Corruption in Russia

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Corruption in Russia is a significant problem that impacts the lives of Russia's citizens. Corruption has penetrated all levels of government and most other aspects of life in Russia. Transparency International has ranked Russia 127th in its recently published 2013 Corruption Perceptions Index.[1] The previous year, Russia was ranked 133rd and in 2011 143rd. It's difficult to say if this improvement is a result of effective anticorruption measures taken by the Russian government but, according to economist Alexandra Kalinina, despite the improved score, corruption in Russia remains "not a problem, but a business".

The spread of corruption in contemporary Russia[edit]

A notable worsening of this ranking for Russia – from 90th place to 126th – occurred at the beginning of Vladimir Putin's second term as president; a drop of 36 places in only one year. An equally pessimistic picture emerges from the estimates of the average size of bribes which has substantially increased over the last five years. For example, according to the Interior Ministry’s Department for Combating Economic Crimes, the average bribe amounted to 9,000 Rubles in 2008; 23,000 Rubles in 2009; 61,000 rubles in 2010; and 236,000 rubles in 2011. In other words, the average bribe in 2011 was 26 times greater than the average bribe in 2008, many times the inflation rate for the same period.[2] According to Sergei Ivanov, the Kremlin chief of staff, the most corrupt spheres in Russia (in terms of household corruption) are healthcare, education, housing and communal services.[3] In comparison, independent experts from RBC magazine name law-enforcement agencies (including the State Traffic Safety Inspectorate) as the most corrupt sphere in Russia, which is followed by healthcare, education, housing and communal services, and social security services.[4] At the government level, however, the five top areas for corruption are as follows: Government contracts and purchases; Issuance of permits and certificates; Law-enforcement agencies; Land distribution and land relations; Construction.

There are many different estimates of the actual cost of corruption. According to official government statistics from Rosstat, the "shadow economy" occupied only 15% of Russia's GDP in 2011, and this included unreported salaries (to avoid taxes and social payments) and other types of tax evasion.[5] According to Rosstat's estimates, corruption in 2011 amounted to only 3.5 to 7% of GDP. In comparison, some independent experts maintain that corruption consumes as much of 25% of Russia's GDP.[6] A World Bank report puts this figure at 48%.[7] There is also an interesting shift in the main focus of bribery: whereas previously officials took bribes to shut their eyes to legal infractions, they now take them simply to perform their duties.[8] Many experts admit that in recent years corruption in Russia has become a business. In the 1990s, businessmen had to pay different criminal groups to provide a "krysha" (literally, a "roof", i.e., protection). Nowadays, this "protective" function is performed by officials.

In the end, the Russian population pays for this corruption. For example, some experts believe that the rapid increases in tariffs for housing, water, gas and electricity, which significantly outpace the rate of inflation, are a direct result of high volumes of corruption at the highest levels.[9] In the recent years the reaction to corruption has changed: starting from Putin's second term, very few corruption cases have been the subject of outrage. Putin's system is remarkable for its ubiquitous and open merging of the civil service and business, as well as its use of relatives, friends, and acquaintances to benefit from budgetary expenditures and take over state property.

Fight against corruption and the new anti-corruption legislation[edit]

The anticorruption campaign in modern Russia began on April 4, 1992, when President Boris Yeltsin issued a decree entitled "The fight against corruption in the public service". This document prohibited officials from engaging in business activities. Moreover, state employees were required to provide information about their income, personal property and real estate holdings, bank deposits and securities, as well as financial liabilities. The implementation of the decree, which formed the basis of the laws on combating corruption and on civil service, was vested in the presidential control directorate. Russia passed the first package of anti-corruption laws in 2008 in response to its ratification of the UN's Convention against Corruption and the Council of Europe's "Criminal Law Convention on Corruption". The decree "On Anti-Corruption Measures" was signed by former President and current Prime Minister Medvedev in May of that year. Since then, numerous changes have been implemented to the Russia’s anti-corruption legislation with the purpose of combatting bribery and improving its business climate. Russian anti-corruption campaign is an ongoing effort by the Russian government to curb corruption, which has been recognized as one of Russia's most serious problems. Central documents in the campaign include the National Anti-Corruption Plan, introduced by Medvedev in 2009, and the National Anti-Corruption Strategy, introduced in 2010. The central organ in the campaign is the Anti-Corruption Council, established in 2008. Medvedev has made fighting corruption one of the top agendas of his presidency. In the first meeting of the Council on 30 September 2008, Medvedev said: "I will repeat one simple, but very painful thing. Corruption in our country has become rampant. It has become commonplace and characterises the life of the Russian society."[10]

