Legalization and/or amnesty argument
A. Developments in the Russian
Federation as a rationale for the
argument
In the Russian Federation, money-laundering is
always linked with the problem of capital flight and a
subsequent lack of investments and with the market
reforms in general. It is commonly argued that since it is
now impossible to identify the origins of assets, it is
easier to assume that all capital is legal. This contention
renders the concept of money-laundering meaningless.
A popular politician Mikhail Prusak (Governor of
the Novgorod region in the central Russian Federation—
one of the showcase regions of successful economic
reform in the Russian Federation), supported by many
inside and outside his region, has launched a national
campaign to declare the legality of all assets currently
held and prepared the corresponding package of bills. In
his opinion, “trying to see what is criminal capital and
what not, would be the most useless step any leader could
make”.53 Mr. Prusak believes that only a small share (2-
10 per cent) of the wealth has been acquired by criminal
means. Thus, as long as the courts have not determined
the assets are criminal proceeds, the authorities should
presume the assets to be legally earned. In Novgorod
region, this has meant that all assets which have appeared
in the region have been accepted as legal. Considering the
current miserable status of the justice system in the
country, one can reasonably expect the same for the
whole country if the same policy is adopted.
Novgorod region also offers greater tax breaks and
more legislative guarantees to investors than most other
regions. It presumes that what looks like moneylaundering is in fact just capital flight occurring because
of imperfect legislation (primarily excessive taxation) and
an unstable economic environment.
Therefore, by
offering a stable and favourable economic environment
and guarantees against criminal persecution and
confiscation of assets, the region is aiming to attract
capital fleeing to offshore zones. Indeed, the Novgorod
region is a Russian champion in attracting investments. It
has the highest rate of investments per unit of natural
resources in the Russian Federation. Despite the fact that
the region is not the most attractive locality in terms of
availability of natural resources, the region has managed
to attract Russian and foreign investments on a large
scale, and this has fostered economic growth and created
jobs.
Academic arguments are also used to advance the
“legalization” proposal. Karl Marx’s Das Kapital54 is
frequently invoked in this connection. The book’s chapter
on the “genesis of the industrial capitalist” describes the
period of “primitive accumulation of capital” in
eighteenth and nineteenth century Europe. It was a period
when
, “in the public opinion, Europe lost its last remnant
of shame and conscience, ... bragged cynically of every
infamy that served them as a means to the accumulation
of capital”.55 At the time, these included slave trade,
child-slavery, public debts benefiting only a few, trade
protection, commercial wars and others. Hence, it could
be understood in general that early capitalism (such as
that of the early 1990s in the Russian Federation) is a
revolutionary period of lawlessness, when capital is
generally accumulated by illegal and/or treacherous
means.
More substantiated arguments are also available to
advocate legalization. For example, Nataliya Lopashenko,
the author of several books on economic crime in the
Russian Federation, believes that all criminal capital has
already been legalized. It happened during the early phase
of the privatization process, through the mass
privatization voucher scheme of 1992-1994. Hence, she
argues that there is not much criminal capital left to
legalize. The bulk, if not all, of the hidden capital is just a
shadow capital trying to escape taxation and an
unfavourable economic and political environment. The
sources of the assets accumulated are activities that
cannot be unambiguously defined as criminal.
Therefore,
16
Russian capitalism and money-laundering
it can be concluded that it is indeed economically and
legally prudent to declare all capital legal.56
Many politicians support the idea of legalization
based on rather pragmatic arguments. Until recently, there
had been no official records of assets owned by Russians.
Hence, they argue that it is impossible to question the
legality of these assets. People can easily claim that their
families have had these assets for a long time without any
official records. An acknowledgement of this reality can
provide some law enforcement officials with an excuse
not to take any action against the owners of capital of
unknown origin. Deprived of funds and skilled personnel,
law enforcement and justice system structures, including
the police and the judiciary, are reported to be lacking
minimum functional capacities. In view of this, one can
argue that it is logical not to strain the limited resources
of the system that tries to do money laundering
