Commentary on Article 218. Legalization (Laundering) of Money and (or) Other Property Obtained by Criminal Means of the Criminal Code of the Republic of Kazakhstan
1. Involvement in lawful circulation of money and (or) other property obtained by criminal means through transactions in the form of conversion or transfer of property constituting proceeds from criminal offenses, or possession and use of such property, concealment or disguise of its true nature, source, location, method of disposal, movement, rights to the property or its ownership, where it is known that such property constitutes proceeds from criminal offenses, as well as mediation in the legalization of money and (or) other property obtained by criminal means, —
shall be punishable by a fine in an amount of up to three thousand monthly calculation indices, or corrective labor in the same amount, or community service for a period of up to eight hundred hours, or restriction of liberty for a period of up to three years, or 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 their official position, —
shall be punishable by a fine in an amount of up to five thousand monthly calculation indices, or corrective labor in the same amount, or community service for a period of up to one thousand two hundred hours, or restriction of liberty for a period of up to five years, or imprisonment for the same period, with confiscation of property.
3. The acts provided for in paragraphs one or two of this Article, committed:
1) by a person authorized to perform state functions, or a person equated thereto, or an official, or a person holding a responsible public position, where such acts are associated with the use of their official position;
2) by a criminal group;
3) on a large scale, —
shall be punishable by imprisonment for a period of three to seven years, with confiscation of property, and in cases provided for by subparagraph 1), with lifelong deprivation of the right to hold certain positions or engage in certain activities.
Note. A person who voluntarily reports an impending or committed legalization of money and (or) property obtained by criminal means shall be released from criminal liability if their actions do not contain the elements of offenses provided for in paragraphs two or three of this Article, or another criminal offense.
The public danger of laundering criminal proceeds is determined by the fact that it represents one of the most dangerous types of economic crimes and complicates the detection and prosecution of the underlying (predicate) acquisitive crimes.
Issues concerning the fight against the legalization (laundering) of money and (or) other property obtained by criminal means are regulated by international legal instruments ratified by the Republic of Kazakhstan: the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, adopted in Vienna (Austria) on December 20, 1988; the United Nations Convention against Transnational Organized Crime, adopted in Palermo (Italy) in November 2000; the United Nations Convention against Corruption, adopted in Merida (Mexico) on October 31, 2003; the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, adopted in Strasbourg (France) on November 8, 1990, and other documents of the international community.
On October 25, 2012, the Republic of Kazakhstan ratified the Treaty on Combating the Legalization (Laundering) of Proceeds Obtained by Criminal Means and the Financing of Terrorism When Moving Cash and (or) Monetary Instruments Across the Customs Border of the Customs Union, concluded on December 19, 2011.
It is common knowledge that the formation of shadow capital takes place in the course of the organized activities of criminal groups — drug trafficking, arms trafficking, illegal gambling, pornography and drug businesses, embezzlement, smuggling, fraud and other dangerous crimes. Such legalized shadow capital is directed towards the acquisition of property and the establishment of both legitimate and fictitious legal entities.
The intensification of international cooperation in combating the legalization of criminally obtained proceeds was facilitated by the United Nations Convention for the Suppression of the Financing of Terrorism, adopted at the end of 1999, as well as the Basel Statement of Principles of the Group of Ten. A special role in this process was also played by a document such as the “Forty Recommendations” adopted by FATF.
At the national level, on August 28, 2009, the President of the Republic of Kazakhstan signed the Laws “On Combating the Legalization (Laundering) of Proceeds Obtained by Illegal Means and the Financing of Terrorism” and “On Amendments and Additions to Certain Legislative Acts on Issues of Legalization (Laundering) of Proceeds Obtained by Illegal Means and the Financing of Terrorism”, as well as other legal acts.
The object of the crime under consideration is the economic interests of the state associated with financial transactions or other dealings involving money or other property.
The subject matter of the crime may be money and other property acquired by criminal means.
In accordance with Articles 115 and 127 of the Civil Code, monetary funds include both cash and non-cash money in the national currency (tenge) or foreign currency.
Other property includes securities, precious stones and precious metals, other movable as well as immovable property. This includes buildings, structures, facilities, motor vehicles, raw materials, materials, goods, land plots, etc.
In accordance with Article 1 of the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime of November 8, 1990, the term “property” covers property of any kind, tangible or intangible, as well as legal documents or papers evidencing title to such property or an interest therein.
In accordance with the Law of the Republic of Kazakhstan dated August 28, 2009, “On Combating the Legalization (Laundering) of Proceeds Obtained by Criminal Means and the Financing of Terrorism”, proceeds obtained by criminal means are money and (or) other property obtained as a result of the commission of a criminal offense (subparagraph 10) of Article 1).