Furthermore, in 2012, the government adopted a new law requiring public servants and employees of state organisations to disclose their source of funds and both their and their families’ acquisitions of property, including real estate, securities, stock and vehicles. The legislation has also, for the first time, defined conflict of interest in connection to public officials and extended anti-corruption legislation to the military. The last modification to the Federal Anti-Corruption Law No. 273 was made in December 2012 and it was implemented on January 1, 2013. By upgrading the Anti-Corruption Law with Article 13.3, Russia has made a significant step towards strengthening the framework of its anti-corruption legislation, aligning it with the best practices recognized on the international level, such as the UK Bribery Act and the U.S. Foreign Corrupt Practices Act. This articles 13.3 of the Anti-corruption Law requires organizations to develop and implement anti-corruption measures such as (i) appointing a specific department or an official to be responsible for preventing corruption and related offences; (ii) cooperating with enforcement authorities; (iii) developing and implementing standards and procedures for ethical business practices; (iv) establishing an ethical code of conduct for personnel; (v) preventing and resolving conflicts of interest; and (vi) preventing the filing of false or off-the-record reports and the use of forged documents. Russia also joined the OECD Anti-Bribery Convention in 2012 and has the G20 Presidency in 2013, where fighting corruption is one of three main issues on the agenda. Companies should therefore actively ensure that they stay compliant with the new amendment to the Anti-Corruption Law.

The anti-Money Laundering Initiative[edit]

Corruption has an obvious connection with money laundering as the stolen assets of a corrupt public official are useless unless they are placed, layered and integrated into the global financial network in a manner that does not raise suspicion. The proceeds of corruption may be laundered in jurisdictions which have not enacted strict anti-money laundering measures and in countries which uphold very strict bank-secretary laws or regulations. This is the reason why the "de-offshorization" policy endorsed by President Putin in 2012 and 2013 (after the Cyprus Affaire) is often considered to be a new anti-corruption mesure. The government's recent initiatives for gradually strengthening control over financial operations of organisations and citizens have been the subject of The Russian Federal Financial Monitoring Service ("Rosfinmonitoring"). A law has been drafted, which introduced amendments to a number of legal acts and aimed at increasing the transparency of currency transactions and at strengthening anti-money laundering measures in Russia. This respective law, with corresponding amendments, was passed on 30 June 2013. The law introduces changes to a variety of legislative acts and ensures the overall enhancement of control over businesses and citizens with respect to financial operations.

The most important amendments for businesses are those that modify the regulation of banking activity. The amendments considerably affect credit organizations which would most likely be required to amend their internal anti money laundering policies and procedures for identification of customers. On one hand, they allow the bankers to demand disclosure of the transaction purpose from the client. On the other hand, this might raise substantial risks in terms of optimizing business, including potential delay in completing payments.

The anti-corruption plan for 2014–2015[edit]

Russian President Vladimir Putin approved a new national anti-corruption plan for the period from 2014 to 2015. The president ordered executive and legislative authorities by July 1, 2014 to make relevant amendments to their anti-corruption plans and to ensure control over their execution. A relevant order has been included in the National Plan to Counter Corruption for 2014–2015.

