Lawyer Nikita Trifonov: When Crime Pays, Fines Lose Their Meaning as Punishment

The Russian government has backed a bill toughening penalties for economic crimes. The key change involves increased fines. For instance, the maximum fine for deliberate bankruptcy (Article 196 of the Criminal Code) will rise from 500,000 to 2 million rubles, while for tax evasion (Article 199 of the Criminal Code) it will jump from 500,000 to 5 million.

Under the current system, where crimes are classified by severity of damage (significant, large, and particularly large), the new amendments propose raising fines by 1.5 to 5 times. Nikita Trifonov, partner at law firm Taeda Legal, Nikita Trifonov believes the amendments are directly linked to the annual inflation rate (7.89%), which significantly exceeds the Central Bank's 4% target.

"As a rule, fine increases are justified by the need to bring them in line with accumulated inflation since the old fines came into effect," Trifonov notes.

But indexation alone doesn't tell the whole story. When developing such changes, law enforcement practice is analyzed: whether existing fines are proportionate to the damage caused and the benefit gained by the violator. For example, if stealing 10 billion rubles carries a 1 billion ruble fine, the economic incentive for unscrupulous business becomes obvious.

"When crime pays, fines lose their meaning as punishment," the expert emphasizes.

It's important to consider different levels of practice. When sentencing, judges look not only at the crime itself but also at who committed it. The expert draws attention to this as well:

"For small business, a million-ruble fine can be devastating, while for large business it's merely symbolic."

The financial dimension can't be ignored either. Higher fines are partly aimed at increasing budget revenues amid ongoing deficits. The key question is whether increased fines will change how law enforcement operates and how business behaves. According to the expert, law enforcement agencies will barely notice the changes.

"This is unlikely to affect law enforcement work—the criminal provisions and evidentiary approaches will remain the same. We'll be able to say more specifically once the full text of the planned changes is published."

For business, however, higher fines will likely strengthen incentives for compliance. This especially applies to companies where previously "budgeted" fine risks were viewed as an acceptable cost of doing business.

"This, in turn, may lead to increased business spending on implementing internal compliance procedures," the expert predicts.

Simply put, it will become more profitable for entrepreneurs to invest in legal clarity of operations and control systems than to pay the state according to the new, increased rates.