A historic anecdote relates that in the early 19th century the tsar asked one of his ministers to give a concise definition of the situation in the country. The minister replied: “They are stealing.” This holds true for today’s Russia as well.
According to the office of the General Prosecutor of the Russian Federation 80 % of Russian bureaucrats are corrupt.
In 2006 they breached the law 47 000 times, taking bribes and selling influence.
This year was no better. Asked by Time Magazine how he is dealing with corruption, President Vladimir Putin answered: “Unsuccessfully. We are addressing this issue unsuccessfully. Our attempts to control corruption have been unsuccessful.” As it turned out Dmitry Medvedev intends to introduce legislation on corruption prevention for the passage in the State duma immediately after inauguration as the President of Russia. A special agency will emerge to coordinate, organize and have control over implementation of the national anticorruption strategy.
Why is corruption so prevalent in Russia? Prominent Russian thinker and anarchist Mikhail Bakunin wrote in the late 19th century in his work Corruption: On Machiavelli.
Development of Statehood that rulers had always used corruption as a tool of government. State power always generates corruption, and corruption cannot exist without state power.Mr.Musa Umarov, Chairman of the subcommittee on corruption in the Federation Council (the upper chamber of the Russian parliament) says corruption is deeply rooted in Russian history and was given a powerful stimulus with the emergence in Russia of a market-oriented economy.
It is true. In the 18th century, under Peter the Great, bribes were officially declared the equivalent of a bureaucrat’s salary. In 1992, after the collapse of the Soviet Union, Moscow Mayor Gavriil Popov officially proposed legalizing bribes to public officials.
Everyone admits that corruption must be eradicated, but no one seems eager to begin with himself. After the October, 1917, socialist revolution, the Bolsheviks launched a fierce struggle against corruption among government officials.
Yet even under Josef Stalin, when bribery was punishable by execution, corruption in Russia was not entirely dormant. Even in the Soviet era, there were underground millionaires. It is unlikely that the Soviet mafia could have operated without the assistance of corrupt officials and police who accepted large bribes. Yet despite its deep historic roots, corruption has never been as large-scale as it is today, and the size of bribes taken by Soviet officials was minuscule compared to current amounts. Corruption in post-Soviet Russia reached its peak during Boris Yeltsin’s presidency (1991-2000), especially during the privatisation campaign. It was no accident that key market reformers and practitioners, Yabloko party leader Grigory Yavlinsky and then Prime Minister Yegor Gaidar, wanted to legalise capital acquired illegally during the Soviet period.
Without this measure, they did not believe that privatisation could be successful.
It is not, therefore, surprising that most of today’s nouveaux riches have a criminal past and their money has come from illegal sources. In 2007, the Berlin-based Transparency International ranked Russia 143rd on the list of 180 countries in its Corruption Perceptions Index. It was given 2.3 points out of ten and shared the ranking with Indonesia, Gambia and Togo.
A year earlier, in 2006, Transparency International had ranked Russia 121st out of 163 countries.
The scale of the problem is staggering.
Last month First Deputy Prosecutor General Alexander Buksman estimated that corruption costs the country $240bn annually, an amount only slightly less than the government's annual revenues.
Corruption is a big business in Russia.
According to independent estimates, the total amount of bribes taken in Russia every year exceeds the federal budget by 160%.
We distinguish here between “official” and “everyday” corruption. The “official” corruption market grew by 800% in the past four years. The average bribe taken by an official is $135,800. Corruption also flourishes in parliament. Rumours in the media mention the price for top positions in political parties, including the pro-Kremlin United Russia Party.
Different sources cited figures between $1mn and $5mn. An upper house seat was said to cost $10mn. A deputy minister’s portfolio was estimated at $30mn.
Of course, these are only rough estimates.
More reliably, investigation documents showed that an attempt had been made to bribe an auditor from Russia’s Audit Chamber for $2mn.
