parlia-

mentary immunity: «the immunity cannot be regarded as

the personal privilege of the deputy exempting him from

liability for criminal and administrative offenses…the par-

liamentary immunity involves adequate protection of thedeputy in the exercise by him of proper parliamentary ac-

tivities (implementation of the parliamentary rights, per-

formance of parliamentary duties) that leads to the gen-

erally 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 ad-

ministratively liable for opinions expressed, speech in Par-

liament or a position expressed when voting, development

and submission of the action documents, necessary con-

tacts with state authorities and officials thereof, as well as

other actions arising from the deputy’s status. At the sametime, by virtue of a general legal principle of non-abuse of

the right of immunity it cannot justify exemption for pub-

licly insulting, calumniation and other incompatible with

the mission of the institution and the deputy’s status of-

fenses 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 con-

cerning parliamentary immunity describes the content

and fundamental basis of such immunity. However, the

current recommendation calls for criteria to be appliedby 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 mer-

its 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 104.1–3 of the

Criminal Code be amended in order to provide for con-

fiscation of the proceeds from corruption in respect of all

corruption offences of the Criminal Code as well as otheroffences which may be connected with corruption and to

provide for efficient seizure in such cases and that the in-

troduction of in rem confiscation under the criminal leg-

islation be considered.


that draft legislation is under preparation within the Min-

istry of Justice aimed at amending article 104 and related

articles of the Criminal Code (CC) in line with interna-

tional requirements for confiscation and seizure, in par-

ticular, to widen considerably the scope of criminal of-

fences in relation to which confiscation and seizure can be

applied. The authorities have added that a draft law (Arti-

cle 174 CC), widening the scope of criminal offences in re-

lation to which confiscation and seizure can be applied is

pending before the State Duma since 1 July 2010. Concern-

ing 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 con-fiscation in rem in the criminal legislation was discussed.

Some 10 MPs representing the pertinent parliamentary

committees, representatives of the Presidential Admin-

istration, the Government, the Constitutional Court, the

Supreme Court, the Prosecutor General’s Office, law en-

forcement bodies, scholars, civil society (including Trans-

parency 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 leg-islation 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, fol-

lowing the round table discussion within the State Duma,

in which a number of stakeholders participated. This part

of the recommendation has therefore been partly imple-

mented.

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 in-

terim measures in cases of corruption, and to assess the

efficiency of the confiscation regime based on the collec-

tion – on an on-going basis – of appropriate and detailed

information and statistics.


that the Academy of the Prosecutor General’s Office (in-

cluding its branches in Saint Petersburg and Irkutsk Law

Institutes and also the Law Institute of the Academy of

the Prosecutor General’s Office and the Institute for train-

ing and professional upgrading of high-ranking prosecu-tors), 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




staff at various levels focusing on the application of meas-

ures 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 General’s Office of the Russian Federa-

tion has in 2009 prepared methodical recommendations

concerning the application of confiscation as a criminal

law measure. The authorities also report that various en-

tities, such as the Academy of Administration of the Min-

istry 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 confis-

cation of property in the course of corruption crimes in

their future studies.81. The authorities furthermore submit that, on 24 De-

cember 2009, the Expert Group against Corruption un-

der the Interdepartmental Working Group for Counter-

acting Economic Crimes met with representatives of law

enforcement agencies to discuss possible adjustments of

departmental statistics, including how to report statis-

tics to allow for evaluation of the efficiency of the use of

confiscation in relation to corruption offences. The au-

thorities 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 Depart-

ment under the Supreme Court, which registers personsconvicted also registers confiscations applied and has is-

sued 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. Fi-

nally, a new form of departmental report of the Federal

Service of Court Bailiffs has been established by the Min-

istry 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 implement-

ed satisfactorily. Recommendation xvi.

83. GRECO recommended to ensure that public ad-ministration 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 Le-

gal 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 Cor-

ruption (ETS 173). These laws have contributed to thespread of the application of various measures to prevent

corruption and to establish liability for crimes of corrup-

tion 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 con-

duct of different types of services unified the provisions

concerning the establishment of relevant rules and limi-

tations for all categories of employees in public admin-

istration (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 with-

in the framework evaluating the public administration in

a more narrow context, as distinct from the law enforce-

ment, 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; how-

ever, 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 adminis-

trative 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 cat-egories 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 meas-

ures for the implementation of such legislation through-

out the public administration, including proper super-

vision of the implementation, be provided following the

adoption.


that the «Federal Law On Providing Access to Informa-

tion on the Activities of State Bodies and Bodies of Lo-cal Self-Government», dated 9 February 2009 (#8-FZ),

entered into force on 1 January 2010. Moreover, to en-

sure 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 infor-

mation, are built on the main principles of: transparency

and availability of information, except for the cases envis-

aged 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 bodiesand courts are to define the appropriate structural divi-

sions 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-




ganise access to information about their activities. The

laws provide for possibilities to appeal against decisions

not to provide access to information, within the hierar-

chy of the administration and, ultimately, to a court of

law. The authorities furthermore submit that several au-

thorities have, currently, started to draw up internal regu-

lations 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 tothis 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 proce-

dure and that it therefore is not in a position to form a le-

gal opinion on its content. GRECO cannot disregard the

crucial importance of making this new fundamental leg-

islation 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 through-

out the public administration at all levels, and would ben-efit 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 Russia’s extensive anti-

corruption 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 consid-er, as a long term objective, the establishment of a special-

ised administrative court system.

