14 July 2015
Companies Held Liable for Corruption Offenses as a New White Collar Crime Prevention Trend

A number of encouraging trends relating to white collar crime in Russia developed in 2014.

Liability for Unlawful Remuneration

The number of companies held administratively liable for unlawful remuneration on behalf of a legal entity doubled (liability of companies for unlawful remuneration on behalf of a legal entity – i.e., bribery or commercial bribing – was introduced for the first time into the Russian Administrative Offenses Code in 2008). 

Intensification of Efforts to Prosecute Corruption-related Administrative Offenses 

The efforts of the prosecution authorities of the Russian Federation to initiate proceedings against companies in corruption-related administrative offenses intensified. 

A company shall normally be held administratively liable after a court decision enters into force regarding charges against the company’s employee of corruption-related crimes (e.g., bribery, commercial bribing). And the offenses, once established, shall be penalized with fines calculated as a multiple of the bribe or corrupt payment. 

A company may protect itself from administrative-corruption offense allegations through compliance with Russian anti-corruption laws, including the development and implementation of standards and procedures meant to ensure a company’s operation in good faith, the adoption of a Code of Business Conduct and Ethics applicable to the company and its employees, zero tolerance of forged documents, and cooperation with law-enforcement bodies. 

Increased Findings of Liability

The number of legal entities and individuals (i.e., company CEOs) held administratively liable for illegal employment or engagement of state or municipal officers and former state or municipal officers increased remarkably in 2014.  As with many countries, Russian legislation contains a set of rules aimed at preventing and resolving conflicts of interests on the state and municipal side. One significant rule is that, when hiring a former state or municipal officer, a company must notify that person’s former employer within ten days. This requirement applies for two years after the individual’s dismissal from the state or municipal office, regardless of how many jobs the person has had during that period. 

Last year, when monitoring companies’ compliance with the anti-corruption laws, the prosecution authorities started focusing on the settlement of conflicts of interest at state and municipal office and actively used their powers to initiate proceedings of administrative offenses. 

Self-Reporting Became More Common

Introduction of anti-corruption standards and procedures, as well as internal monitoring of compliance by companies, can lead to the identification of acts that suggest administrative or criminal offenses. And under Russian law, criminal proceedings in relation to a corrupt payment in a profit-making organization may be instituted at the request of the business entity, provided that the damage was solely to this organization. In 2014, applications to the law-enforcement bodies by companies following internal compliance investigations became more common.

Significantly, although Russian criminal procedure legislation does not require companies to report corruption-related crimes, and criminal law does not provide liability for failure to report crimes, the anti-corruption laws require that organizations cooperate with law-enforcement bodies. 

New Laws Permitting Seizures During Search

Starting from 2013, documents, computers, and computerized information may be seized (i.e., obtained during a legitimate search on company premises), even during a preliminary examination – i.e., after the crime report has been registered but no order to initiate criminal proceedings has yet been issued. All information thus obtained may be used as evidence once criminal proceedings have been initiated. Such seizures should be documented with an on-site inspection report that is not given to the company representatives, making it difficult to appeal the actions of law-enforcement agencies.

A company’s election to report a crime is not a remedy against such seizures, even when the company is willing to fully cooperate with the law-enforcement bodies. 

Conclusion

It is expected that in addition to the further development of the above-mentioned trends, there will be a further tightening of legislation on criminal liability of legal entities for corruption-related crimes. A draft bill providing for criminal responsibility of legal entities for almost forty different offenses, including commercial bribery and bribery, has been submitted to the State Duma of the Federal Assembly of the Russian Federation. Multiple fines have been suggested as punishment for these crimes. 

By Victoria Burkovskaya, Partner, and Tatyana Nozhkina, Counsel, Egorov Puginsky Afanasiev & Partners.

This Article was originally published in Issue 2.2. of the CEE Legal Matters Magazine.

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