A new article «Activity on fund (assets) raising» to the Code of Administrative Offences came into effect by the Federal law No.54-FZ of 09.03.2016 “On Amendments to the Code of Administrative Offences of the Russian Federation”.
Financial Pyramids are considered fraudulent schemes where the income of investors is based on funds raised from next investors.
The new law has eliminated a long standing practice of raising funds and liquidating liabilities as the expense of additional investors. Based on past practices each “pyramid” was active, as a rule of thumb, from one up to three years in average. When the funds came to an end, a pyramid suddenly announced the termination of activity and founders absconded generally with large sums of money.
According to the Ministry of Internal Affairs of Russia, the activity of “financial pyramids” has even intensified in recent years. In 2014 the number of such entities exceeded 160, more than nine thousand individuals were affected and the damage amounted to over 24 million USD.
The new law defines the illegal practice of a “financial pyramid” as follows: “An organization or entity raising funds or other assets (property) from individuals or legal entities, where the investors’ income is generated from the funds received from follow-on investors. Thus the pyramid never generates any other income from investments or legal trading activities.
The creation of financial (investment) pyramids as well as their advertising are in violation of the law Penalties for individuals are set in the amount of from 70 to 700 USD or officials – from 280 to 1400 USD and for legal entities – from 7 000 to 14 000 USD. The administrative liability occurs if funds up to 20 000 USD are raised, for sums of over 20 000 USD a criminal liability is triggered. The relevant amendments to the Criminal Code are now under consideration in the State Duma of Russia:
Individuals or legal entities raising big funds will be fined up to 14 000 USD or in the amount of salary of a convicted party for the period up to two years, or compulsory works or up to 4 years’ imprisonment; for extremely large funds raised stricter fines are imposed or prison terms up to 5 years as an alternative to the financial fines. “Financial pyramids” are considered a criminal activity will be single out in a separate article from the Article 159 of the Criminal Code of the RF “Fraud”.
Source: Credinform Russia