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So, what will the “regulatory guillotine” chop off?

25 november 2019

It seems that the theme of the “regulatory guillotine” is here to stay for along time for a long time. Earlier it was told how it all began. The idea gоt a lot of play, and in a new round it became clear: the Government of the Russian Federation made the final decision irrevocably - a “regulatory guillotine” in the PMPS sphere will be introduced. The request made by the Ministry of Finance of Russia for the non-extension of the “regulatory guillotine” mechanism to the sphere of the state federal assay supervision and to the federal state control when importing the PMPS into the Russian Federation from states outside the EAEU, and when exporting them from the RF to states outside the EAEU, found no understanding in the government.

This, alas, cannot be said about the opinion of the ministry about the “inexpediency” of extending the “regulatory guillotine” mechanism to the control over the implementation of the “anti-money laundering” legislation (combating the laundering of proceeds from crime and the financing of terrorism, or AML/CFT) in the PMPS field. Unfortunately, the launch of the “regulatory guillotine” regarding this type of control over the PMPS sphere is not discussed today.

What does the industry community expect, what does it expect from the outcome of the “guillotine”?

There are a number of factors showing that the “guillotine” can be of benefit to the industry, but, strangely enough, can also do great harm to it. The most important factor is determining the tasks to achieve the goal of the “guillotine” - the elimination of unnecessary industry regulations to make it easier for business to work. However, the understanding of the tasks - how to achieve this goal - changes over time.

The criterion for the appropriateness of maintaining or eliminating of one or another mandatory requirement in the industry regulatory framework, according to the original plan, should have been the approval or non-approval of the old requirement or changing it to the current state.

But after all, any mandatory requirement does not appear in a subordinate normative legal act without any reason, but it appears in execution of the effective law, in support of the entire legal regulation of the industry. And if the law requires anything, the government or the authorized federal executive body (FOIV) issues a by-law containing an updated explanation of this mandatory requirement, revealing the circumstances of its application in detail.

Thus, it makes sense to start the reform of the control and supervisory activity “from the top” - with the definition of the state policy in a particular sector of ​​the economy, and to start reforming (if necessary) the sectoral and not only sectoral legislative framework only after having specified the interests of the state in this economic sector. That is, first, the laws should be amended, and only then – the by-laws could be changed.

Otherwise, an industry disaster may happen - if the question “how exactly should the law be followed?” remains without any clarification in the by-laws and regulations (all kinds of resolutions, instructions, orders, etc.), then there will only be greater arbitrariness and liberal interpretation of the norms of the law during inspections, and increasingly more penalties will be imposed on the entrepreneurs...

Naturally, officials in the ministries (including, of course, the Russian Ministry of Finance) understand this, and therefore, within the framework of the “guillotine” “handed down”, they plan to simply transfer “upwards” almost all the mandatory requirements that are in numerous by-laws. Moreover, this idea - the achievement of the direct operation of laws, without the use of by-laws - has become the dominant today, almost a goal in itself.

But in this case, what will the “guillotine” be for the PMPS sphere, where there is practically no regulatory acts of the USSR and RSFSR periods? In new Russia, they were re-registered in new acts back in the 1990s. It turns out that in the PMPS sphere, where the regulatory function of the state was excessive from the beginning, there is simply nothing to cut with the “guillotine” - everything has been “updated” here long ago!

The optimism with which the industry business community welcomed the news about the “regulatory guillotine” idea can easily turn into skepticism if it becomes clear that the “bottom line” from the “guillotine” is that business will not receive less mandatory requirements, but they will be transferred into the main industry law - FЗ-41 dated 12.03.1998 “On precious metals and precious stones” (and it’s good if there is no actual increase in the requirements).

Moreover, if today the industry business receives penalties for the administrative infractions for the violation of the by-laws’ requirements, after such so-called “guillotine’s assistance”, the penalties will be issued by supervisors for the violation of the requirements of the law. It is not difficult to guess whether they will be higher or remain the same (moreover, it must be taken into account that fines, according to the bill considered in the State Duma, can grow tenfold).

From the point of view of the auditee, there is no difference for the violation of which document (law, regulation or departmental instruction, etc.) he receives an administrative penalty. But from the point of view of the amount of administrative penalty, the violation of the law is significantly more serious than the violation of departmental instructions. Thus, simply transferring mandatory requirements from the departmental acts to the law is the further tightening of the control and supervision, which in no way can be of benefit to the development of the PMPS sector.

Without the complete and final elimination of a significant part of the mandatory requirements, the observance of which is inconvenient or unnecessarily costly for the market participants but is not essential in terms of real threats to the economic security of the state, there is no positive sense whatsoever in updating the regulatory framework of the PMPS sector.

Although, there is a view that the instructions and other by-laws are produced by the officials themselves, at their own discretion, and therefore the number of the industry by-laws constantly increases. Business does not even have enough time to get used to the old requirements, as new ones appear. However, changing laws is difficult, and it is not possible to avoid the democratic discussion procedures, including the discussion with business.