92. The authorities of the Russian Federation claim

that this recommendation has been realised to a large ex-

tent for the following reasons. The Federal Code of Ad-

ministrative Offences envisages the possibility of appeal

against decisions of the administrative bodies. The Fed-

eral Arbitration Proceedings Code and the Federal Civil

Proceedings Code establish the procedures of appeal of

administrative decisions, concerning the rights of indi-

viduals and legal entities. The absence of special laws on

administrative courts and administrative procedures doesnot, 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 protec-

tion 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 supe-

rior (higher) court instances. In view of this, the Supreme

Court of the Russian Federation has initiated organisa-

tional changes and reforms in the system of courts of gen-

eral 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, of-

ficials, 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 relevantprocedural 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 ap-

peal of actions and decisions of state bodies are not limit-

ed 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 organisedby 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 adminis-

trative complaints as it was described in the Evaluation

report: «Article 46 of the Constitution provides that eve-

ryone must be guaranteed protection of his or her rights

and liberties in a court of law and that decisions and ac-

tions (or inaction) of state organs, organs of self-govern-

ment, 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 ap-

peal administrative decisions in court and it is possible tomake administrative appeals against certain decisions of

certain authorities, for example, in respect of the feder-

al Bailiff’s office and criminal justice authorities, accord-

ing 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 ad-

ministrative 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-




lation in place and administrative appeals are still being

dealt with by the ordinary courts: a system that was con-

sidered insufficient according to the Evaluation report

(paragraph 286). The new elements reported – a resolu-

tion by the Supreme Court and some initiatives by the

State Duma – confirms an awareness of the need for re-

form 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 de-

termined 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 employ-

ment in the public administration.


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 serv-

ice» was introduced (article 10). This notion refers to situ-

ations 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, organisa-tions 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 com-

petitive 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 Serv-

ice (2007, #25-FZ), the authorities stress that there are in-

struments in place to implement the latter legislation in

practice. To ensure that recruitment to the state serviceand the municipal service is carried out according to the

law, the bodies of prosecution conduct checks on a regu-

lar basis. In 2009, the prosecutors revealed 263 715 vio-

lations of the laws on state and municipal service and on

counteraction corruption (in 2008–208 284).


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 Corrup-

tion provides for further regulations in respect of officials’conduct during recruitment in order to prevent conflicts

of interest. Apparently, a supervisory role in the imple-

mentation 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 dif-

ficulties relating to the implementation of the legislation

as intended. On the other hand, GRECO is far from con-

vinced that yet more legislation with rules against con-

flicts 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 de-scribed.

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 or-

der 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 con-

flicts of interest, established by the Laws on CombatingCorruption and on State Civil Service, also cover situa-

tions 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 prosecu-

tion service for supervision of execution of laws on com-

bating corruption conduct regular checks on their execu-

tion, regulating the issues of detection and prevention of

the conflict of interests (as developed under recommen-

dation 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 StateLegal Department of the President of the Russian Federa-

tion has prepared draft Presidential decrees «on the Com-

mission for Observance of the Requirements and Stand-

ards to the Service Conduct of Federal Civil Servants and

Management of the Conflict of Interests» and «on Meas-

ures 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, en-

visages that observance of the conduct of persons holding

positions in the Federal state civil service and the settle-

ment of such conflicts of interest, are to be examined by

special commissions. The latter draft Order specifies theapplication of article 12 of the Law on Combating Cor-

ruption 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-




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 commis-

sions. 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 theGovernment 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 fol-

lows 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 com-

missions with supervisory functions appears to be partic-

ularly interesting as a proactive complement to the staticprovisions 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 ad-

ministration and to consider abolishing the legal justifica-

tion for such gifts as contained in Article 575 of the Civil

Code.


that on 28 May 2010, the Ministry of Health and Social

Development of the Russian Federation submitted a draftFederal Law on Making Amendments to Separate Legal

Acts to the Government, envisaging amendments to arti-

cle 575 of the Civil Code (prohibition of gifts over a cer-

tain value) and to a large number of other laws with cor-

responding 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 em-

ployees and civil servants, municipal employees and em-

ployees 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 alsosubmit that the ban on receipt of gifts is to be reflected in

various codes of ethics.

108. GRECO welcomes the intentions reported to leg-

islate 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 fol-

low 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 ad-

ministration in good faith («whistleblowers») from ad-

verse consequences and to provide systematic training toall staff concerned.


that the duty of state and municipal employees to inform

the representative of the employer, the bodies of prosecu-

tion or other state bodies about all cases of approaches to

them by any persons in order to influence them to com-

mit 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, suchas federal ministries, the Prosecutor General’s 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 General’s 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 or-

der of notification of the representative of the employer

about the facts to be addressed when a state or munici-

pal official has been influenced to commit corruption of-fences, in accordance with part 5 of article 9 of the Law on

Combating Corruption.

112. The authorities furthermore indicate that accord-

ing to part 4 of article 9 of the Law on Combating Cor-

ruption, a state (civil servant) or municipal employee, who

notifies the representative of the employer, is to be un-

der the protection of the state according to the laws of

the Russian Federation. In addition to this, the Prosecu-

tor General’s Office has prepared a draft Federal Law on

Making Amendments to separate and specific legal acts

in order to protect persons who voluntarily report suspi-

cions 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-




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 report-

ing corruption (part 5 of article 9 of the Law on Combat-

ing Corruption) in this training as from 2010. The follow-

ing institutions are to provide such training: the Minis-

try of the Interior and its Academy of Administration, the

Federal Security Service and the Federal Service of Con-

trol over Drugs for law enforcement personnel, the Insti-

tute of advanced training for top personnel at the Acad-

emy of the Prosecutor’s Office for staff at the prosecution

offices and investigation committees.

