Kazakhstan dispatch: new law is designed to repatriate assets illegally hidden abroad Dispatches
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Kazakhstan dispatch: new law is designed to repatriate assets illegally hidden abroad

Aidana Tastanova is a Kazakhstan national and a 3rd year law student attending the Moscow State Institute of International Relations under a Kazakh government scholarship. 

On July 12, President Kassym-Jomart Tokayev signed the Law of the Republic of Kazakhstan ‘On the return of illegally acquired assets to the state’, and amendments were also adopted to the Code of Administrative Offenses, the Tax Code and the Law on the Prosecutor’s Office.

After the January events that claimed the lives of hundreds of people in Kazakhstan, President Tokayev repeatedly spoke about some people in high positions under the former government who sometimes accumulated wealth legally, albeit dishonestly, due to their high positions and connections. He said this wealth was hidden abroad in various funds and offshore firms. Then he asserted that half of Kazakhstan’s wealth is in the hands of 162 people, and in November last year at the inauguration ceremony, following the early elections, he said that a bill on the return of assets illegally withdrawn from the country would be developed.

As a rule, a significant share of the total amount of funds illegally withdrawn from the Kazakh economy is income from economic and corruption crimes, as well as legal income withdrawn abroad through illegal financial schemes. The withdrawn funds are invested in real estate and movable property, securities and other financial instruments, industrial enterprises, commercial projects, as well as the criminal sector. A considerable share is placed on accounts in offshore states and territories, where foreign depositors are spared the need to disclose the source of origin of funds and declare them in the country of origin. According to the international organization Tax Justice Network, over the past 25 years, about $140-160 billion have been withdrawn from Kazakhstan to offshore, which is equal to the annual GDP of the entire country and its external debt. Some experts believe that the amount of illegally withdrawn funds may be much higher. To date, according to the Prosecutor General, almost 760 billion tenge has been returned to Kazakhstan.

The new Law applies to entities that are or were persons holding a responsible public position, positions in state legal entities, quasi-public sector entities, as well as citizens affiliated with them.

‘In accordance with the provisions of the law, the refund mechanisms will be applied to subjects of major corruption and oligopoly groups that have grown together with persons with administrative and power resources (connections, influence)’

To apply the provisions of the Law, individuals must have assets in total in excess of the threshold established by law – 44 billion 850 million tenge, or about $ 100 million.

The return of assets is carried out by the authorized body – the Attorney General’s Office. A separate department will be formed in its structure, which will monitor and analyze information based on information from government agencies and other sources not prohibited by law. Based on the results of the analysis, if the authorized body has reasonable doubts about the legality of the acquired assets, it will apply to the Asset Recovery Commission with proposals to include such entities and their affiliates in the relevant Register. At the same time, if there is a risk of withdrawal of an asset from the country or its alienation, the authorized body will apply to the court with an application for taking preliminary interim measures.

The Law provides that the return of illegally acquired assets can be carried out voluntarily or forcibly — on the basis of judicial acts of the republic, foreign States or decisions of competent authorities of foreign states. An important innovation was the voluntary return of property and finances. The gratuitous transfer of assets in favor of the state will be considered individually each time — both investments, created jobs, and violations of laws and obtaining excess profits as aggravating circumstances will be taken into account. At the same time, if after the transfer it is revealed that a particular oligarch or ex-official withheld other cash flows, the investigation procedure will resume – and most likely, through the court.

A special state fund on these issues will be created to accumulate and manage assets returned to the state. The assets received in favor of the state will be transferred to a Special state fund, which is a cash control account in the Ministry of Finance. Funds from the Special State Fund will be used to finance social and economic projects.

Given that assets may be located abroad, the Law provides for mechanisms of international legal cooperation to ensure the enforcement of court decisions, information exchange and other legal interaction. To identify assets abroad, the Government of the country cooperates with international organizations. By the way, in April of this year, the Attorney General’s Office of Kazakhstan signed a cooperation agreement with the Basel Institute on Governance, whose International Asset Recovery Center (ICAR) is one of the largest in the world.

In any case, a significant part of the reforms initiated by President Kassym-Jomart Tokayev after the events of January 2022 are aimed at responding to people’s calls for greater justice. Therefore, sooner or later social justice must prevail, and this law is an important mechanism for the gradual evolutionary return of illicit assets. This legal act will help maintain a delicate balance between the continuation of the construction of a fair Kazakhstan and the investment climate.