RISK AND COMPLIANCE FAILURES LEAD TO CRIMINAL LIABILITY
Recent Surge in Risk and Compliance Failures Among Russian Companies
A recent surge in risk and compliance failures among Russian companies is leading to a growing number of criminal investigations and prosecutions.
Criminal Offenses Under the Criminal Code of Russia
Under the Criminal Code of Russia, receiving a bribe, bribing an official, and completing commercial bribery are all criminal offenses punishable by imprisonment. Additionally, unauthorized collection or distribution of personal data can result in fines, forced labor, or even arrest.
Liability for Risk and Compliance Failures
But it’s not just individual employees who may face criminal liability - governing bodies and senior management can also be held accountable for their role in risk and compliance failures.
- Company directors and CEOs are directly liable to the company and indirectly liable to shareholders for actions performed in bad faith or unreasonably against the interests of the entity.
- Failure to submit a petition when the company becomes insolvent or causing insolvency through negligent acts can also result in subsidiary liability.
- Management officials can face personal administrative liability for a sufficient number of administrative offenses, which may include fines, dismissal, or disqualification.
Compliance Measures as Mitigating Circumstances
Despite the lack of a corporate compliance defense under Russian law, investigators are increasingly considering compliance measures as mitigating circumstances in criminal investigations. This has led to several high-profile cases involving credit organizations and other entities that failed to implement effective risk and compliance management systems.
- JSC Regional Commercial Bank had its license revoked due to poor compliance and internal control systems.
- CJSC Grinn was fined over $1 million for failing to prevent a bribe from being given.
Government Scrutiny
The Russian government is also facing scrutiny for its own risk and compliance management obligations. While state-owned enterprises are required to establish internal compliance procedures, the private sector has yet to make such measures mandatory.
Importance of Effective Risk and Compliance Management Systems
As the digital transformation of the economy continues, companies must ensure that they have effective risk and compliance management systems in place to avoid criminal liability.