Moreover, professors and lecturers of the Academy of the Prosecutor General’s Office systematically participate

in different events for advanced training of employees of

the central administration of the Prosecutor’s Office and

prosecutors’ offices of the subjects of the Russian Federa-

tion as well as investigation divisions of the Investigation

Committee under the Prosecutor General’s Office. The

Institute of advanced training of the Academy of Prose-

cutor Generals’ Office has elaborated and published the

training programme «Prosecutor’s supervision over ex-

ecution 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 submitthat on 29 June 2009 the Order of the President of the

Russian Federation on the organisation of advanced train-

ing of federal state employees (civil servants) – whose of-

ficial duties include the combat against corruption – was

adopted (№ 435-rp). According to the Order, the Fed-

eral 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 serv-

ants) will have taken place. Furthermore, it is planned that

this training will take place on a regular basis.


Concerning the first part of the recommendation, relat-ing 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 report-

ing 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 («whistleblow-

ers»), GRECO is pleased to note that general rules to this

end appear in the Law on Combating Corruption andthat further regulations are to be included in other per-

tinent 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 employ-

ees 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 promul-

gate 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 sec-

tions of public administration, and to ensure its imple-

mentation in practice, including offering adequate train-

ing to all staff concerned.


that, on 16 July 2009, the President of the Russian Federa-

tion signed an updated edition of the Order «on Adop-

tion 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, theauthorities 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 Offi-

cials, 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 pub-

lic sector.


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 fol-

lowed 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




persons for corruption offences and to provide effective,

proportionate and dissuasive sanctions in these cases, in-

cluding monetary sanctions, in compliance with the re-

quirements of the Criminal Law Convention on Corrup-

tion (ETS 173).


that in the light of the ratifications of the United Nations

Convention against Corruption (UNCAC) and the Coun-

cil of Europe Criminal Law Convention on Corruption

(ETS 173) as well as the adoption of the Law on Combat-

ing 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 Administra-

tive Offences (CAO) of the Russian Federation. As a re-

sult, 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 securi-

ties, other property and services of property nature ren-

dered, but not less than one million roubles (EUR 24,000)

in addition to confiscation of the transferred money, se-

curities 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 givinga 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 stipu-

lates that «legal persons can be held liable for the crim-

inal 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 ac-

cording 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 notimpose an obligation to establish criminal liability; how-

ever, the Convention obliges states to establish some form

of liability for criminal offences of corruption. In Russia

there are both administrative offences of corruption un-

der the CAO and criminal offences of corruption under

the CC. GRECO acknowledges that there is administra-

tive liability for legal persons in respect of illegalities un-

der the CAO; however, what has been indicated by the

Russian authorities does not link this liability to the par-

ticular corruption offences provided for under the Crimi-

nal Code. Another problem is that administrative liability

for administrative offences, as established under Article19.28 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 accord-

ing 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 Of-

fences, namely the introduction of an administrative of-

fence 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 hasnot 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.


that, on 31 December 2009, the Director of the Federal

Tax Service adopted guidelines for the detection of cor-

ruption related crimes committed within the tax authori-

ties (Order #MM-7–4/737@). The Guidelines contain

measures to be taken against perpetrators with referenc-

es to pertinent legislation. They also contain preventivemeasures in respect of offences etc. Moreover, on 19 Janu-

ary 2010, the Director of the Federal Tax Service adopt-

ed a programme to fight corruption in tax bodies (Order

#MM-7–4/12@) to implement measures of anti-corrup-

tion policy, for example, prevention of conflicts of inter-

est and to notify the law enforcement agencies about the

signs of corruption in tax bodies . The authorities further-

more 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 addi-

tional professional anti-corruption training of civil serv-ants is planned for 2010 in the educational institutions un-

der the Federal Tax Service.


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 Gen-

eral’s Office of the Russian Federation has adopted

measures to activate cooperation with professional as-

sociations of auditors, lawyers and notaries in the field




of combating corruption, in particular, concerning the

provision of information to the competent law enforce-

ment 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 General’s Office and Notary Chambers

of the subjects of the Russian Federation, the Prosecu-

tor General has adopted a Resolution containing provi-

sions which oblige the notaries public to inform com-

petent state bodies about corrupt acts they observe.

Furthermore, the Audit Chamber of Russia has elabo-

rated guidelines concerning reporting of money launder-

ing and financing of terrorism for the training auditors.

On 30 November 2009, the Council of the Audit Cham-

ber of Russia adopted a decision to include provisions,

which obligate the auditors to inform law enforcementagencies on details of corruption offences. Moreover,

upon the initiative of the Prosecutor General’s 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 per-

tinent training for private sector auditors. The authori-

ties furthermore submit that the Federal Chamber of

Lawyers (Barristers) has expressed its readiness to par-

ticipate 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 pro-

fessions of the private sector are more vague, however, the

recommendation does not require more than to «encour-

age» representatives of these «free» professions.

131. GRECO concludes that recommendation xxvi has

been dealt with in a satisfactory manner.

III. CONCLUSIONS132. 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 Sec-

ond 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. Rec-

ommendations iii, v, vii, ix, xi, xiii, xiv, xvi, xvii, xviii and

xix-xxiii have been partly implemented.

Recommendations iv and xxiv have not been imple-

mented.

