Putin’s ban on officials’ foreign bank accounts hard to implement
On 12 February, Russian President Vladimir Putin, in an attempt to crack down on corruption, submitted a bill that would ban Russian Cabinet members and other senior officials from having foreign bank accounts and owning foreign stock. The proposal also applies to the officials' wives and underage children. Some analysts, however, say this will be very difficult to implement.
Putin first mentioned the move in his state-of-the nation address in December, casting it as part of efforts to make officials accountable to the public. "How can you trust an official or a politician who rants about Russia's benefit but tries to keep his money abroad?" he said in the speech.
If the proposed law comes into effect, civil servants will be given three months to get rid of their foreign savings and stocks. Those who fail to do so will lose their jobs.
According to the document, the main objective of the legislation is to provide Russia’s national security, increase investments into the country’s economy and make the fight against corruption more efficient.
Asked how it would affect foreign investment in Russia, Natalya Orlova, chief economist at Russia's Alfa Bank, told New Europe on 13 February that the move is part of the anti-corruption campaign so potentially this is probably positive sign for investors because it means better control of state officials.
“In the meantime, it’s very hard to imagine how this will be implemented,” Orlova said. “I think it is very vague. Internally, there’s a feeling that it will be quite hard to implement,” she said, adding that it’s unclear what the penalties will be. “But this can be used as pretext to put pressure on some officials.”
The dismissal of Anatoly Serdyukov, the minister of defence, in November over corruption allegations has started discussions about controlling offshore bank accounts. “I think there is an overall will to increase the transparency of the economy,” Orlova said.
In addition to controlling state officials, the Kremlin also needs to reinforce some laws in the financial sector, the Alfa Bank chief economist said.
Putin is unhappy about the offshore transactions but it’s very hard in all cases to imagine how concretely the law will be implemented, Orlova said.
She said the official way for the government to make Russians bring their money home is to announce a tax amnesty. But she warned that if Russia will stop capital outflow, it would generate capital inflows as the depreciation will be so dramatic that economic growth will evaporate very quickly. “The Russian economy will not grow because you cannot grow when your ruble is too strong. Economically speaking, capital outflow is a very nice way to allow Russia to ease comfortably the pressure of competitive depreciation abroad,” Orlova said.
“Russia is allowing the capital to flow away. This is easing the pressure on the ruble exchange rate. At the moment it’s not a good time to think about tax amnesty - of inviting capital back. This is additional argument to doubt this agenda, the anti-corruption campaign and the will to control account transactions will be implemented because economically it’s not a good time,” Orlova said.