Kazakhstan Adopts a Law on Confiscation of Assets

1. Grounds for confiscation

Under Law of 12 July 2023 No. 21-VIII “On Recovering Illegally Acquired Assets to the State” (Заңсыз иемденілген активтерді мемлекетке қайтару туралы), property can be confiscated if a public official and/or associated persons get (either directly or through associated persons) assets and/or revenue (also from previously obtained assets) as a result of using (by using) administrative authority resources (connections, influence).

In this context, public officials are those who:

hold important public positions, positions that imply the fulfillment of managerial functions in a public legal person or a subject of the quasi-public sector;
have (had before) administrative authority resources (connections, influence) with regard to the persons holding (who held) important public positions;
fulfill (fulfilled) managerial functions in a public organisation or a subject of the quasi-public sector.

Persons associated with public officials are:

persons who have family relationship with public officials, i.e. parents, children and their spouses, adopters and their spouses, adoptees and their spouses, full and half-siblings and their spouses, grandparents, grandchildren, great-grandchildren and their spouses, great-grandparents, and spouses, including former ones, persons who have family relationship with the spouses, including former ones;
relatives, relatives of spouses, and relatives of former spouses;
persons in dependence of or having joint household with public officials;
natural persons, legal persons and unincorporated associations (organisations) the activities of which can be actually defined by public officials or their associates, including by instructing them, the persons authorized to act on their behalf, and members of the governing bodies of legal persons or unincorporated associations (organisations);
persons acting otherwise on behalf of and/or in the interest of public officials and their associates, including trustees of their property;
persons who own, use or dispose of property based on a contract and/or other agreement with public officials and their associates;
persons having common property with public officials and their associates;
natural and legal persons having joint commercial and economic interests with public officials and their associates;
legal persons which are controlled directly and/or indirectly by public officials and their associates;
other natural and/or legal persons recognised as associates.

“Property” that can be subject to confiscation constitutes assets of public officials and/or their associates, the conformity of whose value with the amount of legal income or other legal sources of coverage of expenses to acquire those assets is not proved in court (hereinafter, assets of unexplained origin). Confiscation can be enforced only if the total amount of these assets owned, used, possessed or controlled by public officials and/or their associates is equal to or exceeds the amount of monthly calculation index by 13 million times (i.e. is 44.85 billion KZT or roughly 99 million USD).

2. Institutional environment

To recover assets, Kazakhstan establishes:

an asset recovery agency subordinate to the Prosecutor General’s Office (hereinafter, Authorised Body);
a Commission chaired by the prime-minister and responsible for elaborating proposals and recommendations on asset recovery (hereinafter, the Commission).

The Authorised Body has the following objectives:

undertake asset recovery activities, including searching for, collecting, processing, summarizing and evaluating information on assets and analysing data on the origin of assets;
ensure interagency interaction and coordination of activities of law enforcement bodies, asset recovery bodies and other public bodies, as well as international legal cooperation in criminal, administrative and civil areas to recover assets, in searching (disclosing), confirming the origin, enforcing provisional measures, interim measures and recovering illegally acquired assets to the State;
maintain the Register of persons with regard to whom there is reasonable doubt to believe that the source of acquisition (origin) of their assets is legal (hereinafter, the Register). The Register contains information on public officials and/or their associates, heirs and successors of public officials and/or their associates who (allegedly) own(-ed), possess(-ed) or control(-led) the assets whose legal source of acquisition (origin) must be proved;
conclude agreements on voluntary asset recovery and other similar agreements;
initiate administrative, criminal and civil proceedings on asset recovery;
establish the form of and procedure for filing asset declarations together with the Authorised body performing management functions in the field of tax revenues and other mandatory payments to the budget;
prepare on an annual basis information on countering illegal acquisition and movement of assets and on adopting systemic measures to be published on the website of the body, and other functions.

The objectives of the Commission include:

develop recommendations to be considered by the Authorised body on systemic measures aimed at eliminating the causes of and conditions for illegal acquisition of assets as well as their movement outside the country, on different methods and mechanisms to recover assets to the State and/or their integration into legal economic circulation;
consider information on assets and other data proving legal source of acquisition (origin) of assets disclosed in declarations;
create the Register, taking account of social and economic risks and other factors.

3. Confiscation procedure

The Authorised Body, based on the information of public bodies and other sources not banned by the law, monitors and analyses information and assesses the legality of sources of acquisition (origin) of assets of public officials and/or their associates. If it has reasonable doubts, it detects:

the persons involved in the scheme of illegal movement of assets and their associates;
the total amount of assets;
the indicators and circumstances of illegal acquisition of assets, their movement outside the country;
other relevant data.

Based on the findings of the analysis, the Authorised Body submits the issue of inclusion in the Register of the persons with regard to whom there are reasonable grounds to believe that their assets have legal sources of acquisition (origin) for the consideration of the Commission.

If the Commission agrees, the Authorised Body notifies those persons about the inclusion of the information about them in the Register. After that, they can file asset declarations supplementing them with data (documents) proving the legal sources (origin) of the assets disclosed. If public officials and/or associated persons do not prove legal acquisition of assets, the latter are recognised to be assets of unexplained origin.

If there is a risk of movement of assets outside the country or of their alienation, the Authorised Body can file a request for interim measures, including:

arrest of assets;
prohibition to undertake certain actions such as transactions entailing loan and other obligations, encumbering the assets with liens or other interests of third parties;
prohibition for third parties to transfer property to public officials and/or their associates;
suspension of the sale of assets;
prohibition to use shares of financial institutions and shares (stakes in the authorised capital) of the persons directly or indirectly owning the shares of financial institutions etc.

Under the Law, asset recovery can be either voluntary or forced. Forced asset recovery is implemented on the basis of rulings of domestic judicial bodies, judicial or other competent authorities of foreign countries or – in the case of civil proceedings – as a result of recognition of assets as assets of unexplained origin regardless of conviction, criminal prosecution, pre-trial investigation, statute of limitation for prosecution etc.

4. Special public fund and managing company

Additionally, a Special Public Fund will be established on the basis of the Ministry of Finance to transfer the money confiscated to the State due to its unexplained origin (hereinafter, the Fund) which will subsequently be spent on social and economic projects and functioning of the Authorised Body.

A Managing Company will be established to manage the Fund. Its objectives will include:

take over the ownership of assets recovered on behalf of the State;
ensure the preservation and maintenance of the assets forfeited to the State;
dispose of assets;
ensure that the money obtained from the sale of assets is transferred to the Fund.

The Law entered into force on 24 July 2023.