The Second Clipping for the Russian business

Alexey Mozzhukhov
Finance Law Ininvestments 8 December 2016

On the introduction of The Criminal Finances Bill by the British Government to the British Parliament, October 13, 2016

There were a few caustic comments in the press and in the Internet, which was followed by dismal silence.

Is the restless British Government actually plotting against our unsuspecting compatriots? Or is it probably a newsworthy occurrence which fits very well in the established image created by the media of the confrontation between pretentious Anglo-Saxon elites and Russia, which is getting up off its knees?

Due to the increasing number of queries from the people concerned about the fate of their property in London, we will clarify our point of view.

We have to agree that our fellow citizens actually have reasons to be concerned.

According to the Bill, the owner of property in the United Kingdom can be sent a request about their property of unconfirmed origin (unexplained wealth order). Upon the receipt of the request, the owner shall disclose the sources used for the purchase of the property.

Such request can be sent by the High Court, which acts upon the application submitted by law enforcement agencies.

The list of law enforcement agencies in the United Kingdom authorized to send such requests to the High Court is frightening, and the names of the agencies may sound repulsive for an entrepreneur:

- National Crime Agency;

- Her Majesty's revenue and customs;

- Financial Conduct Authority;

- Director of Serious Fraud Office;

- Director of Public Prosecutions.

A request from the High Court may be sent to a person for some trivial reasons:

1) The value of the property exceeds £ 100,000; 2)

there are reasonable grounds to believe that the person's legitimate income is not sufficient for the purchase of the property;

3) There are reasonable grounds to believe that a person has been involved ina grave offence or it is a politically exposed person (PEP).

If the Court is not satisfied with the explanations provided by the person, the property is considered to be recoverable property and may be confiscated by court decision.

What conclusions should one make from this situation?

Firstly, some provisions for the seizure of illegally acquired property have already been present in the British law for some time (see the Proceeds of Crime Act of 2002). However, the Bill introduces a mechanism for a seizure of property on a massive scale. That means that the confiscation procedure that existed before was not enough, and now it is necessary to arrange the process in the conveyor mode. And that is in the context of Brexit and expectations of budget deficit. This is disturbing. Secondly, the threshold value of the property is £100,000, which makes it possible to launch the said process in respect of any of our compatriots who naively saw England as their second home. Thirdly, a sort of suspense is created by the fact that the Bill applies to politically exposed persons even in the absence of any elements of offense. The interpretation of the Bill in terms of teleology is disturbing because one starts wondering whether or not the main target of the Bill are the Russian politically exposed persons? Fourthly, we should not forget that the proceedings in the High Court are open. As a result of such proceedings, the English public may discover some curious incidents relating to the "customs and practice" of the Russian business which result in rapid wealth accumulation by some of the persons involved. On October, 26 the second reading was held in the House of Commons (the lower House of the British Parliament). It will be followed by a hearing in the Upper House (House of Lords), and then it is submitted to her Majesty for approval. The law is very likely to be passed by the end of this year. As a result, the British Criminal Finances Bill is very likely to effect the second clipping of the Russian finance after the dismal clipping of deposits which was masterly conducted by the Europeans in Cyprus in March, 2013.

Alexey Mozzhukhov

Director of the International Law Department

Law Ininvestments 30 September 2016

Mikhail Larin

The General Counsel of the Legal Support Department for Investment Projects

Finance Law 30 September 2016

Mikhail Polozov

Deputy Head of the Legal Support Department

Jurisprudence 7 June 2016

Lada Notova

Lawyer, MA student at Law School, Mikhail Lomonosov Moscow State University

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