According to Transparency International, bribes in Russian courts of law total $210mn a year. The real amount is certainly much higher, given that only 1%-2% of bribery cases are registered by the Prosecutor General’s Office. Experts from the Indem Foundation, a Russian NGO promoting democracy, estimated that executive authorities account for 87.4% of the bribes accepted by corrupt officials, lawmakers for 7.1%, and the courts for 5.5%.
Vladimir Putin’s government has stepped up its anti-corruption effort. In 2003, over 2,000 people were convicted on bribery charges and another 2,000 for abuse of office. However, the Interior Ministry’s economic security department has registered around 9,000 economic offences involving bribe-giving and bribe-taking since January 1, 2007. The Prosecutor General’s Office reported over 50,000 cases of violation of the civil service law since the beginning of this year, the bulk of them involving corruption. About 600 criminal procedures have been initiated.
From January to October 2007, according to Russian Deputy Foreign Minister Alexander Yakovenko, 10 000 cases of bribe-taking were registered in Russia.
Interestingly, offences that account for a mere 0.4% of all crimes committed in Russia account for 80% of the material damage resulting fromthese crimes. These are tax crimes. The figure is truly staggering.
One reason why corruption flourishes these days is the lack of a consistent legal environment, a set of solid anticorruption acts. The legal war should not only be waged on civil servants who take bribes and embezzle federal funds, but also on money-laundering and organised crime. Fighting thesemany evils separately doesn’t work in Russia, as life has shown.
In 1988 two bills - an anti-corruption act and an anti-organised-crime act - were passed by the Supreme Soviet of the USSR, and both were vetoed by Yeltsin, whose “Family” became a synonym in Russia for corruption.
At the beginning of this century an anticorruption bill was considered several times by the lower house of the Russian parliament. The first version was submitted to the house in 2001, but since then it has been discussed only once, during the first reading in 2002. There have been several attempts to revive the bill in the four years that followed. Progress was meagre.
The UN Convention against Corruption (UNCAC), which Russia ratified last year, essentially requires the signatory countries to criminalise a wide range of acts, including bribery, embezzlement of public funds, money-laundering, and obstruction of justice, and to join forces against such crimes, notably by seizing and confiscating criminal bank accounts, and returning the embezzled funds to the countries of origin.
Are these provisions effective in Russia? In December 2003, Russia was one of the first nations to sign the Convention.
However, that same month it libe-ralised its criminal law by abolishing confiscation of property as a criminal penalty. As a result, Russia failed to live up to its own international commitments. Its courts have no authority to seize bank accounts, confiscate the embezzled money, and return it to the country of origin.
Last year, as part of the anti-terrorist effort, a series of amendments to the law was adopted which added clauses on the confiscation of property to a number of Criminal Code articles. But it is not applied as a penalty, as required by international documents. Under the present law, confiscation is not even applied in cases of fraud, theft, burglary, robbery, forgery and counterfeiting. The property of individuals charged with these serious crimes cannot be confiscated.
On November 24, 2003, the president signed an order establishing the Anti- Corruption Council, which was a good start. The council was to hear annual reports by the prosecutor general and submit its report on the results of its activities to the president. It was composed of the heads of all branches of government, including the prime minister, parliament speakers, and chairs of courts. According to its regulations, the council was to hold meetings as and when necessary, but it met only once, on January 12, 2004. On that day Putin proposed electing Prime MinisterMikhail Kasyanov as the council’s chairman for the next six months.
Paradoxically, Kasyanov was the epitome of corruption and was popularly known as “Misha 2%” (for the personal share he expected from each transaction) when he was deputy finance minister.
On February 5, 2007, Putin liquidated the Anti-Corruption Council and signed a decree setting up an interdepartmental working group to formulate proposals on fighting corruption. It was led by presidential aide Viktor Ivanov, reputed to be the “gray eminence” of the Kremlin. According to the decree, the interdepartmental working group is to “prepare proposals for formal adoption of the clauses of the UN Convention against Corruption, dated October 31, 2003, and the Council of Europe’s Criminal Law Convention on Corruption, dated January 27, 1999.” Putin has entrusted Ivanov with adapting Russian legislation to international anticorruption law. The approval of amendments to the anti-money-laundering law was one of his group’s first practical results.