Of course, from this point of view, the direct requirements of the law are preferable to those of the by-laws. But the question remains, what is worse for business - a more severe punishment for violating the stable requirements of the laws, or a less severe punishment for violating the "suddenly appeared" new requirements of the by-laws ...

However, if the goal of the “guillotine” is to really have a positive impact on the economy (there is no doubt about this), then it is impossible to do without affecting the regulatory framework, the goals of the state policy in each of the sectors of the economy, and sectoral legislative framework.

It is obvious, recognizing this need, in the “Action Plan (roadmap) approved by the Chairman of the Government of the Russian Federation D. A. Medvedev, there is a clause on the development of a new regulatory structure for each sphere of public relations or type of control (supervision), on the preparation and discussion of this new structure with the expert and business community.

But the trouble is, the development and public discussion of the new regulatory framework was supposed to begin in July, and be completed by the end of August. It is clear that the lag behind the roadmap in case of the PMPS sector that is under the jurisdiction of the Russian Ministry of Finance, is explained by the failed attempt made by the ministry to escape the “guillotine”. But in fact, the industry business community escaped the most important stage of the “guillotine” - the discussion of the regulatory structure, that is, the discussion of what, in fact, the state needs from the PMPS sector in principle, what is reasonable to be regulated by the state, and what should be left to the sphere of the norms of the Civil Code of the RF.

As a result, the Ministry of Finance sent a document to the all-Russian public structures of entrepreneurs at the very end of August only, and the document contained two sections:

- “The structure of the normative legal regulation of relations arising in the course of activities related to the production, use and circulation of precious metals, as well as to the production (in terms of sorting, primary classification and initial evaluation of precious stones), use and circulation of precious stones (federal state assay supervision)";

- “The list of legal acts and their parts (appendices) containing mandatory requirements, the compliance with which is assessed while controlling the implementation of the federal state assay supervision.”

In short, the justifications for the future regulatory policy in the PMPS sphere and a list of regulatory legal acts were provided for discussion by the business that the Ministry of Finance was ready to terminate (partially or completely).

So, “The structure of regulatory legal regulation ...” turned out to be the actual justification for the fact that everything is very good in the current state regulation in the industry. Everything is very rational, there is nothing excessive in the regulations of the PMPS and nothing needs to be changed.

And for most acts from the list provided by the Ministry of Finance of Russia (23 items), the basic mandatory requirements are supposed to be simply transferred to the Federal Law “On Precious Metals and Precious Stones” to become a direct law.

But the industry business community has repeatedly emphasized that in the absence of any exceptional properties of the objects under control (the currency status of the PMPS has been legally lost long ago), the general principle should work, according to which the power of regulatory impact should be minimal. The regulatory system should be aimed only at those objects where socially significant risks may arise, and only within these risks, and should be aimed, first of all, at reducing the risks of damage to human life and health, as well as preventing significant material, environmental, social and other similar damage to the state and society as a whole.

The regulator should not interfere with the activities of the entrepreneur arbitrarily. The control over the risks of Intercompany activities, commercial, managerial or other similar risks, i.e., those types of risks that do not directly affect the values ​​protected by the state, is excessive.

Obviously, the non-compliance with the mandatory requirements of Federal Law FZ-41 and its by-laws is - far from always - a risk of "undermining the economic security of the state." In the PMPS sphere, the economic interests of the state consist mainly in the development of the sector, increasing the PMPS production, processing and use, collecting due taxes from their circulation, creating jobs for the Russian citizens, providing them with income.

At the same time, a significant part of the FZ-41 norms applies to the purely technical aspects of the PMPS circulation, in which businesses are connected not with the state, but with other businesses, or the norms relate to the internal operations of the same business unit.

Thus, the violation of such mandatory requirements can in no way become a threat to the economic interests of the state, and the norms themselves - when it is expedient to introduce them into the civil acts (agreements) - can be established between interacting entities. That is, if the risks from non-fulfillment of the majority of mandatory requirements arise, then these risks are not the state’s risks. In this connection, there is no need to introduce such mandatory requirements by the state in a compulsory way, and the state can leave them to the discretion of the contracting businesses or consider them as the business risks of a single entity.

In the bottom line we have: the "regulatory guillotine" working group begins its work, but it is not clear whether there is an opportunity not only to discuss the elimination of the obsolete subordinate legislation (which, as noted, practically absent in the PMPS sphere), but also somehow influence the state policy in the PMPS field, on the industry law itself. And without changing the industry regulatory framework as a whole, the mechanism of the “guillotine” in the PMPS sphere will only transfer all currently existing norms from by-laws to the law itself. It is only possible to fight against transferring the mandatory requirements to the law, but for losing their force, until their liquidation conflicts with the state policy pursued by the PMPS sphere and also set and enshrined in Federal Law FZ-41.

One last thing. Could the absence of discussions of the mandatory requirements of the AML/CFT legislation in the “guillotine” lead to the fact that amid the reduction in the number of mandatory assay supervision requirements (if the reduction succeeds), the same supervisors would begin to check the AML/CFT requirements with greater force?

Vladimir Zboikov for Rough&Polished