The Recommendation of the Council of Europe of September 9, 1991, concerning the prohibition of the exploitation of sex for profit, pornography, prostitution, trafficking in human beings and minors, also provides for ensuring the possibility of seizure and confiscation of proceeds from crimes related to the sexual exploitation of children and minors.
The objective aspect of the crime under consideration is characterized by:
involvement in lawful circulation of money and (or) other property obtained by criminal means;
carrying out transactions in the form of conversion or transfer of property constituting proceeds from criminal offenses;
possession and use of such property;
concealment or disguise of its true nature, source, location, method of disposal, movement, rights to the property or its ownership, where it is known that such property constitutes proceeds from criminal offenses;
mediation in the legalization of money and (or) other property obtained by criminal means.
The above-mentioned acts are referred to as the legalization (laundering) of monetary funds or other property obtained by criminal means.
According to subparagraph 11) of Article 1 of the Law of the Republic of Kazakhstan “On Combating the Legalization (Laundering) of Proceeds Obtained by Criminal Means and the Financing of Terrorism”, legalization means the involvement in lawful circulation of money and (or) other property obtained by criminal means through transactions in the form of conversion or transfer of property constituting proceeds from criminal offenses, or possession and use of such property, concealment or disguise of its true nature, source, location, method of disposal, movement, rights to the property or its ownership, where it is known that such property constitutes proceeds from criminal offenses, as well as mediation in the legalization of money and (or) other property obtained by criminal means.
Paragraph 19 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan “On Certain Issues of Application by Courts of Legislation in Cases Involving Criminal Offenses in the Sphere of Economic Activity” states that, for the purposes of Article 218 of the Criminal Code, the legalization (laundering) of money and (or) other property obtained by criminal means should be understood not as any disposal of money or other property obtained through the commission of a criminal offense, but only as their involvement in lawful circulation through transactions in the form of conversion or transfer of property constituting proceeds from criminal offenses, or possession and use of such property, concealment or disguise of its true nature, source, location, method of disposal, movement, rights to the property or its ownership, where the person knows that such property constitutes proceeds from criminal offenses, as well as mediation in the legalization of money and (or) other property obtained by criminal means.
At the same time, courts must also be guided by the explanations contained in paragraph 3 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated July 11, 2003, “On Judicial Practice in Cases of Embezzlement”, according to which the disposal by the guilty person of stolen property at their own discretion (sale or gratuitous transfer to other persons, damage, disassembly, destruction, etc.) does not constitute an independent criminal offense and does not require additional qualification.
In order to hold persons involved in the legalization of monetary funds and other property acquired by criminal means criminally liable, it is necessary that they be aware that the financial transaction or dealing involving them, as well as entrepreneurial or other economic activity, is carried out using monetary funds or other property acquired by criminal means, and that they desire to perform such actions.
The involvement in lawful circulation of money and (or) other property obtained as a result of criminal offenses may be carried out by means of transactions of any kind (sale of property, purchase of movable or immovable property using money obtained through the commission of criminal offenses, exchange of property acquired by criminal means for other property, etc.). In accordance with Article 147 of the Civil Code, transactions are actions of citizens and legal entities aimed at establishing, changing or terminating civil rights and obligations.
The involvement in lawful circulation of money and (or) other property obtained as a result of criminal offenses may also be carried out through various financial transactions, which are also considered transactions, for example:
crediting monetary funds to an account, distributing them among deposits in various banks, converting them into another currency, purchasing securities;
transferring monetary funds abroad by individuals or legal entities or placing them in bank deposits with their subsequent return from there, etc.
As a rule, financial transactions involving money or other property obtained by criminal means are carried out through banks and organizations engaged in certain types of banking operations related to the opening and maintenance of bank accounts. Subsequently, these monetary funds are used to make various payments.
Transactions in the form of conversion or transfer of property constituting proceeds from criminal offenses are understood as actions aimed at concealing the illegal origin of property acquired by criminal means or assisting any person involved in the commission of the underlying offense in avoiding the legal consequences of their actions.
According to paragraph 20 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated January 24, 2020, a transaction in the form of conversion, for the purposes of Article 218 of the Criminal Code, means transactions aimed at legalizing money or other property obtained by criminal means, directed at establishing, changing or terminating civil rights and obligations, as well as creating the appearance of the emergence or transfer of civil rights and obligations.
At the same time, financial transactions and dealings knowingly undertaken by the perpetrator conceal the connection between the money or other property being legalized and the criminal offense, are aimed at concealing the fact that the property was acquired by criminal means and ensuring its open circulation. Possession and use of such property should be understood as both formal and actual possession and use of this property in one's own interests.
Concealment or disguise of the true nature, source, location, method of disposal, movement, rights to the property or its ownership, where it is known that such property constitutes proceeds from criminal offenses, represents the concealment or disguise of the actual nature of the origin, location, placement or movement of the property or rights thereto, where it is known that such property constitutes proceeds obtained by criminal means.
Mediation in the legalization of money and (or) other property obtained by criminal means may include participation in the acts specified in the Article under consideration or an attempt to commit them, as well as providing assistance, facilitation or consulting in connection with the commission of such a crime.
In practice, complicated schemes consisting of a series of transactions and operations are used to legalize money or other property acquired by criminal means, the main purpose of which is to eliminate the possibility of tracing such funds.
The elements of the crime under the Article being commented on are present even in cases where the perpetrator carries out only one financial transaction or one dealing involving monetary funds or property acquired by criminal means.
If a person carries out legalization (laundering) by means of several transactions involving monetary funds or property obtained as a result of one criminal offense, such actions must be qualified under Article 218 of the Criminal Code.
The structure of the elements of the crime is formal. A crime committed in the form of transactions shall be considered completed upon the commission by the perpetrator of actions entailing the emergence, modification or termination of civil rights and obligations. The moment at which a transaction is deemed concluded is determined by civil legislation (for example, transactions subject to mandatory state or other registration in accordance with legislative acts shall be deemed concluded from the moment of registration, unless otherwise provided for by legislative acts (paragraph 1 of Article 155 of the Civil Code)). At the same time, under the meaning of the law, liability under the Article of the Criminal Code under consideration also arises in the event of any movement of the specified funds, including in the process of carrying out a transaction, if the purpose of such movement is the laundering of property obtained through the commission of criminal offenses.
An act in the form of carrying out financial transactions is considered completed at the moment when at least one relevant transaction is deemed to have taken place (for example, the crediting of monetary funds to a bank account).
If a transaction or financial operation does not take place due to circumstances beyond the control of the person, their actions fall under an attempt to commit a crime (Part 3 of Article 24 of the Criminal Code).
The subject of the crime is an individual who has reached the age of sixteen and who did not participate (in any form of complicity) in the commission of the criminal offense as a result of which the monetary funds or other property were acquired. Such persons may include employees of credit institutions and professional participants in the securities market.
From the subjective perspective, the crime under consideration is committed in the form of direct intent. The perpetrator realizes that they are carrying out actions aimed at involving in lawful circulation money and (or) other property obtained by criminal means through transactions in the form of conversion or transfer of property constituting proceeds from criminal offenses, or possession and use of such property, concealment or disguise of its true nature, source, location, method of disposal, movement, rights to the property or its ownership, where it is known that such property constitutes proceeds from criminal offenses, as well as mediation in the legalization of money and (or) other property obtained by criminal means, and desires to perform such actions.
An essential element of the subjective aspect of the crime is the presence of a special purpose in carrying out financial transactions and other dealings involving monetary funds or other property acquired by criminal means, namely, giving a lawful appearance to the possession, use and disposal of the specified monetary funds or other property.
Part 2 of Article 218 of the Criminal Code provides for liability for the legalization of criminal proceeds committed: 1) by a group of persons upon prior conspiracy; 2) repeatedly; 3) by a person using their official position.
Part 3 of Article 218 of the Criminal Code establishes increased liability for the commission of acts provided for in Parts 1 and 2 of this Article where they are committed: 1) by a person authorized to perform state functions, or a person equated thereto, or an official, or a person holding a responsible public position, where such acts are associated with the use of their official position; 2) by a criminal group; 3) on a large scale.
For the characteristics of these qualifying and especially qualifying circumstances, see the commentary to Articles 214–217 of the Criminal Code.
Legalization on a large scale shall be understood as money and (or) other property obtained by criminal means in an amount exceeding twenty thousand monthly calculation indices (subparagraph 38 of Article 3 of the Criminal Code).
In accordance with the Note to Article 218 of the Criminal Code, a person who voluntarily reports an impending or committed legalization of money and (or) property obtained by criminal means shall be released from criminal liability if their actions do not contain the elements of offenses provided for in Parts 4 or 3 of Article 218 of the Criminal Code, or another criminal offense.
The acts provided for in Parts 1 and 2 of Article 218 of the Criminal Code are classified as crimes of medium gravity.
The act provided for in Part 3 of Article 218 of the Criminal Code constitutes a serious crime.
Commentary of 2021 to the Criminal Code of the Republic of Kazakhstan by Isidor Shamilovich Borchashvili, Honored Figure of Kazakhstan, Doctor of Law, Professor, Academician of the Kazakhstan National Academy of Natural Sciences, 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 the 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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