How asset recovery legislation stimulates increase in investments

The law on asset recovery and a committee on asset recovery under the General Prosecutor’s Office are going to be key instruments for dismantling “Old Kazakhstan” and installing the “New” one.

In the middle of September, President Kassym-Jomart Tokayev met with representatives of big business. The gist of the meeting was the issue of recovering illegally obtained assets. Tokayev came up with the idea of asset recovery back in May 2021. However, in July 2023, this idea became more tangible and took the shape of the law on asset recovery.

The government wants assets to come back home

On July 12, 2023, Kazakhstan officially adopted the law on the state’s recovery of illegally obtained assets. The purpose of the law is to recover public assets and bring them back to the real economy; to eliminate reasons and conditions that facilitated illegal withdrawal of assets and to restore social justice.

The government is going to go after any asset purchased with the help of money illegally withdrawn from Kazakhstan. According to the law, this money is any revenue obtained through administrative pressure. Authorities can launch an investigation if they have a rational reason to suspect that someone obtained control over assets illegally.

Law enforcement officials will go after all former and current public servants and managers from the quasi-public sector to see if they possess assets with a value greater than the revenues of those public servants and managers. The government will also examine revenues by entrepreneurs to ensure they weren’t obtained through preferences, shady negotiations or lobbying to obtain access to public procurements or procurements by quasi-public companies or subsoil users.

Prosecutors will also be suspicious of any abnormal conditions of a deal, as well as any losses by a commercial bank or the Development Bank of Kazakhstan through loans known to be irrecoverable or loans obtained with violations of the legislation of the Republic of Kazakhstan or internal banking procedures.

In order to find illegally obtained revenues, the government is going to use all available sources of information starting from accountant reports to analytical data published by the media.

The law will be applied to any jurisdiction within the country. This means that hiding assets at the Astana International Financial Center won’t help perpetrators. Moreover, the country’s authorities are even going to search illegal assets abroad, as the law can be applied to any citizen of Kazakhstan and foreigners, public servants and businessmen, subjects of investigation and any individuals affiliated with them.

The General Prosecutor’s Office will publish all the information about asset recovery work (results, measures applied and recommendations) on its website.

Corrective actions

The government has already established the key tool for the implementation of the law. The Asset Recovery Committee under the General Prosecutor’s Office consists of 114 specialists, who have been given the authority to examine whether assets were purchased with the help of illegally obtained revenue, to monitor suspicious activity and to recover such assets. This authority is part of measures prepared by the General Prosecutor’s Office and aimed at the implementation of the law on asset recovery. They were presented on July 21, 2023.

In early September, the agency prepared rules for the monitoring of the legality of the origin of money spent on acquiring an asset. The monitoring might be initiated by the head of the committee or at the suggestion of the General Prosecutor’s Office and his deputy with no limitation period. «The monitoring period may cover all the period starting from the moment of an asset acquisition,» the rules said. In some cases, the monitoring of legality can be extended and applied to any other asset if necessary.

In order to better understand how the process of asset recovery may work, let’s take a look at the law, General Prosecutor’s Office rules and statements by the president.

In the first stage, prosecutors are engaged in searching for assets. They have to identify the physical location of assets, as well as the connection between these assets and those who control them. After the search for assets, the Asset Recovery Committee prepares a register of assets subject to the monitoring of legality with all the history of their ownership. Authorities should inform owners of such assets that they are being added to the register. An entity might be on this list for no longer than one year.

Within the period from one to three months after being added to the list, asset owners can file a declaration on assets disclosure with accompanying documents proving the legality of the asset’s origin. In turn, prosecutors have to respond or require additional information within six months.

The Asset Recovery Committee also plays a crucial role as it can recommend that prosecutors drop a case due to lack of evidence, push them to bring the case into the court, make a deal on voluntarily asset recovery or just put more effort into reviewing case papers.

If an asset is recovered by free will, no legal actions against its owners should be taken. In this case, even a fine isn’t always necessary because the government will take into account investments its owner has poured into the development of an asset, the number of jobs he created and all other factors that characterize efficacy and conditions of asset exploiting, according to the law.

President Tokayev has also highlighted that fair and patriotic business will always be respected and protected by the government. «Let me be clear: investments into such productions will be considered as a serious attempt to prove the legality of assets origin,» he said suggesting that big businesses put money into 15 megaprojects. 

On the other hand, if a subject of the register doesn’t want to cooperate, he will pay the price. Even before bringing the case to court, prosecutors can seize an asset, ban any transactions with it, prevent dividend payouts or take any other measures that the law on asset recovery describes as “preliminary measures.” 

Once the court identifies the cost of an asset or the sum of the damage, it will be recovered by force.  If an asset meant to be recovered can’t be recovered as it is due to being withdrawn, becoming legal or being sold, the subject of an investigation should compensate the cost of the asset. This recovered money will be kept in the special public fund controlled by a managing company.

Patronage and fear

Ex-President Nursultan Nazarbayev once threatened big businesses that he could personally take each of them to court. The current president has gone to even greater lengths by preparing rules for such court proceedings in the first place.

The key purpose of the law is to make the business elite more loyal to the current government. Even though the idea of 15 megaprojects resembles Nazarbayev’s project of 30 corporate leaders, it works. The country’s big businesses obey directives from the country’s authorities and pour money wherever the government wants. These loyal businesses are expected to form the backbone of the “New Kazakhstan.” In contrast to the “Old Kazakhstan,” they will receive public support and subsidies for legitimate reasons, which is a key factor.