Marina Ushakova, of Squire Sander’s Moscow office, and Ritchie Thomas, of Squire Sander’s Washington, D.C. office, have the following to say about recent anticorruption developments in Russia:

Russia is on the threshold of a drastic change in the design of its system of penalties for bribery, both on the supply side and on the demand side. Last month Russian President Dmitry Medvedev introduced a bill making the changes into the lower chamber of the Russian Parliament. As all Duma factions have already declared support of President Medvedev’s anti-corruption proposals, the bill could be adopted as early as this month.

The bill would make convicted bribe-takers pay the public treasury for the bribe-filled envelopes they have collected. Potentially huge fines would replace jail time as the primary penalty for bribe-taking. The bill proposes to establish a sort of “multiplication table” under which corrupt officials caught in the act will have to pay the treasury fines tens of times larger than the bribes they received.

The maximum financial penalty – a hundred-fold amount of the bribe – would be imposed for very large bribes, i.e. those in excess of one million rubles (approx. 35,350 US dollars or 25,450 Euros). If the culprit took a small bribe, the fine will be 25 – 50 times higher than the amount received. Specific multipliers are to be determined by the judge.

According to the authors of the bill, hitting bribe-takers in the wallet is much more effective than the threat of prison. So far it have been mostly small fry corrupt officials who went on trial. As  Chairman of the Supreme Court of the Russian Federation Vyacheslav Lebedev recently reported, only 35 people were convicted last year for receiving bribes in excess one million rubles (approx. 35,350 US dollars or 25,450 Euros). The vast majority — sixty-five percent of convicted corrupt officials were small fry who took bribes of 500 rubles to 10,000 rubles (approx. from 17 to 357 US dollars or from 13 to 256 Euros). Moreover, the majority of convicted bribe-takers were doctors or police officers. Not one of those held a senior position. Yet it seems unlikely physicians and minor police officials are the ones whose conduct dominates corruption practices in the country.

Under current law, imprisonment is the primary anti-corruption penalty. Ill-gotten funds are not necessarily confiscated; and it seems little effort is made to trace them. This situation does not seem to deter corrupt officials.  The question is whether the soon-to-be-adopted new system of fines will have greater effect.  That is likely to depend at least as much on enforcement practices as the penalty structure.

The bill provides similar penalties on the bribery supply side, that is, for those offering bribes. That will be of interest to corporations, which are not threatened by jail time, but may find the potentially substantially increased fines an increased deterrent when facing bribe demands.

Cooperation with bribery investigations is encouraged by a provision in the bill offering the possibility of immunity for bribe-payers who actively assist investigations. Also, an individual will not be prosecuted if it is shown public officials virtually extorted a bribe. And, in case of the bribe-giver, acknowledgment of guilt and surrender provides an avenue to a release from liability.

Another novelty in the new legislation is introduction of an article into the Criminal Code penalizing go-betweens in bribery transactions. Many have made fortunes and careers for themselves by learning how to bring thick envelopes into the relevant offices. Of course, those activities allow something to stick to the fingers of the go-betweens. For such people the bill brings potentially bad news: a prison sentence or a huge fine.

The new legislation seems an effort to create an environment that will increase the impact of anti-corruption efforts in Russian society. But it is not enough just to change penalty structures. Enforcement practices also are critical.  There are signs that positive steps recently have been taken in this area as well.

Stay tuned for more developments from Russia.