Commentary on Article 217. Creation of and Leadership over a Financial (Investment) Pyramid of the Criminal Code of the Republic of Kazakhstan
1. The creation of a financial (investment) pyramid, that is, the organization of activities aimed at generating income (property benefits) from attracting money or other property, or rights thereto, from individuals and (or) legal entities without using the attracted funds for entrepreneurial activities that ensure the fulfillment of assumed obligations, through the redistribution of these assets and the enrichment of some participants at the expense of contributions made by others, as well as leadership over a financial (investment) pyramid or its structural subdivision —
shall be punishable by a fine in an amount of up to three thousand monthly calculation indices, or by community service for a period of up to eight hundred hours, or by restriction of liberty for a period of up to three years, or by imprisonment for the same period, with confiscation of property.
2. The same acts committed:
1) by a group of persons upon prior conspiracy;
2) repeatedly;
3) by a person using his or her official position;
4) by attracting money or other property on a large scale, —
shall be punishable by restriction of liberty for a period of three to seven years or imprisonment for the same period, with confiscation of property and deprivation of the right to hold certain positions or engage in certain activities for a period of up to three years.
3. The acts provided for in Parts One or Two of this Article, committed:
1) by a criminal group;
2) by attracting money or other property on an especially large scale;
3) by a person authorized to perform state functions, or a person equated to such a person, or an official, or a person holding a responsible public position, if such acts are associated with the use of his or her official position, —
shall be punishable by imprisonment for a period of five to ten years, with confiscation of property and deprivation of the right to hold certain positions or engage in certain activities for a period of up to seven years, and, in the cases provided for in Subparagraph 3), with confiscation of property and lifelong deprivation of the right to hold certain positions or engage in certain activities.
Note. A person, other than the organizer of a financial (investment) pyramid, who voluntarily reports his or her involvement in assisting the creation of a financial (investment) pyramid or leadership over it or its structural subdivision, and also actively contributes to the disclosure or suppression of its activities, shall be exempt from criminal liability if his or her actions do not contain the elements of another criminal offense.
The public danger of the act lies in the violation of the constitutional rights and freedoms of citizens, the interests of legal entities and the state, and the infliction of material and moral harm upon them.
The object of the crime under consideration is the social relations concerning the normal functioning of financial (investment) activities.
The additional object is the property interests of citizens or legal entities. The subject matter of the crime is money or other property, or rights thereto.
The objective side of the crime consists of:
- the creation of a financial (investment) pyramid;
- leadership over a financial (investment) pyramid or its structural subdivision.
The creation of a financial (investment) pyramid means the organization of activities aimed at generating income (property benefits) from attracting money or other property, or rights thereto, from individuals and (or) legal entities without using the attracted funds for entrepreneurial activities that ensure the fulfillment of assumed obligations, through the redistribution of these assets and the enrichment of some participants at the expense of contributions made by others.
The attractiveness of investing money in such a pyramid for the general public is associated with the promise of high returns without the need to make any effort, despite the fact that such returns cannot be maintained for a long period of time, and the fulfillment of the pyramid's obligations to all participants becomes knowingly impossible.
The objective side of this crime also includes cases of leadership over the financial (investment) pyramid itself or its structural subdivision. Leadership may consist of coordinating its activities, distributing functional responsibilities among its participants, and other similar actions.
At the same time, the activities of a financial (investment) pyramid are associated with the absence of any intention on the part of its founders or managers to use the attracted funds for entrepreneurial activities and thereby ensure the fulfillment of assumed obligations.
In terms of its legal structure, the composition of the crime under analysis is formal. The crime shall be considered completed from the moment the financial (investment) pyramid is created, as well as from the moment a person begins exercising leadership over the financial (investment) pyramid or its structural subdivision.
The subject of the crime is a physically sane individual who has reached the age of sixteen and has created such a structure or exercised leadership over it. The exceptions are the cases provided for in Subparagraph 3) of Part 2 and Subparagraph 3) of Part 3 of this Article, which establish a special subject of the crime.
From the subjective side, the creation of and leadership over a financial (investment) pyramid are committed in the form of direct intent. The perpetrator is aware that he or she is creating a financial (investment) pyramid for the purpose of generating income (property benefits) from attracting money or other property, or rights thereto, from individuals and (or) legal entities without using the attracted funds for entrepreneurial activities that ensure the fulfillment of assumed obligations, through the redistribution of these assets and the enrichment of some participants at the expense of contributions made by others, or that he or she is exercising leadership over such a financial (investment) pyramid or its structural subdivision, and desires to commit such actions.
Part 2 of Article 217 of the Criminal Code establishes liability for the same acts committed: 1) by a group of persons upon prior conspiracy; 2) repeatedly; 3) by a person using his or her official position (see the commentary to Part 2 of Article 216 of the Criminal Code).
The commission of an act by a person using his or her official position means that the subjects of such an act may include persons working in state bodies or institutions, as well as in non-governmental institutions, who do not fall within the category of persons authorized to perform state functions or persons equated to them.
According to Subparagraph 38) of Article 3 of the Criminal Code, the attraction of money or other property on a large scale means income exceeding one thousand monthly calculation indices.
Part 3 of Article 217 of the Criminal Code establishes liability for the acts provided for in Parts 1 or 2 of the said Article of the Criminal Code, committed: 1) by a criminal group; 2) by attracting money or other property on an especially large scale; 3) by a person authorized to perform state functions, or a person equated to such a person, or an official, or a person holding a responsible public position, if the acts are associated with the use of his or her official position. The aforementioned qualifying and especially qualifying circumstances are examined in the commentary to Article 216 of the Criminal Code.
According to Subparagraph 3) of Article 3 of the Criminal Code, the attraction of money or other property on an especially large scale means income exceeding five thousand monthly calculation indices.
The Note to Article 217 of the Criminal Code contains an incentive provision. Thus, if a person, other than the organizer of a financial (investment) pyramid, voluntarily reports his or her involvement in assisting the creation of a financial (investment) pyramid or leadership over it or its structural subdivision, and also actively contributes to the disclosure or suppression of its activities, such person shall be exempt from criminal liability, provided that his or her actions do not contain the elements of another criminal offense.
Active assistance in the disclosure or suppression of a crime means the commission by the perpetrator of proactive actions aimed at assisting the investigation in fully establishing all the circumstances of the crime, exposing all its accomplices, and identifying the causes and conditions that contributed to the commission of the crime. Such assistance may be expressed in giving confessional statements that indicate not only one's own guilt but also the involvement of other persons, providing physical and other evidence or indicating the location where such evidence can be found, assisting in the organization and conduct of investigative actions, and so forth. Documents confirming the active nature of the perpetrator's assistance may include his or her explanations, statements, interrogation record, and records of other investigative actions conducted with his or her participation.
The act provided for in Part 1 of Article 217 of the Criminal Code belongs to the category of crimes of medium gravity.
The acts provided for in Parts 2 and 3 of Article 217 of the Criminal Code belong to the category of serious crimes.
Commentary of 2021 on the Criminal Code of the Republic of Kazakhstan, by Isidor Shamilovich Borchashvili, Honored Figure of Kazakhstan, Doctor of Law, Professor, Academician of the National Academy of Natural Sciences of Kazakhstan, member of the Scientific Advisory Councils under the Constitutional Council of the Republic of Kazakhstan and the Supreme Court of the Republic of Kazakhstan, member of the working group on reform of the law enforcement system under the Security Council of the Republic of Kazakhstan, Honored Employee of the Ministry of Internal Affairs of the Republic of Kazakhstan.
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