The Office of the RK General Prosecutor introduced for parliamentary review a draft law “On counteraction of legalization (money laundering) of funds received via illegal means, and financing terrorism”. Despite the honorable mission titling the document, the proposal has caused many questions and disputes. The draft law supposes the creation of a financial investigation body under the Office of the General Prosecutor, which can stop any financial operation without any prior court hearing or investigation if the amount exceeds US$30,000, or if they are subject to the vague classification of “suspicious”. As per request by Exclusive, Ms. Munavara Paltasheva provides her comments on the draft law:
Certainly we are completely aware of the fact that the law “On counteraction of legalization of funds received via illegal means, and financing terrorism” is no doubt necessary. However under the conditions of stable development of the country, this draft law requires additional review, and should handle a much wider range of pressing issues for business.
Money laundering in Kazakhstan is, first of all, directed towards maintaining those circles of corrupt officials. This is related to the manifestations of criminality and gangster activities of local origin. The act violates the moral basis of our society, as it leads to the spread of prostitution, drug addiction, and unregulated gambling – all these phenomena are direct threats to our society. Primarily, the efforts of the authors of the draft law should be directed towards [combating] these, along with prevention of terrorist threats
Meanwhile, we are convinced, and experienced experts in the judicial sphere support our opinion, that behind those populists who speak on the necessity to fight against money laundering and terrorism, realization of the draft law could result in the loss of rights and breeching the freedoms of citizens, including businesspeople. Also, new barriers to development of domestic business may be erected. The idea of the draft law noticeably ignores, during the carrying out of financial monitoring, issues related to the protection of the rights of businesspeople, as well as protective measures against legalization of revenues received via extralegal means. Such an idea, despite the formality of the law, could lead to widening of abuse by some officials, bankers, and so on. All this might increase the opportunities for crimes of corruption.
A number of provisions are of a subjective character, which may be dually interpreted, and lead to the indiscriminate abuse of businesspeople. Namely, this concerns the introduction of the “suspicious” category within the carrying out of financial monitoring. Any financial operation, at the whim of a bank representative, postal worker, notary, or any employee from a financial monitoring body can be declared suspicious and stopped.
Will the country end up with a new supervisory and controlling body? Will we have a situation where those businesses striving to extricate themselves from the shadows will again return to them? Until there is an exact mechanism for realizing the provisions of this law, as per old habits, we may bureaucratize this honorable effort for the battle against money laundering. In short, balancing the ideas within the draft law would be desirable – to ensure the necessary fight against money laundering, illegally received funds and terrorism – while simultaneously adhering to constitutional principles in the protection of the rights and freedoms of individuals and citizens. Protection of law-abiding businesspeople is a must.
Defending them from possible abuses on the part of supervisory and controlling organizations. The assumption of the existence of [contradictory or protective] references within other legislation is incorrect. As laws are single-tier acts, they follow the principle of prioritization in accordance with the date of issue, with the most recent superceding its predecessors. The subject draft law should also stipulate that any infringement should not occur on the rights and freedoms of citizens and legal entities that have nothing to do with money laundering and terrorism. Also within the draft law should be stipulated the [punitive] responsibilities applied to state officials and financial monitoring bodies for possible infringements.
For the same purpose, the creation of a system for regulating relationships in this sphere, with the help of the draft law, [applicable] subordinate legislation, and especially [internal] resolutions established by concerned agencies should be carefully considered. This draft law refers many issues for regulation under other agencies’ auspices. As practice shows, quite often this [process] generates a lot of multiple barriers for businesspeople.
Behind the scenes have been left out techniques and methods of money laundering if illegally received funds, including fraudulent payments for nonexistent goods and capital equipment, forged construction and renovation services, creation of shell companies, suspiciously operating stores and restaurants that are fully staffed and hardly patronized, as well as others. Only complex control, such as review [the paired transactions of] finance and goods (finance and customs, finance and construction, and so on) should be in place.
The article concerning transactions involving cash and other assets subject to financial monitoring was developed very formally. In the current working it seems quite ineffective, and appears constructed in such a way as to be easily overlooked (e.g. The transfer and receipt of a certain amount within a certain period could easily be changed by as little as one cent, or payment made an hour later, and the transaction would then not be subject to financial monitoring). One might get the idea that this article was written purposefully with loopholes. The same is true concerning the date upon which the law comes into force – in six months. During that period, one can make many transactions prohibited by this law, so that later on no one would be punished [for such violations] in accordance with the law.
In the draft law, unsubstantiated is the accent on defining the term, illegal activity, as “unlawful”. Meanwhile, according the international convention, adopted in 1990, here we should be speaking about a “criminal” activity. That version was accepted in Russia as well. If we were to follow the current draft law, then any administrative infringement could be recognized as illegal. This will make any businessperson nervous in his or her actions.
The authors of the law refer to the usage of global experience in its creation, especially concerning the introduction of such a tool as giving the right to a financial oversight body to hold a transaction for a period of five days. At the same time, in France, operations can be blocked only up to 12 hours, in Italy and Poland – up to 48 hours, and in Belgium – up to two working days. As we can see, there is a difference.
Some provisions of the draft law even have an absurd character. Recently, the law’s authors, without paying attention to the fact that the law has yet to be passed, have started introducing an additional draft law on the introduction of changes and amendments to the legislative acts of the RK. Moreover, the number of these suggested changes is so great that any businessperson would be completely confused. Particularly, the current draft law requires changes and additions be made to 23 codes and laws, as well as containing 50 amendments to normative acts. A law-abiding businessman should study all of these, as they concern his activities.
Which activity we are talking about is unclear unless that person should actually abandon all of his duties and attempt to understand the legal logic and stylistic absurdity introduced. An example of this is that amendment to the Code on Administrative Infringements: “Part one of article 541, [subsection]