133. The Russian Federation received a vast number

of recommendations in the Joint First and Second Evalu-

ation Round. Some of the recommendations require fun-damental measures, including the creation of a clear basis

for the National anti-corruption policy, far-going legisla-

tive reforms and organisational changes in public admin-

istration, law enforcement, the judiciary as well as in rela-

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 ad-

dressed a large majority of the recommendations even if

only just over a third of them could be considered as im-

plemented in full. The adoption of a National Anti-Cor-

ruption Strategy and the accompanying National Anti-

Corruption 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 docu-

ments and information in various fields of public admin-

istration. Having said that, it cannot be disregarded that

a large majority of the recommendations need further at-

tention by the authorities and areas such as criminal im-

munity of public officials and the independence of the

judiciary appear particularly critical matters in this re-spect. GRECO notes that several recommendations re-

quire legislative reforms which have been instigated but

are not yet completed and that many recommendations

are about implementing legal norms, rather than adopt-

ing 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 lead-

ing position in relation to typical tasks of the law enforce-

ment 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 nota-bly 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 sec-

tor, 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 pub-

lic administration, at central, regional and local levels in

order to be effective in practice. Furthermore, existing

monitoring mechanisms relating to the fight against cor-ruption, 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 in-

ternational non-governmental organisations with an an-

ti-corruption agenda.

134. GRECO invites the Head of the delegation of the

Russian Federation to submit additional information re-

garding the implementation of recommendations by

30 June 2012.

135. Finally, GRECO invites the authorities of the Rus-

sian Federation to authorise, as soon as possible, the pub-lication of the report, to translate the report into the na-

tional language and to make this translation public.

Source: www.coe.int




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 re-

ceived Royal assent1. However the Act has not yet come in-

to 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

UK’s progress to date in its fight against bribery and cor-

ruption, highlights the key offences under the Act and dis-

cusses some of the Act’s noteworthy features which com-

mercial organisations and individuals should consider toreduce 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

HISTORIC DEVELOPMENTOF BRIBERY AND CORRUPTION

LEGISLATION IN THE UKTo 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 re-

peated calls for the overhaul of the outdated and frag-

mented 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 or-

ganisations such as the Organisation for Economic Coop-eration and Development («OECD») and Transparency

International («TI»).

In order to tackle the problem, several organisations

produced reports and recommendations, calling for new

THE UK’S FIGHTAGAINST BRIBERY –

THE BRIBERY ACT

COMES INTO FORCEON JULY John Hull, Marc Hansen, Dan Smith (Latham & Watkins, London),

and Kseniya Elmova (Solicitor)




legislation to be introduced. Examples of such reports in-

clude the 1995 government-sponsored Nolan Committee

«Report on Standards in Public Life», 1998 and 2007 Law

Commission proposals for reform and the 2007 Law Com-

mission 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 Of-

fice («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 out-

side 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

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 inves-

tigation. Further, in November 2008, the Law Commis-

sion announced the proposed reforms, which in turn re-

sulted in the Bribery Act 2010.

DOMESTIC AND INTERNATIONALPERCEPTION OF THE UK

IN TACKLING BRIBERYAND CORRUPTION

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 re-

gime. For example, between April 1999 and March 2002,

the SFO was asked to provide assistance to other coun-

tries in 14 cases of corruption, including 1 instance in Rus-

sia and 1 in Ukraine2.

As to domestic investigations, the SFO historically only

mentioned corruption as part of individual cases in its an-

2 See SFO Annual Report 2001–2002 at http://www.sfo.gov.uk/about-us/annual-reports–accounts/annual-reports/annual-report-2001–2002/key-facts-and-figures.aspx.

John Hull Marc Hansen




nual reports, and not as a separate case type category. It was

not until its 2001–2002 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 «Conven-

tion on Combating Bribery of Foreign Public Officials in In-

ternational Business Transactions»3 («OECD Anti-Bribery

Convention»), to which the UK is a signatory.

During 2005–2006, the SFO stated in its annual report

that it had formed a team with responsibility for «main-

taining the register of all allegations of bribery or corrup-

tion of overseas officials by British persons and compa-

nies», 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 as-

sistance.

Despite these efforts, TI’s 2005 Progress Report on the

enforcement of the OECD Anti-Bribery Convention criti-

cised the UK, stating it was one of the countries where no

foreign bribery cases had been brought (with only 4 inves-

tigations). It also said that in the UK there was no centrali-

sation or adequate coordination of the law and enforce-

ment, and no prosecutions. TI also opined that the UKgovernment needed substantial improvement in its efforts

3 See http://www.oecd.org/document/21/0,3343,en_2649_34859_2017813_1_1_1_1,00.html.

to build public awareness of the issue and that the use of

corporate compliance programs, accounting and auditing

requirements may need to be strengthened.

TI’s 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. Fur-

ther, in 2007 there was one reported case of domestic brib-

ery by foreign companies (although subsequent figures in

relation to such bribery have not been reported to date).

In its 2008–2009 annual report, the SFO dedicated a

large section to its commitment to fight against corrup-

tion. In 2008, TI considered firms headquartered in the

UK as the fifth least likely (jointly with Germany and Ja-

pan) to engage in bribery when doing business abroad,

out of 22 countries in TI’s «Bribe Payers Index», up from

sixth place in 2006. It was, perhaps, concerning that de-

spite its top 5 ranking in 2008, a separate statistic in the

2008 Bribe Payers Index (which was not taken into con-

sideration in the ranking) said that 58% of survey partici-

pants thought that the UK’s efforts in the fight against cor-

ruption were either ineffective or very ineffective. As this

was a new statistic for the 2008 Bribe Payers Index (andno subsequent reports have been produced), it is unclear

how this figure may have changed with time.

Between 2005 and 2008, the UK’s efforts in relation to

foreign bribery prosecutions and investigations increased,

Dan Smith Kseniya Elmova




as set out in Fig. 1. However, despite the increase in inves-

tigations and prosecutions, this placed the UK only in the

«moderate enforcement» of the OECD Anti-Bribery Con-

vention group of countries in TI’s 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 UK’s standing has been broadly con-

sistent 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 countriessuch as Russia and Ukraine. In 2008, 2009 and 2010, the

UK’s 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 con-

cern over the issue.

