5 march 2012

Prime Minister Vladimir Putin meets with Deputy Prime Minister Igor Sechin

During the meeting Vladimir Putin and Igor Sechin discussed the proposals drafted according to the prime minister’s instructions on monitoring the incomes of the management of large companies with state participation. “We should be guided bythe world’s best practices when a failure to submit returns or provide correct data involves criminal liability,” Putin said.

Transcript of the beginning of the meeting:

Vladimir Putin: Mr Sechin, I asked you to draft proposals on further efforts to monitor the activities of the management of large companies. I’m referring to the declaration of income for relevant officials and the need to make their interaction with business partners absolutely transparent, in order to rule out any affiliation of the companies with state participation and these partners in their day-to-day work. I know that you have a number of proposals. I’d like to hear them. Needless to say, this work must conform to the existing legislation.

Igor Sechin: Mr Putin, after you issued these instructions to the government and to the departments on December 19 during your visit to the Sayano-Shushenskaya hydro power plant, we checked the declarations of top managers of public companies. In addition to energy companies, we inspected oil and gas, transport, and communications companies, as well as banks. Our task was to receive documents on incomes and information on chains of owners and partners under the existing agreements. This is a really serious issue. For example, two of these companies have agreements with offshore contractors totalling 522 billion roubles. At present, there are about 9,800 such contractors. This is a major effort. At the same time we have managed to determine clearly the range of people providing information and transaction criteria. We have developed electronic forms to facilitate this work, and have made them available to all companies, because it is simply impossible to exchange paper documents on so many employees and contractors.

This work has already produced positive results – a number of officials have quit commercial companies. In some cases companies have made the necessary personnel decisions even without recommendations from government bodies. Branch ministries and supervisory bodies have conducted simultaneous inspections. On your instructions, both the Federal Tax Service and the Federal Service for Fiscal and Budgetary Supervision took part in this work.

A preliminary analysis of these inspections has revealed that company officials concealed their participation in commercial firms in more than 200 cases. Regrettably, we cannot say that we have received this information in full. We are continuing this work and we will carry it through to the end. On the whole, based on these instructions, the analysis of information is already promoting competition and making the entire public sector more efficient. Implementation of these instructions fully corresponds to international experience and the trend towards countering excessive offshore activities. We believe that this work will improve our economic performance.

Mr Putin, we have studied a number of proposals that require your instructions for departments and ministries. These proposals are based on the experience of the world’s biggest economies – the United States, Finland, France and Britain. They are aimed at introducing amendments to specific legal acts with a view towards making the operation of public companies transparent on a permanent basis. They are also designed to minimise the negative influence of the excessive use of offshore schemes.

Mr Putin, we’d like to suggest that you instruct the Finance Ministry and the Bank of Russia to look into the issue of enhancing supervision in the banking sphere because the banking sector must play an active role in this work. Without unbiased information from banks it is very difficult to make a comparative analysis of the information presented by companies. We would like to ask you to give instructions on presenting draft normative acts on making amendments to the current legislation. It is necessary to enhance the work you have instructed us to do.

Vladimir Putin: Let’s do this. Please, describe your proposal in more detail. We should be guided by the world’s best practices when a failure to submit returns or provide correct data involves criminal liability. The legislation in some countries with developed market economies includes such liability for officials. This discourages them from getting involved in illegal activities or circumventing state-imposed supervision. This is not the only thing that we have to consider. We shouldn’t invent anything Russian on this score, but look at how these norms operate in other countries. We must look at them, analyse them once again and submit proposals to the State Duma.

Igor Sechin: The measures you mentioned are provided f in the U.S. legislation.

Vladimir Putin: That’s great. Tell us about it in more detail.