It is difficult to say when this work will be completed.
As long as there is no anti-corruption legislation in Russia, courts are using the criminal law clauses that stipulate punishment for bribes, squandering of budgetary and extra-budgetary funds, money laundering, and other crimes.
These are effective clauses and the attempts by Transparency International to equate Russia to Zambia or Chad in terms of corruption are not tenable, if only because the organisation disregards the ramified system of control agencies in Russia and the results of official investigations, including corruption cases.
There are more than a score of control agencies fighting corruption in Russia, which operate independently, such as the Accounts Chamber, or within ministries and departments.
In 2003 and 2004, Russia’s law-enforcement agencies informed the Accounts Chamber that they had initiated 539 criminal proceedings on the basis of the chamber’s findings. By 2008, they had initiated about 800 such cases.
Among executive bodies, Control and Audit at the Finance Ministry, the Federal Treasury, and The Federal Tax Service are the most important. The Federal Service for Financial and Budgetary Supervision was set up at the FinanceMinistry in 2004.
Little is known about the Fourth Economic Security Department of the Federal Security Service (FSB). Information published in the Russian media on the basis of FSB data shows that the national shadow sector accounts for 20%-40% of GDP.
Since the beginning of perestroika in 1985, up to $25bn has annually fled Russia, which to date adds up to $250-$350bn.
Some experts say this is a conservative estimate, and that the true figure could be about $1tn or even more. Russian money-launderers presumably account for a substantial part of this business, and their operations, according to FSB estimates, is a danger for Russia’s well being as well for that of other countries.
Therefore, its task is to do everything possible, jointly with Russian and foreign specialists, to stop the outflow, most of which is “dirty” and taken outside of Russia for laundering. The FSB is actively cooperating with the Russian Committee for Financial Monitoring in these efforts.
The Russian Financial Monitoring Committee, which in 2004 was renamed the Federal Financial Monitoring Service, has been headed since November 5, 2001 by Viktor Zubkov, now Russian Prime Minister.
At the time Zubkov became head of Russia’s financial intelligence, the country held one of the top places on the FATF black list. Now the findings of every second investigation by the service are sent to law-enforcement bodies.
In 2006 alone, the service submitted 4,277 documents containing information on more than 120,000 operations worth RUR770bn ($31.6bn, or €21.4bn). All of them were related to “dirty” money – embezzled government funds and returns fromdrug trafficking or terrorismfinancing.
An FATF inspection in Russia in September 2007 showed that the country fully complies with the organisation’s standards for cooperation in the fight against money laundering and terrorism financing.
The Interior Ministry’s Economic Crime Department in 2006 disclosed 251,740 economic and tax crimes, with over 50% described as grave or especially grave.
In the past five years, over 1million economic crimes have been discovered.
The most dangerous is raiding, i.e. the seemingly legal takeover of companies by criminal groups through court rulings based on fake documents. Raiding is a crime that cannot be effective without corrupt officials and prosecutors and judges conspiring with criminals.
The high-profile corruption scandals that have recently shaken Russian society show that the Russian authorities are resolute in their fight against corruption, even in their own ranks. In May 2006, about twenty high-ranking officers from the Federal Security Service, the Interior Ministry and the Federal Customs Service lost their jobs, and so did several prosecutors for “numerous and grave violations of discipline.” In 2005, four members of the Federation Council – the upper house of the Russian parliament – were dismissed from their posts on charges of corruption. In more recent news, I would mention the arrest of Deputy FinanceMinister Sergei Storchak on November 18, 2007. According to investigators, he, together with two Russian businessmen, tried to embezzle $43 million dollars from the state budget.
Of course, such exposures are commendable.
But overall, anti-corruption efforts in Russia are still unsatisfactory. The Russian Government’s success in fighting corruption, strongly supported by the vast majority of its citizens and by all political parties, will depend on whether it pursues this task systematically and seriously, and not just as a populist campaign.
The situation is slowly improving with each year, but there is still a great deal to be done to eradicate corruption, themost dangerous and the most persistent evil in Russia.