THE BRIBERY ACT 2010In order to address the rising criti-

cism of the UK system and to bring the

UK in line with the leaders in the strug-

gle against bribery and corruption,

on 8 April 2010 the Act became law.

The Act is far-reaching, with world-

wide scope, and its potential defences

are still unclear whilst its sanctions in-

clude unlimited fines. The Act closely

follows the requirements of the OECD

Anti-Bribery Convention in creating

a separate offence of bribery of a for-

eign public official. It also brings brib-

ery offences into purely private trans-actions (provided other elements are

satisfied). Although the Act has been

passed, it has not yet come into force.

The UK government has announced

that the Act will come into force on 1 July 2011. In antic-

ipation 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 frag-

mented 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 advan-

tage, 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 be-

haviour 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 of-fence for commercial organisations who fail to prevent

bribery, unless they can prove their procedures for pre-

vention are adequate. In doing so, one of the Act’s aims

is to help tackle the threat that bribery poses to econom-

ic progress and development around the world. As eve-

ry 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 consid-

ered in detail and every commercial organisation should

review its internal anti-bribery measures and consider

what steps it should take to protect itself from investiga-

tions or even prosecution.

GENERAL OFFENCE ONE: BRIBINGUnder 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), intend-

ing that this will induce someone (not necessarily the per-

20

25

15

10

5

02005 2006 2007 2008

ProsecutionsInvestigations

Fig 1. Foreign bribery prosecutions and investigations

in the UK 2005–2008. Source – TI Progress Reports on

OECD Anti-Bribery Convention

160

150

140

130

120

110

100

90

80

70

60

50

40

30

20

10

0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

12 12

14 13 13

10

13 13

10 11

1216

1117

20

47 49

76

70

83

7783

8883

8174

86 87

113

95

128 128

121

99

143

118

134

147152

149

134

154

United Kingdom Russia UkraineYear

R a n

k

Fig 2. TI’s Corruption Perceptions Index (CPI) for the UK, Russia and Ukraine

for the period 1995–2010. Source TI’s annual CPI records




son being bribed) to perform improperly a relevant func-

tion or activity, or to reward someone for improper per-

formance. 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.

GENERAL OFFENCE TWO:BEING BRIBED

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 im-

properly 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 acquiescenceperforms improperly (whether or not the third person

knows or believes the performance is improper) in antici-

pation 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 per-

formance is improper.

FUNCTIONS OR ACTIVITIES ANDTHEIR IMPROPER PERFORMANCEThe «functions or activities» that may be affected by a

proscribed bribe encompass a very wide range of behav-

iour. They include not only public functions, but also se-lected private functions, i.e. any activity either connect-

ed with a business, trade or profession, performed in the

course of a person’s 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

is to ensure that the law applies equally to public and pri-

vate functions without discriminating between the two.

«Functions or activities» include behaviour anywhere in

the world, even if it is unconnected with the UK. Further-

more, 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 facilita-

tion payments, being simply customary or apparently offi-

cially tolerated, are not permitted under the Act. The gov-

ernment 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 norequirement 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 hospi-

tality 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 practic-

es». She further stated that «if a case involving corporatehospitality 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 unreasonable»4. 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/am/100323s01.htm

ITAR-TASS ph oto




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 corpo-

rate hospitality activity and that prosecutorial discretion

would apply in each individual case.

It is also notable that not all types of functions and ac-

tivities are caught by the Act. The Act limits its applica-

tion 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.

OFFENCE THREE: BRIBERYOF A FOREIGN PUBLIC OFFICIAL

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 inten-

tion to influence the official and to obtain or retain busi-

ness 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 official’s request, assent or

acquiescence, where the official is neither permitted nor

required by the relevant written law to be so influenced.

OFFENCE FOUR:SENIOR OFFICER CONNIVANCE

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 cor-

porate, 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 of-

fence outside the UK, the senior officer will only be guilty

if the senior officer has a close connection with the UK.

TERRITORIAL APPLICATION –GENERAL OFFENCES

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 omis-

sion 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 indi-

vidual ordinarily resident in the UK, or a body incorporated

under the law of any part of the United Kingdom.

OFFENCE FIVE: CORPORATE FAILURETO PREVENT BRIBERY

Section 7 of the Act introduces a new offence targeted

specifically at commercial organisations, which is of a dif-

ferent nature to the offences set out above («Section 7 Of-

fence»). 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 connec-

tion» 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 Act’s terri-

torial application).

«Relevant commercial organisations» are either UK

corporate bodies or partnerships carrying on business an-

ywhere in the world or foreign corporate bodies or part-

nerships 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

organisation’s employee, agent or subsidiary.

The Section 7 Offence is a strict liability offence

which means that liability does not depend on proof of

the organisation’s state of mind. However, the Act pro-

vides for one defence, namely that the organisation «had

in place adequate procedures designed to prevent per-

sons associated with the organisation from undertaking

[the bribery]».

The Act does not specify what would constitute «ad-

equate procedures». However, the Act obliges the Secre-tary of State to publish «guidance about procedures that

relevant commercial organisations can put in place to pre-

vent persons associated with them from bribing» for the

purposes of the «adequate procedures» defence.