Inspections will be held in the Pension Fund, the Social Insurance Fund, the Federal Fund of Compulsory Medical Insurance, Russian state corporation Vnesheconombank, Rosatom and Rostec, the Deposit Insurance Agency, the Support Fund for the Reform of the Housing and Utilities Sector, the Russian Highways state company and other organizations. The Russian Prosecutor General's Office is to submit to the president "a report on revealed violations, measures taken to correct them and proposals to improve work to counter corruption in the above-mentioned organizations" by December 1, 2014, as the document says. In particular, in order to prevent corruption-related crimes and fight such crimes in the utilities and professional education systems, the Construction, Housing and Utilities Ministry, the Interior Ministry and the Investigative Committee were ordered to explain the responsibility for corruption-related crimes to utilities workers. A report on the results should be submitted by December 1, 2014. By March 1, 2015, a report on implementation of another order should be submitted to Putin. The Prosecutor General's Office is to check whether anticorruption laws are enforced in the housing and utilities and education systems. Earlier Russian Prosecutor General Yuri Chaika said that one of the priorities of the state policy is the fight against corruption, indeed. "In our country, a National Anti-Corruption Plan. I want to emphasize that, in matters of its execution Russian prosecutors to take a leadership role," Chaika said.[11]

The Civil Society and Research on Corruption in Russia[edit]

Civil society is always an ally of the fight against corruption. Despite the current climate of intimidation, the civil society is functioning in Russia. Transparency International Russia's report from 2012 shows a variety of activities that give citizens a chance to monitor corruption. It collaborated with the Youth Human Rights movement on a large-scale campaign in 20 cities to check police officers' identification tags. This is a proactive exercise to stop petty corruption. If an officer can be identified, he or she is less likely to ask for a bribe. Transparency International Russia also monitors the income statements of Russian public officials with the help of students and publishes the results and monitored the use of 600 million rubles (US$19 million) of public funds to socially oriented NGOs, and found several cases of conflict of interests. It provided analysis and recommendations on making this process more transparent and accountable. the NGO works cooperatively with all individuals and groups, with for-profit and not-for-profit corporations and organisations, and with bodies committed to the fight against corruption. It undertakes professional analysis and papers on corruption-related issues trying to explain the reasons of the spread of corruption, its political and social implications and trying to analyse the possible scenarios for the future.

Recently, many Russian bloggers started campaigning in the Internet with declarations to fight corruption and address state institutions with petitions to punish the state-related companies and individuals found to be involved in thefts. Particular prominence was gained by LiveJournal blogger Alexey Navalny who organized large-scale campaigns.

References[edit]

  1. ^ http://cpi.transparency.org/cpi2013/results/
  2. ^ "Основные макроэкономические показатели". Icss.ac.ru. 1997-07-26. Retrieved 2014-07-14. 
  3. ^ May 2008 – December 2011, Deputy prime minister of Russia, since December 2011, the head of Russian Presidential Administration
  4. ^ Автор статьи: Максим Легуенко, Екатерина Трофимова (2014-06-17). "Взятки в России: кто, где, сколько и можно ли с этим бороться? :: Деловой журнал :: РБК daily". Magazine.rbc.ru. Retrieved 2014-07-14. 
  5. ^ "Доля теневой экономики в РФ снизилась почти до 15%, таблицы "затраты-выпуск"... - Пресс-центр - Интерфакс". Interfax.ru. Retrieved 2014-07-14. 
  6. ^ Source: Milov, Nemtsov, Ryzhkov, Shorina (2011). "Putin. Corruption. Independent expert report", p. 6.
  7. ^ "Коррупция в России как система "распилки" ВВП - новость из рубрики Общество, актуальная информация, обсуждение новости, дискуссии на Newsland". Newsland.ru. Retrieved 2014-07-14. 
  8. ^ "Средний размер взятки в России в 2010 году вырос с 27 до 47 тысяч руб | РИА Новости". Ria.ru. Retrieved 2014-07-14. 
  9. ^ Milov et al., Op,cit., 2011, p. 6.
  10. ^ Sakwa 2011, p. 329
  11. ^ RIA NOVOSTI

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