Financial Markets: Increasing Complexity, Maintaining Stability

3–5 July 2019, ST. PETERSBURG

    Ministry of Finance in Favour of Criminal Liability for Illegal Lenders

    SAINT-PETERSBURG, 4 July/Tass/. The Ministry of Finance of Russia considers it necessary to toughen the penalties for illegal lenders, including subjecting them to criminal liability, as the primary way of limiting consumer lending risks. This was announced to journalists by Deputy Finance Minister Alexey Moiseev on the sidelines of the International Financial Congress.

    "I believe that the first thing we must do is finally amend the Code of the Russian Federation on Administrative Offenses and the Criminal Code to provide a [tangible] punishment for people who lend as microfinance institutions but who are not listed in the [CB] registry. The people that adverstise ‘loans in 5 minutes,’ these people should be held accountable, right up to criminal law,” said Moiseev. “In general, banks in Russia rarely misbehave, microfinance institutions do so a little more, but the worst behaviour comes from lenders who are completely unregulated due to the fact that they operate in a grey area,” the deputy minister added.

    Now illegal lenders are subject to administrative liability, he recalled: “A small fine. Lenders pay it and continue on, as the fine is nothing compared to the profit [which they make].”

    In the spring of this year, the Central Bank on behalf of the President of the Russian Federation developed measures to combat illegal lenders, including introduction of criminal liability.

    Illegal lenders position themselves as organisations that have the right to provide loans to the public. However, they do not have a Central Bank licence and they are not listed in the microfinance institution registries or consumer credit cooperatives.

    In 2018, the Central Bank identified 2,293 illegal lenders, a 70% increase from 2017.