To officials will forbid to hide foreign assets from ex-wives

Three years after the ban for officials to own assets abroad, the Ministry of Finance has specified “foreign financial instruments”, which isn’t something you own or use. Still this concept of law was not defined, leaving loopholes to bypass the ban.

Officials and deputies will not be permitted to transfer assets into trusts, and to issue property to third parties, it follows from the text of the bill (has a copy). The project was approved in late March by the government Commission on legislative activities of what the government reported, but did not disclose details. The Ministry of Finance suggests to forbid to officials to own and use foreign financial instruments not only directly but also “indirectly through third parties.” This formulation includes all potentially — “and ex-wives, and adult children of officials”, draws the attention of the partner Paragon Advice Group Alexander Zakharov.

Now to own and use foreign financial accounts and instruments are prohibited only by officials, their spouses and minor children. “If the prohibition [on possession of foreign assets] for marriage partners spelled out specifically, former spouses, it turns out, will now be classified as “third parties”, explains the lawyer, remembering the cases where officials were divorcing the wives of the transfer to them of the greater part of his property.

In addition, the Ministry of Finance proposes to prohibit the use of “foreign structures without forming a legal entity”, and it trusts, foundations, partnerships, etc., as follows from the Tax code. Although in itself the concept of trust in the Russian legislation is not defined (foreign ownership), the reference to “foreign structures without formation of the legal person” means to hide assets in trusts will be impossible, says Farrukh Abdullakhan from the forensic Department of KPMG in Russia and the CIS.

In 2013, the Commission on control over reliability of data on incomes of deputies asked the Supreme court to check the Deputy Sergey Petrov (founder of the group “Rolf”), who discovered the Cyprus trust. But the Supreme court then reasoned that this is a legitimate form of ownership. The trust transferred its assets to the Minister for open government Mikhail Abyzov, when he moved from business into government.

Developed by the Ministry of Finance the list of prohibited instruments in General, has six points. Including fall under the ban of any securities, shares or shares in foreign companies; concluded with the foreign loan agreements or credit agreements; derivatives (as defined in the law “On securities”), where one of the parties to the transaction is a foreign person or entity. Violation of the prohibitions threatens employees with dismissal, while MPs — loss mandates. But the bill will come into force only six months after the official publication, and before that it even has to approve the government (the state Duma). When the document will be considered at a government meeting, it is not yet clear. Comment from the press Secretary of Prime Minister Dmitry Medvedev could not be obtained, the press service of the Ministry of Finance has not responded to the request.

Read more about how to close the loopholes officials with assets abroad, read the Topic of the day.