The details of this case were published on Kommersant’s website; they can be viewed via the link

In 2018, a tax audit was initiated in respect of one of Moscow’s officials. As a result, the tax authorities identified a discrepancy between the income officially declared and the expenses incurred by the entire family — the difference amounted to approximately RUB 8.5 million in favor of expenses.

In addition to the tax authorities, this discrepancy also attracted the attention of the prosecutor’s office, which, through the court, sought to have a number of the official’s real estate assets transferred to the state. The claim for the transfer to state revenue of two apartments and two parking spaces belonging to the official’s family was granted by the Lefortovo District Court and subsequently upheld by the Moscow City Court — the defendants were unable to prove a level of wealth that would have allowed them to make such expensive purchases. Nevertheless, the public official and his family plan to continue the litigation at the cassation stage.

In practice, there are not many cases of property confiscation on similar grounds (one example is the Dmitry Zakharchenko case).

Nevertheless, we expect the supervisory authorities to pay closer attention in the near future to the sources of income of public officials and their close relatives.

In particular, in August 2020, information emerged about planned amendments to Russian legislation. Under them, public officials convicted of corruption crimes will have their cash confiscated if the amount exceeds the person’s total income over the previous three years and no reliable evidence proving the lawfulness of its receipt has been provided. The bill itself was submitted to the State Duma for consideration only on 22 March 2021:

The bill provides that, in the specified cases, not only property for which no evidence has been provided confirming that the property was acquired — real estate, yachts, securities — with lawful income (this is already provided for now) may be confiscated, but also cash and bank deposits if there is no evidence of the lawfulness of their receipt (this is what they intend to provide for).

Although the new rules are intended to apply to public servants and officials, we believe that such an approach may form a certain trend in legislation, which in the future may lead to the extension of these rules to other categories of citizens.

Our specialists are ready to conduct an audit of your asset portfolio in order to confirm the legality of the sources of capital formation.

The scope of services includes:

• Diagnosing the asset portfolio to identify tax and currency risks, as well as the availability of grounds supporting the sources of funds,

• Preparing / arranging / submitting the necessary documentation in order to reduce the identified risks,

• Developing an action strategy and preparing a set of documents confirming the lawful origin of the capital.

In the future, this set of documents may be used as a “defensive file” if questions / demands arise from the regulatory authorities of Russia and foreign countries, as well as when opening bank accounts and undergoing KYC procedures.