10/06/2014 - Kazakhstan cracks down on white-collar crime, new legislation announced

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Category: Economy, Finance & Investment News
Published on Tuesday, 10 June 2014 Written by Charles van der Leeuw

ALMATY (TCA) — A new legislation to be prepared through the summer and to be presented in Parliament in September is meant to fill up a legal vacuum that exists in Kazakhstan regarding insider dealing and other forms of fund and paper value “orchestration”, official media on behalf of the government and Parliament have announced. Especially in the United States and the United Kingdom, insider dealing, defined in the encyclopedia as “trading of a public company's stock or other securities (such as bonds or stock options) by individuals with access to non-public information about the company” is a criminal offence which can send executives to prison for ten or more years in serious cases.

In other western countries such as the Netherlands, Germany and Italy, insider dealing is also punishable by law but prosecutors seldom apply it. Value orchestration is a wider and vaguer definition, referring to any attempt, either by hiding information or giving false information, to mislead markets on which a company’s paper is being traded. The announcement by the Kazakh authorities has come in the midst of a thorough campaign to combat fund embezzlement and other forms of white-collar crime in Kazakhstan.

The starting shot for the current crackdown on “boardroom crime” in Kazakhstan was given in early April this year by Adilbek Dzhaksybekov, a former Defense Minister after he had been appointed Secretary of State replacing Karim Massimov who was appointed the country's new Prime Minister. “Statistics show that the level of judiciary enforcement is very low. In 2013, out of 2.2 trillion tenge subject to recovery of funds based on court rulings, only 108 billion tenge were collected, that is, 5 percent," a press statement of Dzhaksybekov publicised by the Kazakh independent agency Tengrinews on April 10 was to read. "This situation necessitates a sweeping reform of the system of enforcement proceedings, and development of new approaches towards resolving of the pressing problems."

In the meantime, words have been accompanied by tough action. According to a separate report by Tengrinews referring to the Deputy Chairman of the Agency for Combating Economic Crimes and Corruption (Financial Police) in Kazakhstan, Marat Akhmetzhanov, close to the equivalent of $1.6 billion has been embezzled in the country since the beginning of this year.  “Akhmetzhanov said that in 2013 alone more than 10,000 corruption offences were discovered and investigated,” the agency’s report reads. “During [the first] five months of this year more than 5,000 cases were discovered and are now being investigated or at various stages in court. Of these, 27 per cent are heavy and especially grave crimes, 65 per cent are economic crimes. More than 21 percent are corruption related. The money embezzled in 2013 and in the first five months of this year amounts to 290 billion tenge ($1.58 billion). Measures are already being taken to recover 157 billion tenge ($860 million)," the official was quoted as declaring. “According to the official data, nearly 300 officials of various ranks have been prosecuted for corruption during the period. Of them, 22 are senior officials of state level, and 83 officials are regional.” Among high-raking suspects involved in fraud cases are the Deputy Minister of Agriculture, the President of the national space company Kazakhstan Gharysh Sapary, former governor of Atyrau Oblast, as well as senior executives of major state enterprises including Kazatomprom and Kazakhstan Temir Zholy.

“International estimates suggest that the money offshored from Kazakhstan amounts to $138 billion,” the news agency wrote in yet another report published on May 23. “This figure was given at a meeting of the National Chamber of Entrepreneurs of Kazakhstan that gathered to discuss combating corruption and shadow economy. According to Tax Justice Network, Kazakhstan is among the ten countries notorious for offshoring money. The most popular destinations that Kazakhstanis offshore their money to are the Netherlands, Britain, Switzerland, the Virgin Islands, Cyprus, and Luxemburg.  However, the foreign law enforcement agencies are not in a rush to disclose information about Kazakhstan owners of the offshore accounts to the Kazakhstan Government. They are delaying provision of information and drawing on inquiries.”

High-profile cases like those of Rakhat Aliyev and his counterpart Mukhtar Ablyazov are only topping a long list of Kazakh citizens who have deprived their national economy of amounts that really hurt. "The notorious [ex-] mayor of the Southern capital [Almaty] and his family declared only $5.3 million in their income reports," the agency quoted Deputy Prosecutor General of Kazakhstan Andrey Kravchenko as saying, referring to Viktor Khrapunov. "Nearly 100 million Swiss francs have been frozen on Swiss accounts of the brother of a former Kazakhstan governor," the official said about Amanzhan Ryskaliyev, brother of ex-governor of Atyrau Oblast Bergey Ryskaliyev. “But we see that when we send inquiries to the Western law enforcement authorities it takes them several months or even a year to reply. But criminals don't sit waiting [for their accounts to be frozen]. They deal with the money very quickly and transfer them elsewhere."

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