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Changes to Economic Crimes Bill Greeted by Business

Nurgaliyev, left, Chaika and Medvedev meeting business leaders Saturday. Dmitry Astakhov

President Dmitry Medvedev has decided to remove from the Criminal Code the article on false entrepreneurship, reduce prison terms for money laundering and increase the threshold for economic crimes to be treated as major and massive, Vedomosti has learned.

Medvedev carried through on his promise Saturday to business representatives, submitting to the State Duma on Monday a host of changes to the Criminal and Criminal Procedural codes that would liberalize how economic crimes are punished.

The bill, a copy of which was obtained by Vedomosti and made available on the newspaper's web site, would remove from the Criminal Code Article 173, on false entrepreneurship, and it would remove violations of licensing terms and conditions from Article 171, on illegal entrepreneurship, and Article 172, on illegal banking activity. The formulation was too vague and led to broad interpretations, according to explanatory notes accompanying the legislation.

Money laundering, covered under Article 174, Point 1, would now require the presence of a defining characteristic: The action must "give the appearance of legality to the ownership, use or distribution of the indicated funds." The change was needed to prevent someone charged, for example, with false entrepreneurship, from also facing laundering charges for making any purchase with the funds in question.

The punishment for money laundering would be reduced to between three and 10 years, from the current five to 15. Medvedev's bill also proposes increasing the levels of funds involved in economic crimes when determining whether an offense was "major" or "massive."

The planks would be raised sixfold to 1.5 million rubles ($50,000) for major offenses and 6 million rubles ($200,000) for the most serious economic crimes.

The liberalization of the money-laundering law will change how arrests are made, said lawyer Vladimir Zherebenkov. Now, suspects can be locked up while on trial for "serious" and "severe" crimes — carrying maximum sentences of five to 10 years and 10 years or more, respectively. The money-laundering charge is often tacked on to other crimes to make them more serious, he said.

Previously, the law had never included a clear definition of what constitutes money laundering, meaning that investigators were free to interpret it however they wanted. The president's proposals will help reduce the number of arrests, Zherebenkov said.  

The bill would also establish minimum bail sizes. Suspects in minor and serious crimes would need to post at least 100,000 rubles, while suspects in severe crimes would be required to offer at least 500,000 rubles. Physical property, stocks and bonds will also be allowed to serve as bail.

On Feb. 1, a group of senior United Russia officials, led by Duma Speaker Boris Gryzlov, submitted changes to Article 108 of the Criminal Procedural Code that would prevent suspects accused of 33 economic crimes from being held in pretrial detention, as long as the charges did not fall under the serious or severe categories.

The president's changes would also ban pretrial detentions for the offenses listed in the earlier bill, and they add to the list fraud, embezzlement and causing material damages — as long as the crimes are related to business.

Pretrial detentions for economic crime will only be used in exceptional circumstances, according to the bill's explanatory notes. The majority of people accused of such crimes "do not pose a major threat to society if they remain free pending a verdict," and "the excessively harsh and not always justified practices of investigators and the courts" when choosing how to restrict a defendant's movement have led to a situation where 70,000 incarcerated suspects are not sentenced to prison terms.

Finally, Medvedev's changes would stiffen the repercussions for officials who try to interfere with business. For example, refusing to register an individual entrepreneur or to offer a license, as well as illegal interference in business activity, will be punishable by a fine of 500,000 rubles, up from 200,000 rubles now, or a ban on holding certain posts for three to five years.

The earlier amendments submitted by deputies will be recalled, and the president's bill will be passed through an expedited process, said Vladimir Gruzdev, first deputy chairman of the Duma's Legislation Committee.

Yana Yakovleva, chairwoman of the Business Solidarity partnership, said the bill would introduce major changes and that it would have been hard to believe that Medvedev would actually agree to all of the changes that had been discussed.

The clarification of what constitutes money laundering will finally bring that article into line with international practice, she said, adding that the other measures were also timely. But the move toward liberalization should come from both directions, with changes to the law that would fight corruption and lawlessness in law enforcement agencies, Yakovleva added.

Sergei Borisov, head of the Opora small and midsize business lobby, who attended the Saturday meeting with Medvedev, said he was more than pleased with the bill. The task now, he said, will be watching how the changes are enforced, since even some good rules are not always handled well. For example, very few cases are opened under the law against illegal interference in business activity.

A source in the central administration of the Interior Ministry said the body agreed that in economic crimes, where the priority is on recovering losses, it is better to release suspects on bail. The article on false entrepreneurship is rarely used, so its elimination should not lead to big changes, the source told Vedomosti.

But the proposed amendments to the money-laundering law could very well prevent it from being tacked on to other charges, the Interior Ministry source said.

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