ITAR-TASS photo




The guidance was long awaited. Originally, it was expect-ed 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, cou-

pled 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 consul-

tation exercise» on the guidance about procedures which

commercial organisations can put in place to prevent

bribery on their behalf. The consultation began on 14 Sep-

tember 2010, when the government published the draft

guidance on adequate procedures. The draft guidance in-

cluded 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 prin-

ciples set out in the draft guidance. The public consul-

tation 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 theprocess 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 MoJ’s guid-

ance on «adequate procedures» was being delayed, contra-

ry to the MoJ’s 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 Con-

federation of British Industry) and from UK press express-

ing concerns at the scope of the offences and at the alleged

competitive disadvantage to UK businesses when compet-

ing 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 pe-

riod before the Act commences». It is important to bearin mind that, because of the way the Act has been draft-

ed, the final guidance on adequate procedures does not

provide «safe harbours» for relevant commercial organi-

sations. 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 pre-

scriptive nor exhaustive to enable all organisations to as-

sess the adequacy of their procedures with absolute cer-

tainty. Therefore, organisations may still need to consid-er their position carefully before knowing what, if any,

changes they should make to their procedures.

TERRITORIAL APPLICATION –SECTION 7 OFFENCE

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 Of-

fence. What we do know is that any «relevant commercial

organisation» could be subject to the offence and this def-

inition includes bodies corporate or partnerships, wher-

ever 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 def-

inition, and it may well be that an «ordinary meaning» will

be given to this. This lack of definition has been raised pri-

or 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 securi-

ties (e.g. notes) on the London Stock Exchange would fall

within «carrying on business». The guidance on adequateprocedures, published on 30 March 2011 (see above) of-

fers 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

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mere listing will not be enough. How this measure of «de-

monstrable business presence» will be applied in practice

remains to be clarified by future case law.

SANCTIONSAn 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.

WHAT DOES THE ACT MEAN FORINDIVIDUAL AND COMMERCIAL

PERSONS?The Act raises a number of difficult legal and practical

issues which will require careful consideration by com-

mercial organisations and individuals. The following is-

sues are particularly noteworthy:1. Offences can arise from purely private transactions.

It is not necessary to find a public or governmental ele-

ment.

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 busi-

ness» 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 re-

view 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 gen-eral offences.

7. There are severe personal consequences for senior

officers where offences occur with their consent or con-

nivance.

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.

POISED FOR ACTIONWhilst the coming into force of the Act is awaited on

1 July 2011, progress is being made in the UK in the arenaof fighting against bribery and corruption, which has been

internationally noted.

The latest annual report from the SFO for 2009–2010,

published in July 2010, showed that 26% of cases accepted

for investigation by the SFO related to corruption and brib-

ery, 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 UK’s

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 ef-

fective systems and controls in place to counter the risks

of bribery and corruption associated with making pay-

ments to overseas firms and individuals.

However, there is still a lot of work to be done. For ex-

ample, 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 de-lay 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 meas-

ures and no effective anti-bribery compliance programmes

relating to foreign bribery enforcement. That said, in com-

parison to the other OECD Anti-Bribery Convention sig-

natories, 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, with2 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 pub-

lic 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 Act’s aims to bring about a new era of strict en-

forcement against bribery, and foreign bribery in particular.

It is expected that the new regime will reform the law andbring forward a «new consolidated scheme of bribery of-

fences to cover bribery both in the UK and abroad»5.

CONCLUSIONAs the UK moves forward in its pursuit of conquer-

ing 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 disrup-

tion in cases where those associated with it are involved in

bribery. Commercial organisations should review the Actcarefully and ensure their worldwide internal systems and

controls are adequate.

5 See the Bribery Act 2010, Explanatory Notes




THE US EXPERIENCEON 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 givingbribes 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 areaimed 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




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 auditsthe 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 imprisonmentperiod cannot exceed one year.

On October 17th, 1990, the US President had signed

an Order N 12731 which established common principles




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 toaccept 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 EthicalConduct 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 theseorganizations, regardless of the capacity in which he acts.

b) Аn 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 theofficials 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:

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 hisboss 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

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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 DisclosureAct), 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 (employeesof 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 officein exchange for support for their candidates in elections

(Article 599 of the Title 18 of the USC). The US law also

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 investigatecorruption 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, usingimpeachment 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 thecourse 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 toITAR-TASS photo




foreign companies and foreign nationals, if they commit

bribery in the United States, notwithstanding the factthat 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 accordancewith 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 in1977, 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

2008–2009, 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 least22 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. Asa 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 willingto 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 investigationand 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.

ITAR-TASS photo




To begin with, we have to note the existence of signifi-

cant differences between methods and approaches of vari-

ous law systems when it comes to confiscation of funds

and assets obtained by illegal means. While some law sys-

tems enforce so called ‘property-based system’, others rely

on the ‘value-based system’, and the rest use the combina-

tion thereof.

The ‘property-based system’ provides for the confis-

cation 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 followedby the confiscation of an equivalent value.

In the combination of these systems, crime proceeds

and instruments are confiscated while simultaneously de-

termining 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 offenc-

es that invoke confiscation, requirement for preceden-

tial conviction of the offender1, used standards of proof

(in criminal or civil proceedings)2, and issue of legitima-

cy 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 civilproceeding has yielded the evidence that the assets obtained represent

the proceeds of crime activities or can be recognized as crime instru-ments (means). Other countries allow the confiscation to take place upona decision made by the civil or administrative court.

2 Furthermore, in some countries the legislation provides for dis-cretional right to transfer the burden of proof, thus the accused party isobliged to prove the legitimacy of property origins.

LEGAL SYSTEMSOF CONFISCATION

Regulations of the United Kingdome, USA, Germany,

Austria, Switerland, Netherlands and Japanlegal systems on confiscation of funds and assets

obtained as a result of crime

State Duma Security Committee, State Duma Commission on Anti-corruption Legislation




The legislation in many countries allows to transfer

the burden of proof from the law enforcement authorities

(courts) to accused individual (alleged or charged offend-

er) when it comes to crime proceeds.

