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Russia’s Increased Asset Recovery Effort
It is apparent that an increasingly forceful approach is being taken by Russia to tackle fraud.
Corruption and Fraud
A recent survey conducted by the Economic Intelligence Unit for the 2015-2016 Global Fraud Report indicated that 20 percent of Russian senior executives, who responded to the survey, reported theft of physical assets or stock. Twenty percent of those Russian respondents also reported corruption and bribery, while 17 percent reported misappropriation of company funds and 13 percent cited vendor, supplier or procurement fraud. By comparison, in the 2013-14 Global Fraud Report, 32 percent of Russians reported corruption and bribery, 29 percent noted information theft, loss or attack, and 24 percent reported management conflicts of interest. From this, it seems there is not a clear driver for the bulk of fraud in Russia.
Regulation and Legislation
Nevertheless, Russia has taken a more forceful approach to curbing fraud. For example, the country joined the OECD Anti-Bribery Convention in 2012, and in 2013, Russia’s Federal Anti-Corruption Law No. 273 introduced requirements for companies to set up compliance programmes containing anti-corruption measures. Companies that fail to comply with these requirements could incur heavy fines. This law is similar to internationally-recognised anti-fraud and corruption legislation in the United Kingdom and in the United States. Furthermore, in 2014 and 2015, steps were taken so that Russians would begin reporting annually on foreign bank account transactions and declaring any ownership of more than 10 percent in any controlled foreign company.
Litigation in English Courts
As the Russian government looks for solutions to further reduce corruption and fraud, we are seeing an upward trend in government agencies and state-owned entities pursuing fraudsters. These cases are showing up more and more in English courts with an increasing number of Russian litigants. In fact, from March 2014 to March 2015, only U.S. - based parties litigated more than Russians in the English Commercial Court.
It is no surprise that so many foreign litigants take advantage of our courts. It is because in England, we have at our disposal a wide array of tools that can be used to seek and recover assets worldwide. Of course, success depends upon where the assets are located and how well they have been hidden. However, we regularly coordinate internationally, in places like Russia, and implement cross-border strategies designed to recover assets.
Recovery of Russian Assets
There have been various recent examples of attempts to recover stolen money. One method used is obtaining ancillary relief for defendants who may be facing up to two years of imprisonment if they do not disclose their assets. This relief can be a powerful tool and one we use regularly, and it often compels these defendants to settle with their victims. Such settlements are often confidential, so we cannot be certain of the extent to which the recovery of such assets has been successful. Yet, we look to the increase in cases as an indication that something positive is coming out of these matters.
Curbing a Vicious Cycle
While the Russian government tries to further reduce corruption and fraud through regulatory, legislative and judicial maneuvering, we may not be seeing an actual increase in fraud, but rather an increase in exposure as high staff turnover, riskier markets and complex information technology platforms continue to challenge companies. These types of issues are not necessarily within the government’s control.
Steven Philippsohn is a leading authority on complex international asset recovery. Over the last 30 years his firm has been retained by governmental, national and international organisations. A founding member of ICC FraudNet, he is listed by The Times of London as one of the 100 key influential legal professionals in the United Kingdom. Among his firm's highlighted work is representation of the primary defendant to a $1 billion claim (one of The Lawyer’s Top 20 cases for 2014 and 2015).
ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit.