Commentary on Article 219. Unlawful Obtaining of a Loan, Use of a Budget Loan for an Unintended Purpose of the Criminal Code of the Republic of Kazakhstan
1. Obtaining by an individual entrepreneur or the head of an organization of a loan, subsidies or preferential lending terms by submitting to a bank or another creditor knowingly false information about the business position, financial condition or pledged property of the individual entrepreneur or organization, or about other circumstances that are of material significance for obtaining a loan, subsidies or preferential lending terms, as well as failure to inform the bank or another creditor of information about the occurrence of circumstances that may entail the termination of lending or subsidizing, the cancellation of benefits or the restriction of the amounts of the allocated loan or subsidies, if these acts have caused major damage, —
shall be punishable by a fine in the amount of up to two thousand monthly calculation indices, or corrective labor in the same amount, or community service for a period of up to six hundred hours, or restriction of liberty for a period of up to two years, or imprisonment for the same period.
2. Use of a budget loan for an unintended purpose, if this act has caused major damage to a citizen, organization or the State, —
shall be punishable by a fine in the amount of up to two thousand monthly calculation indices, or corrective labor in the same amount, or community service for a period of up to six hundred hours, or restriction of liberty for a period of up to two years, or imprisonment for the same period.
Note. A person who has committed an act provided for by this Article for the first time shall be exempt from criminal liability if the damage is voluntarily compensated.
The public danger of this crime lies in the fact that, when it is committed, the rights of credit organizations, the State, as well as citizens who, as a result of the unlawful obtaining of a loan by another entity, are deprived of such an opportunity, are violated.
Liability for the unlawful obtaining of a loan and the misuse of a budget loan is established in one Article (Parts 1 and 2 of Article 219 of the Criminal Code), which contains the elements of two crimes combined by the legislator on the basis of the commonality of their immediate object, namely public relations arising in the sphere of lending.
The legal basis for banking and other lending in the Republic of Kazakhstan consists of the special provisions of the Civil Code of the Republic of Kazakhstan; the Law of the Republic of Kazakhstan dated August 31, 1995, “On Banks and Banking Activities in the Republic of Kazakhstan”; the Law of the Republic of Kazakhstan dated March 30, 1995, “On the National Bank of the Republic of Kazakhstan”; the Law of the Republic of Kazakhstan dated March 28, 2003, “On Credit Partnerships”; and others.
The object of the crime is credit relations in the economy, as well as the property interests of citizens and legal entities.
The subject of the crime is a loan, subsidies or preferential lending terms, which represent more favorable conditions compared with the general conditions for obtaining and repaying a loan.
According to subparagraph 8) of paragraph 2 of Article 30 of the Law of the Republic of Kazakhstan “On Banks and Banking Activities in the Republic of Kazakhstan”, one type of banking operation is banking borrowing operations: the provision by a bank, mortgage organization, an organization that is not a bank and carries out brokerage and (or) dealer activities in the securities market, or subsidiaries of the national managing holding in the agro-industrial complex sector, of loans in monetary form on the terms of payment, maturity and repayment.
According to paragraph 3 of Article 30 of the said Law, the activities of organizations carrying out microfinance activities in providing microloans in accordance with the legislation of the Republic of Kazakhstan on microfinance activities do not constitute banking operations.
When concluding a loan agreement, the creditor undertakes to provide the borrower with money in the amount and on the terms stipulated by the agreement, while the borrower, in turn, undertakes to repay the amount received and pay remuneration.
In accordance with Article 35 of the Law of the Republic of Kazakhstan “On Banks and Banking Activities in the Republic of Kazakhstan”, repayment of loans may be secured by a penalty, pledge, guarantee, suretyship and other methods provided for by the legislation of the Republic of Kazakhstan or by the agreement.
Subsidies are appropriations from the State budget intended to cover the losses of enterprises and organizations whose costs of producing and selling certain types of products are not covered by the revenue component of their activities, to provide financial support to the military industry, infrastructure sectors and others.
Preferential lending terms are more favorable terms compared with the general terms, associated with the provision of certain advantages or partial exemption from compliance with established lending rules (for example, granting a loan without security for its repayment, deferring the commencement of its repayment, etc.).
The objective side of the crime provided for in Part 1 of the Article under consideration is expressed in the fact that an individual entrepreneur or the head of an organization obtains a loan, subsidies or secures preferential lending terms by providing a bank or another creditor with knowingly false information about the business position, financial condition or pledged property of the individual entrepreneur or organization, or about other circumstances relevant to obtaining a loan, subsidies or preferential lending terms, as well as by failing to inform the bank or another creditor of information about the occurrence of circumstances that may entail the termination of lending or subsidizing, the cancellation of benefits or the restriction of the amounts of the allocated loan or subsidies, provided that these acts have caused major damage.
Obtaining a loan means its issuance (at least in part). A loan may be issued in cash; the loan amount may be credited to the current account of the borrowing enterprise or organization; it may be directed by the bank, upon the borrower's instruction, directly towards payment of settlement and monetary documents submitted against the account, etc. Obtaining subsidies or preferential lending terms should be understood in a similar manner.
The business position represents a set of internal and external data characterizing the conduct of economic activities by an organization. Knowingly false information about the business position includes, for example, data that does not correspond to reality concerning the founders, managers and shareholders of an organization; fictitious agreements, payment and other documents relating to a business transaction for which a loan is being requested; and others.
False information should be understood as information about the business position and (or) financial condition of the borrower, or its own pledged property, which does not correspond to actual reality and is knowingly distorted by the perpetrator in comparison with the actual facts. Thus, the information referred to in the corpus delicti under consideration is defective and does not correspond to reality. Knowingly false information about the financial condition may include, for example, falsified accounting documents concerning registration with the tax committee, in which the financial condition is presented in a more favorable position, and others.
In addition, knowingly false information may be contained in the following documents: the technical and economic feasibility study of the loan, copies or originals of agreements and contracts confirming it, enterprise balance sheets (annual and the latest quarterly balance sheets), certificates concerning the existence (absence) of loans with other banks and creditors, state registration documents and licenses. Documents confirming the right to obtain a loan on preferential terms may also relate to pledged property (in loans secured by a pledge), documents on the insurance of credit transactions, etc.
When deciding whether knowingly false information was of material significance for obtaining a loan, subsidies or preferential lending terms, it is necessary to establish whether the perpetrator had a real opportunity to obtain them without providing such false information, on the basis of other genuine information also submitted to the creditor.
In cases where other non-false information submitted to the creditor was sufficient for granting a loan, subsidies or preferential lending terms, the individual entrepreneur or the head of the organization shall not incur criminal liability under Article 219 of the Criminal Code of the Republic of Kazakhstan.
The acts provided for by Article 219 of the Criminal Code of the Republic of Kazakhstan entail criminal liability regardless of whether the unlawfully obtained credit funds or funds used for purposes other than their intended purpose have been repaid.
This crime is characterized by the existence of a causal relationship between the submission by an individual entrepreneur or the head of an organization of knowingly false information about the business position, financial condition or pledged property, or about other circumstances of material significance, and the obtaining of a loan, subsidies or preferential lending terms. This relationship consists in the fact that the decision to grant a loan, subsidies and (or) credit benefits is based specifically on knowingly false information and would not have been made without such information.
Paragraph 21 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan “On Certain Issues of the Application by Courts of Legislation in Cases of Criminal Offenses in the Sphere of Economic Activity” also emphasizes the following:
“Criminal liability under Part One of Article 219 of the Criminal Code arises in the event that an individual entrepreneur or the head of an organization obtains a loan, subsidies or preferential lending terms by submitting to a bank or another creditor knowingly false information about the business position, financial condition or pledged property of the individual entrepreneur or organization, or about other circumstances that are of material significance for obtaining a loan, subsidies or preferential lending terms, as well as by failing to inform the bank or another creditor of information about the occurrence of circumstances that may entail the termination of lending or subsidizing, the cancellation of benefits or the restriction of the amounts of the allocated loan or subsidies, if these acts have caused major damage.
When considering cases involving the unlawful obtaining of a loan or subsidies, or when deciding whether knowingly false information was of material significance for obtaining a loan, subsidies or preferential lending terms, it is necessary to establish whether the person had a real opportunity to obtain them without providing false information, on the basis of other information submitted to the creditor that corresponded to reality.
If the court establishes that sufficient information corresponding to reality was provided to obtain the loan, then the provision of other false information alongside reliable information does not constitute the unlawful obtaining of a loan”.
The structure of the corpus delicti is material. This crime is considered completed from the moment major damage is caused to the bank or another creditor. In accordance with subparagraph 38) of Article 3 of the Criminal Code of the Republic of Kazakhstan, major damage means damage caused to a citizen in an amount exceeding two hundred times the monthly calculation index, or damage caused to an organization or the State in an amount exceeding two thousand times the monthly calculation index.
The subject of the crime under Part 1 of Article 219 of the Criminal Code is a special subject, namely an individual entrepreneur or the head of a commercial or non-commercial organization, regardless of its organizational and legal form or form of ownership.
According to Article 30 of the Entrepreneurial Code of the Republic of Kazakhstan, individual entrepreneurship is an independent and initiative-based activity of citizens of the Republic of Kazakhstan and kandas aimed at obtaining net income, based on the ownership of the individuals themselves and carried out on behalf of individuals, at their own risk and under their property liability. Other individuals are prohibited from carrying out individual entrepreneurship. Individual entrepreneurship is carried out in the form of individual or joint entrepreneurship.
The head of an organization is a person responsible for conducting the affairs of the organization and who, within the scope of their authority, may perform organizational and administrative or administrative and economic functions within that organization.
The unlawful obtaining of a loan by an individual (a general subject of the crime), where there are grounds for doing so, should be classified under Article 195 of the Criminal Code, which provides for liability for causing property damage through deception or abuse of trust.
The unlawful obtaining of a loan associated with the bribery of the head of a bank or another creditor who influenced the decision on granting the loan is classified cumulatively with Article 253 of the Criminal Code, which provides for liability for commercial bribery.
The subjective side of the crime provided for in Part 1 of Article 219 of the Criminal Code is characterized by guilt in the form of direct or indirect intent. The individual entrepreneur or the head of the organization realizes that they are obtaining a loan, subsidies or preferential lending terms by deceiving the creditor and providing it with knowingly false information about their business position, financial condition, pledged property or other circumstances of material significance for obtaining them, as well as that they are failing to inform the creditor of information about the occurrence of circumstances that may entail the termination of lending or subsidizing, the cancellation of benefits or the restriction of the amounts of the allocated loan or subsidies; they foresee the possibility or inevitability of causing major damage to citizens, organizations or the State as a result of these actions and desire the infliction of such damage or, without desiring it, consciously allow it or remain indifferent to the occurrence of such consequences.
This crime should be distinguished from fraud, since, when it is committed, the perpetrator's intent is directed not towards misappropriation, but towards temporarily obtaining a loan with the subsequent intention of repaying such loan, albeit late.
Part 2 of Article 219 of the Criminal Code establishes criminal liability for the use of a budget loan for an unintended purpose, if this act has caused major damage to a citizen, organization or the State (for example, a monetary loan allocated by the National Bank of the Republic of Kazakhstan for the elimination of the consequences of a natural disaster is used for the construction of cottages or the acquisition of other expensive property).
The object of the crime provided for in Part 2 of Article 219 of the Criminal Code is the procedure for state-purpose lending.
The subject of this crime may be a budget loan.
In accordance with Article 171 of the Budget Code of the Republic of Kazakhstan dated December 4, 2008, budget lending is a process that includes procedures for making a decision on the provision, use, servicing and repayment of a budget loan.
A subject of civil-law relations receiving a budget loan is obliged to use the funds solely for their intended purpose in accordance with the concluded loan agreement and may not credit them to deposit accounts as credit resources, use them to purchase foreign currencies, or allocate them to other financial transactions (providing funds as part of contributions to the authorized capital of another legal entity, etc.).
The objective side of the corpus delicti provided for in Part 2 of Article 219 of the Criminal Code is characterized by the use of a budget loan for an unintended purpose.
The use of a budget loan for an unintended purpose means disposing of the loans received for purposes other than those specified in the loan agreement. For example, a loan is obtained for the development of agriculture, but is spent on housing repairs.
According to paragraph 3 of Article 12 of the Budget Code, budget loans are funds allocated from the budget on the basis of repayment, maturity and payment. Consequently, when considering cases under Part 2 of Article 219 of the Criminal Code, the court is obliged to establish the source of lending.
The use of a budget loan for an unintended purpose may cause major damage to citizens, organizations or the State, which constitutes a mandatory condition for liability under Part 2 of Article 219 of the Criminal Code. According to subparagraph 38) of Article 3 of the Criminal Code, major damage means damage caused to a citizen in an amount exceeding two hundred times the monthly calculation index, or damage caused to an organization or the State in an amount exceeding two thousand times the monthly calculation index.
The acts provided for by Article 219 of the Criminal Code entail criminal liability regardless of whether the unlawfully obtained loan or subsidies have been repaid or whether the budget loan has been used for purposes other than its intended purpose, except for the cases provided for in the Note to this Article.
For the purposes of Article 219 of the Criminal Code, damage should be understood as the amount of the credit funds received and the bank's remuneration.
The act is considered completed at the moment major damage is caused to citizens, organizations or the State. Thus, the corpus delicti is material.
The subject of the crime provided for in Part 2 of Article 219 of the Criminal Code is a special subject, namely an individual entrepreneur or the head of a commercial or non-commercial organization, a sane person who has reached the age of 16.
From the subjective side, the crime is committed intentionally, as a rule, with indirect intent. The person realizes that they are using the loan received not in accordance with its intended purpose, foresees the possibility or inevitability of causing major damage to citizens, organizations or the State as a result thereof, and desires to cause the said damage or consciously allows it.
Motives and purposes do not affect the classification of the crime under Parts 1 and 2 of Article 219 of the Criminal Code. The person's intent is directed towards temporarily obtaining a loan with the intention of subsequently repaying the funds borrowed. At the same time, it should be particularly emphasized that the purpose of not repaying the loan, which arose before its receipt, must be categorically excluded. If a person obtains a loan with the intention of appropriating it, their actions must be classified as fraud under Article 190 of the Criminal Code.
If a person used an official document forged by that person to unlawfully obtain a loan, the act committed should be classified cumulatively under Part 1 of Article 385 of the Criminal Code (or Article 369 of the Criminal Code) and the relevant part of Article 219 of the Criminal Code.
If an individual entrepreneur or an organization obtains a loan or preferential lending terms by providing a bank or another creditor with knowingly false information about their business position, financial condition or pledged property, and this does not result in major damage, liability arises under Part 1 of Article 233 of the Code of Administrative Offenses. The use of a budget loan for an unintended purpose, if this act does not cause major damage to an individual, organization or the State, entails liability under Part 2 of Article 233 of the Code of Administrative Offenses.
The acts provided for in Parts 1 and 2 of Article 219 of the Criminal Code are classified as minor crimes.
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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