On 6 October and 19 December 2020, Kazakhstan’s President signed Law No. 365-VI ZRK1 and Law No. 384-VI ZRK2 (“Amendments“), respectively, which introduced certain changes to the country’s anti-corruption legislation, including the Anti-Corruption Law,3 Criminal Code4 and Civil Code.5 Law No. 365-VI ZRK became effective on 18 October 2020, and Law No. 384-VI ZRK came into effect on 31 December 2020.
1. Gifts and hospitality for public officials
- Among other things, the Amendments introduced changes to Article 509 of the Civil Code. Specifically, the Amendments eliminated a provision allowing certain categories of public officials (i.e., state servants6) to receive simple gifts of minor value not exceeding 10 times the monthly calculation index (MCI) (KZT 29,170 or approximately USD 70).
- Prior to the Amendments, Article 509 of the Civil Code served as a principal gift and hospitality rule with respect to interaction with state servants. That rule provided that simple gifts of minor value were acceptable if no corrupt intent was involved (i.e., if gifts were not provided in exchange for the fulfilment by the state servant of their official state functions).
- By eliminating the only rule on what would constitute an acceptable gift or benefit for state servants, the Amendments effectively say that state servants are no longer allowed to accept any gifts or benefits (irrespective of their nature or value).
- This change in the law has been confirmed recently by the Anti-Corruption Agency,7 which clearly stated that state servants are now prohibited from accepting any gifts or benefits regardless of their value or nature.
2. New (expanded) definition of the term “public officials”
- The Amendments expanded the list of persons that are treated as public officials8 for local anti-bribery purposes. The list of covered public officials now includes the following:
- persons authorized to make decisions on the organization and the conduct of public tenders;
- persons responsible for the selection and implementation of projects financed by the state budget or the National Fund of Kazakhstan.9
Accordingly, these individuals are now subject to the restrictions under the Anti-Corruption Law, including the restriction in respect of gifts and hospitality regardless of their value or nature.
Overall, the term “public officials” is defined to include persons employed by state agencies who are paid from the state budget. Senior officers of state-controlled companies (national management holdings, national holdings, national companies, their subsidiaries and affiliates; e.g., the pharmaceuticals distributor “SK-Pharmacy”) are treated as “public officials” for the purposes of local anti-bribery laws.
- The Amendments also prohibit family members of public officials from receiving gifts (or other benefits or services) if such gifts are provided in exchange for the fulfilment by the public official of their state functions. For such purposes, “family members” include the official’s spouse, parents, children (including children over the age of majority, i.e., 18) and dependents permanently residing with the official. This inclusion is a new provision and did not exist prior to the Amendments.
- Under the Amendments, it is an offense for a public official to accept gifts (or hospitality) even if the value of the gift is minor and no corrupt intent is involved. A failure by the public official to comply with the prohibition on the acceptance of gifts (or hospitality) may result in the official being dismissed from public office or being subject to an administrative fine. With regard to the gift-giver, the Amendments do not provide for specific sanctions for the provision of small gifts to public officials where no corrupt intent is involved. However, still there may be reputational risks for the gift-giver as such behavior could be viewed as being contrary to the government’s policy on fighting corruption.
- In addition, the Amendments have tightened the penalties for bribery. Specifically, Article 367 of the Criminal Code has been amended so that bribery is now punishable by a monetary penalty of up to 30 times the value of the bribe or imprisonment for up to five years (at the discretion of the court). Previously, the penalties under Article 367 were limited to a monetary penalty of up to 20 times the value of the bribe or imprisonment for up to three years. Hence, where it can be demonstrated that the gift was provided with the corrupt intent of influencing the official’s actions or decisions, there is risk of criminal sanctions.
4. Other changes
- According to the Amendments, public officials are now prohibited from opening and maintaining bank accounts with foreign banks operating outside of Kazakhstan, as well as from keeping cash and other valuables in safe deposit boxes of such foreign banks. Public officials are required to close any existing foreign bank accounts or safe deposit boxes not later than 1 July 2021. The failure of a public official to comply with this new prohibition will result in the relevant official’s dismissal from public office.
Provision of gifts to public officials is no longer in line with the Anti-Corruption Law, but in practice the likelihood of any particular gift being problematic for the gift-giver would depend on the circumstances surrounding each particular case, e.g., the value of the gift, the context in which the gift has been provided and the nature of the relationship of the parties (e.g., whether the parties are relatives or friends).
With this in mind, we recommend that companies with operations in Kazakhstan consider the following actions:
- even closer monitoring of their interactions with state officials (and state-controlled companies) in Kazakhstan;
- reviewing and updating internal compliance policies to ensure that they are aligned with the new rules mentioned above;
- conducting internal trainings to employees and representatives aimed at addressing the changes introduced by the Amendments.
In addition, foreign financial institutions may consider strengthening their KYC and other check procedures with respect to Kazakhstani account holders (to ensure that such account holders do not qualify as public officials for local anti-bribery purposes).
For further information and to discuss what this development might mean for you, please get in touch with your usual Baker McKenzie contact.
1 Law On Amendments and Changes to Certain Legal Acts of the Republic of Kazakhstan on Matters of Fighting Corruption dated 6 October 2020.
2 Law On Amendments and Changes to Certain Legal Acts of the Republic of Kazakhstan on Matters of Strengthening of Protection of Rights of Civilians in Criminal Proceedings and Fighting Corruption dated 19 December 2020.
3 Law On Fighting Corruption dated 18 November 2015, as amended.
4 Criminal Code of the Republic of Kazakhstan dated 3 July 2014, as amended.
5 Civil Code of the Republic of Kazakhstan (Special Part) dated 1 July 1999, as amended.
6 Kazakhstani citizens holding an official position in state agencies who are paid from state budget and are authorized to carrying out official functions on behalf of the state.
7 See https://www.zakon.kz/5045099-antikorruptsionnaya-sluzhba-rasskazala.html (in Russian).
8 Persons authorized to perform state functions and persons equated to them.
9 The state’s financial assets and property that are in the accounts the National Bank of Kazakhstan and the Government.