The results of the poll organized by the UN demon-

strate that, according to the current legislation of Alge-

ria, Afghanistan, Bahrain, Belarus, Bulgaria, Brazil, Hon-

duras, Greece, Indonesia, Spain, Italy, Colombia, Mauri-

tius, 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 crim-

inal 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 beplaced on the individual who committed the offense.

The legislation in different countries contains comparable

norms on possibility of detection and confiscation of prop-

erty – in order to use it as evidence in criminal proceedings

(material evidence). Such property objects include: crime in-

struments; 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 beused 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 crim-

inal 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 measureor other measure of criminal law;

procedural grounds, substantiating the confiscation•

of objects and documents (material evidence), regu-

lated by the norms of criminal procedure legislation.

The list of objects covered by the term ‘material evi-

dence’ 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 de-

tected 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 re-sult 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 confisca-

tion is classified as a criminal punishment measure, with

the aim to compensate for the damage caused, the legisla-

tion of various countries allows to confiscate any other as-

sets 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 or-

der 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 re-

locate the assets, or temporary title to such assets, or tem-

porary 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 meas-

ures is closely linked to confiscation issues at the level of

legal regulations.

CONFISCATION IN THE UNITEDKINGDOME LEGISLATION

The UK legislation does not include confiscation in the

system of criminal punishments or to the list of punish-

ments 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 procedur-

al measures, since it is only applied to committed crimes of

increased danger, which in the UK are classified as «seri-

ous crimes implicating arrest of a suspect before the court

proceeding» and «crimes, implicating arrest of a suspect

before the court proceeding». Primarily, the legislator con-

siders as such crimes related to illegal drug trafficking and

laundering of income received as a result thereof.

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The supplementary nature of confiscation is also sup-

ported by the fact that а) norms, regulating confiscation

procedure, are contained not in the criminal, but in proce-

dural and delegated legislation; b) whereas main sanctions

(imprisonment and fine) have alternative nature, i.е. the

legislation provides for the possibility of their substitu-

tion, the confiscation, on the other hand, has an absolute-

ly definite nature; c) confiscation following the commit-

ted 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 reimburse-

ment of damage caused by this crime to the state.

According to the UK legislation, procedures of detec-

tion and seizure of assets (funds) are identical, notwith-

standing the investigating process (implemented auton-omously by the national law enforcement authorities or

upon request of other countries). In general, court proce-

dures 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:

а) instruments of crime; b) assets and funds (part of as-

sets) 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 owner-

ship); c) income (in any form) from criminal activities re-

lated to illegal drug trafficking, terrorism and some otherserious crimes. Confiscation cannot be applied to all de-

tected 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 re-

ceived 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 defend-

ant is provided with the copy of the report and entitled to

give explanations on the contents of the report and disputeinvestigator’s 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 re-

sult of illegal drug trade, and are in fact proceeds of offi-

cial lawful activity.

Upon completion of pleading procedure, the court is-

sues the confiscation order, if the decision about confisca-

tion was passed.

3 This demonstrates one of the fundamental principles of English law, ac-

cording to which the conviction of guilty individual should precede any ma-terial penalties. The British law does not allow, on one hand, adding confisca-tion decision into sentencing decision, and, on the other hand, criminal courtproceedings cannot review any civil claims. Also, the legislation prohibitsparallel review (simultaneously in criminal and civil proceeding) of cases andclaims that may invoke decisions on confiscation (divestiture) of assets.

CONFISCATION INSTITUTEIN THE US LEGISLATION

The US legislation divides confiscation of crime instru-

ments and income from criminal activities into civil for-

feiture (Title 18 of the United States Code § 9812, Title

21 of the United States Code § 8813) and criminal forfei-

ture (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 ap-

proach is used when the defendant is convicted, and deci-

sion cannot be enforced, in case of his death or disappear-

ance. Also, such measures are limited to the assets ownedby 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 with-

in 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

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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 pos-

sible confiscation4.

Legal standards regulating confiscation related to com-

mitted 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, or5) 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 sei-

zure of such objects by the law enforcement authorities.

As to ‘pre-trial confiscation’ of funds and assets obtained

by criminal means аs a method of preservation, it is ap-

plied related to a limited number of crimes and, prima-rily, only after the investigation by the US law enforce-

ment authorities.

4 Civil confiscation institute is also known in the law enforcementpractice of the UK, Italy, Germany, Japan, France, Canada and other coun-tries. In particular, Italian legislation specifies a civil forfeiture procedureof preventive nature: the court is entitled to issue an order to arrest theassets owned by any individual if his lifestyle does not correspond to hisevident or declared income. In this case, the individual needs to explainthe origins and nature of his income. If such person can clearly explainand prove the legitimacy of his title to his assets, then he shall be enti-tled to keep them. However, if such person cannot provide to authori-ties 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 transna-tional crime; appropriate control principles for adopting legislative andother measures at the national level.) Reference document on preliminary agenda for the UN ministerial world conference on organized transna-tional crime (Naples, Italy,1994).– UN document E/CONF.88/3, 25 Au-gust 1994. - P. 14).

The detection and arrest of property subject for confis-

cation 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 con-

fiscated are detected, its preservation is ensured by so called

pre-conviction confiscation. In order to implement the lat-

ter, attorney presents to the federal district court support-

ing evidence of such necessity, and, after reviewing this evi-

dence, based on attorney’s request, the judge issues a pre-

sentence 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 speci-

fied by the Racketeer Influenced and Corrupt Organizations

Act – RICO of 1970. (Title 18 of the United States Code §

1961–1968); according to Title 21 of the United States Code

§ 853(е) – in case of crimes related to illegal drug traffick-ing (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 § 1956–1957). 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 administra-

tion of court marshals or appointed liquidator.

