Russia Sets Terms for Capital Amnesty to ‘Correct Past Mistakes’

Diverse Paper Currency, Coins, Line Graph

(Bloomberg – – Andrey Biryukov, Anna Andrianova – March 26, 2015)

Russia laid out the terms of a draft law to offer amnesty on repatriating capital, promising new incentives and legal protections to aid an economy starved of investment by sanctions over Ukraine.

The bill won’t require the return of assets to Russian territory, demanding only their registration in a “transparent” jurisdiction that isn’t blacklisted by the Financial Action Task Force, Prime Minister Dmitry Medvedev said at a government meeting in Moscow on Thursday. Under the proposed legislation, the declared assets won’t be subject to a one-time tax and won’t be used for criminal investigations, Finance Minister Anton Siluanov said at the meeting.

“We need to give people an opportunity to declare their capital freely and peacefully,” Medvedev said. “This will help us to correct past mistakes.”

The government is crafting the law almost four months after President Vladimir Putin called for “a full amnesty” on money returning to Russia as a currency crisis, a tailspin in oil prices and sanctions imposed over the Ukrainian conflict sparked record capital outflows. Russia is looking to harness the billions stashed away in low-tax offshore jurisdictions in the years following the Soviet breakup in 1991 as its economy enters a recession and some companies and banks remain walled off from foreign funding.

Illicit capital outflows related to Russia’s shadow economy may have been as much as $211.5 billion between 1994 and 2011, according to Global Financial Integrity, a Washington-based group researching cross-border money transfers.

‘Public Forgiveness’

“It’s an opportunity that makes it possible to clean up, get what’s called public forgiveness and live with this property without any fear for your future,” First Deputy Prime Minister Igor Shuvalov told reporters after the meeting.

Capital outflows, which more than doubled in 2014 to $151.5 billion, may reach about $110 billion in 2015, according to the central bank. Fixed-capital investment will fall 13.7 percent in 2015 after contracting 2.5 percent last year, the government forecasts.

Outflows may ease as a result of the amnesty, central bank First Deputy Governor Ksenia Yudaeva said March 23.

The government approved the draft bill Thursday and will submit it to the lower house of parliament to be adopted by June 1. Declarations will be accepted until Dec. 31, Medvedev said.

Russia is prepared to start talks next week with the FATF, a Paris-based intergovernmental money laundering watchdog, to discuss the proposed bill, according to Siluanov.

“I doubt it will have a major impact,” Piotr Matys, a London-based foreign-exchange strategist at Rabobank International, said by e-mail. “After all, those who keep their funds abroad simply don’t trust the government and offering them amnesty is unlikely to change that.”

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