According to provisions of Title 18 of the United States

Code § 981–982 and Rules 7, 31 of the Federal Regulations

on Criminal Procedure in the US district courts, the pre-sentence confiscations should be followed by the judicial

procedure and review of case of civil or criminal confis-

cation.

CONFISCATION INSTITUTEIN THE LEGISLATION OF GERMANY

The General Part of a current Criminal Code of the

Federal Republic of Germany, Section Three ‘Legal conse-

quences of the offence’, Chapter Seven (§§ 73–76) specifies

that confiscation can be applied to: а) substantive benefits

(including cash funds) obtained as a result of crime; b) ob-

jects 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-

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cause it is damaged or destroyed; e) objects used or intend-

ed 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 com-

mitted 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 Crimi-

nal Code of the Federal Republic of Germany, confisca-

tion 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 meas-

ures that exclude confiscation).According to the Criminal Procedure Code of the Fed-

eral 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 re-

quest 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 tem-

porary use until the end of the trial, under the condition

of return upon demand.

Seizure of assets and funds aimed at ensuring confis-

cation 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 itsmaintenance 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 protec-

tive 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).

CONFISCATION

IN THE LEGISLATION OF AUSTRIAAccording to the standards of the Criminal Code of

the Austrian Republic, list of enforcement measures ap-

plied after committed offence is recognized as a crime, in-

cludes: seizure of unlawful proceeds (any assets and sub-

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, 144–148, 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 intend-

ed 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 ensur-

ing the implementation of court sentence on seizure of property or criminal proceeds, or destruction of objects

and goods prohibited for free circulation.

Article § 144а of the Criminal Procedure Code of Aus-

tria states that justified presumption that particular ob-

jects or assets may be subject to confiscation allows to ar-

rest 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 mov-

able property;3) issue a court restriction on transferring to any third

party of the titles to bank accounts, legal entities, manu-

facturing 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 INTHE LEGISLATION OF SWITzERLAND

Among the criminal law institutes of Switzerland we

can distinguish following legal institutes related to confis-

cation 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 pro-

vides 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 pun-

ishment.

3). Forfeiture to the state benefit of presents and other

substantive benefits is implemented by seizure of:




а) gifts and objects given with the aim to motivate forcommitting a criminal offense or to reward for commit-

ting 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 addi-

tional 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 becausethey 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 gen-

eral, the criminal proceeding of Switzerland and its cantons

defines a sound system of measures aimed at implementa-

tion of reviewed procedural functions, including following:

1. The actual detection of funds and assets by investi-

gation and implementation of powers given by the court.

This is implemented by requesting the information, inter-

viewing witnesses, face-to-face questioning, scheduling

and organizing expert evaluations, seizures, searches etc.

These measures in their nature and procedural form, justas in most of the countries within European judicial estab-

lishment, 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 sta-

tus «seized for inspection», or arrest of documents, ob-

jects and valuables obtained by criminal means.

3. Depending on the needs of law enforcement authori-

ties 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 thecourt proceeding.

The funds and assets received as a result of criminal

activities that may be subject to confiscation or, what’s im-

portant, subject to return to the victim of the crime, are

preserved by sequestration. This means temporary sus-

pension of disputed assets by the third party with the pur-

pose of preserving them.

4. The confiscation foresees the implementation, ac-

cording to the established procedural order, of measures

on transferring to the benefit of Swiss Confederation or

canton budgets:

а) 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 crimi-

nal offense;

c) gifts and objects given with the aim to motivate for

committing a criminal offense or to reward for commit-

ting of such offense, or objects obtained by an individu-al 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, ar-

rested for preserving, to the individual with a lawful title to

them; such option is called ‘restitution’. This measure is im-

plemented in cases when there is a «product of the crimi-

nal offense or illegal act» in a form of documents, objects

and valuables, unlawfully taken away from the victim.

CONFISCATION INSTITUTE IN

THE LEGISLATION OF NETHERLANDSThe Criminal Code of the Kingdome of the Nether-

lands of 1886 with subsequent changes and amendments

in the system of sanctions for committing offenses pro-

vides 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 legis-

lation does not provide for general confiscation – i.e. forfei-

ture 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,

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namely, application of ‘enforcement measures’ including

confiscation of illegal income or assets and seizure of ob-

vious 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 stan-

dards 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 meas-

ure 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 pre-

ceding 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 confisca-

tion is only allowed based on order of investigating judgeor 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. infor-

mation specifically protected by the professional confiden-

tiality 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. Enforce-ment 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 spe-

cial legislative acts establish the powers for control and su-

pervision over implementation of enforcement measures.

CONFISCATION INSTITUTE

IN JAPAN LEGISLATIONPursuant to Article 9 of the Criminal Code of Japan,

the confiscation represents additional punishment, or-

dered for committing offences according to a procedure

specified in Articles 19 and 19–2 of the Criminal Code:

«Article 19. (Confiscation)Confiscation can be applied to the following objects:

1) Object directly involved as element of committed of-

fense;

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 in-dividual other than the offender had acquired such object

after the offense has been committed, and knew of its ori-

gins, then such object can be confiscated notwithstanding

the fact that it does not currently belong to the offender.

Article 19–2. (Obtaining an equivalent value)

The amount equivalent to original value may be ob-

tained when part of the object or complete object men-

tioned in Items (3) or (4) of Paragraph 1 of the preceding

Article cannot be confiscated.

According to Japan legislation, confiscation may be or-

dered not only as additional punishment for committed

offense, but also in cases of violation of civil law norms.

According to the standards of Criminal ProcedureCode 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 ensur-

ing 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, ob-

jects obtained by illegal means are returned, based on suf-

ficient 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 of-fense, 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.

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anti corruption international issue6

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