Some 16 months after the launch of Ukraine’s signature anti-corruption initiative, the electronic system of asset declarations has become an exercise in futility.
Effective verification of the declarations was never introduced. The agency responsible for verifying the declarations has been accused of falsifying its results. The operation of the system itself is in jeopardy.
The failure to ensure the proper verification of declarations and the independence of the National Agency for Preventing Corruption is also a breach of Ukraine’s international obligations.
The European Union has held up 600 million euros in financial assistance and Ukraine could lose its visa-free travel regime with the European Union if it does not follow the reform path.
The failure to deliver results in the fight against corruption is not a consequence of ill-conceived legislation or time-related constraints. With the attacks on the newly created anti-corruption law enforcement agencies and resistance to the creation of the anti-corruption court in Ukraine becoming more blatant, the international community has finally started to acknowledge that strong vested interests are deliberately sabotaging the fight against corruption.
This sabotage includes the e-declaration system.
In fact, the functioning of the system and the verification of e-declarations have been undermined since thier launch. Moreover, the sabotage has been carried out according to a plan involving the Presidential Administration, members of parliament (mainly from the ruling coalition factions, the Petro Poroshenko Bloc and the People’s Front), the Prosecutor General’s Office, the National Agency for Preventing Corruption and the State Service for Special Communication and Information Protection.
The National Agency for Preventing Corruption and the State Service for Special Communication and Information Protection are legally accountable to the Cabinet of Ministers, but are heavily influenced by the Presidential Administration.
The initial plan had the following stages: the government launched e-declarations, but immediately took it under control to block any possible results and effects; It then reported the successful launch of the system in order to get a visa-free regime and financial assistance from the EU and the International Monetary Fund; one that came it started discrediting the system, while announcing the creation of a new one (that will take years and most probably will never be created).
Below are facts and documents that show that the proper functioning of the asset declaration system has been sabotaged since its very launch.
Moreover, the proper verification of e-declarations could have been launched more than a year ago, but it has not been launched due to this sabotage.
The software of the e-declaration system was changed before the launch. When the initial launch of the e-declaration system was derailed 18 months ago, the system was improved by agencies controlled by the State Service for Special Communication and Information Protection.
But the service actually derailed its launch and participated in a sham hacker attack on it. President Petro Poroshenko ordered the service to improve the software. “The software was changed drastically,” the president said. Nobody has ever assessed what was changed, but the modifications caused a number of problems in operation of the system immediately after its launch.
The changes made to the system made it unable to perform its functions. Almost immediately after the launch of the system, problems with filling out, submitting and publishing e-declarations were reported. Some functions and forms appeared not to match the requirements of the law. A number of changes were so obvious that some even assumed that the system was completely different from the one had been initially developed with the support of international donors. Moreover, some of the changes could only have been made if there had been unauthorized interference. However, both the National Agency for Preventing Corruption and the State Service for Special Communication and Information Protection denied having access to the system, so this issue was addressed by the Parliamentary Committee on Preventing Corruption. Based on official documents, a working group of members of the committee discovered that the changes had been made by agencies controlled by the State Service for Special Communication and Information Protection.
The NAPC has refused to accept the modules for automatic verification of e-declarations, but never developed ones of its own. These parts of the software were developed in 2016, but were never accepted by the NAPC. First, the NACP refused to accept the modules almost immediately after the launch of the system. A second attempt was made a year later, in 2017 — the NAPC announced the start of the testing of automatic verification modules, but later claimed that they could not be launched because they were not in line with the demands of the State Service for Special Communication and Information Protection.
The e-declaration system is run by an entity that was involved in a fake hacker attack on the e-declaration system. The state enterprise is called Ukrainian Special Systems, and is controlled by the State Service for Special Communication and Information Protection. An internal audit of the NAPC has concluded that the falsification happened with a fake key issued by Ukrainian Special Systems, and the National Police opened a criminal investigation into the incident. However, this did not stop the NAPC from making Ukrainian Special Systems the administrator of the e-declaration system. Ukrainian Special Systems imposed severe restrictions on access to the e-declaration system, even for the staff of the NACP, so that only Ukrainian Special Systems could access the system and potentially make unauthorized changes.
Soon after the launch of e-declarations, Ukrainian Special Systems claimed that no automatic verification of e-declarations could be introduced with the existing system, and effectively suggested creating a new one. In 2016, Ukrainian Special Systems drafted a document that calculates two cost options for the new system: a cheaper option of $8.4 million and a more expensive option of $12.7 million. At the same time, the authors of the document devote only five out of its 112 pages to an analysis of the existing system, where they claim that the existing software and hardware does not meet the requirements and doesn’t allow the introduction of additional functions, including automated verification. Notably, not a single test that would normally be required to make conclusions like this appears in the text.
The campaign to discredit e-declarations started immediately after the visa free regime was granted by the EU. On May 17, the documents were signed in Strasbourg, and on May 24 the Prosecutor General’s Office claimed that the United Nations Development Program had never held any tenders to develop the system, and that it had been developed by students from Kyiv Polytechnic Institute. On May 30, the Prosecutor General’s Office claimed that developers of the system had falsified agreements for the development of the e-declaration system and transferred money intended for the e-declaration system to a foreign company to evade taxes.
In such circumstances, we called for an independent assessment of the e-declaration system to be made. But this has been blocked by the State Service for Special Communication and Information Protection. In July 2017, Prime Minister Volodymyr Groysman instructed the communications service and the NACP to assess the system with the involvement of independent experts. However, the State Service for Special Communication and Information Protection refused to give access to the system to independent experts. Instead the NACP announced a series of tenders for an audit of the system, but under terms that exclude the participation of independent companies.
Between November 2017 and February 2018 the NACP announced four tenders in a row with discriminatory requirements for participants. An analysis of the terms of these tenders shows that these could be won only by a company either controlled or influenced by the State Service for Special Communication and Information Protection. Moreover, the service likely announced one tender after another on purpose, in order to apply a clause allowing it to arbitrarily choose an auditor if nobody applies for two tenders in a row. With these requirements, the auditor could only be, again, a company either controlled or influenced by the service. Essentially the service would be auditing itself.
Now, with the EU having required Ukraine to ensure the effective verification system of asset declarations under the Visa Suspension Mechanism and setting it as a condition for 1 billion euros of macro-financial assistance, the political elites may again attempt to circumvent the EU by putting forward an argument for the creation of the new e-declaration system. They also might launch something that would be presented as automated verification, but that would never lead to the effective verification of e-declarations.
Either will result in the further hampering of the work of the e-declaration system as an anti-corruption tool and fighting corruption in general.
The solution is, first, to ensure the independence of assessing the e-declaration system. If this were made a condition for the disbursal of next tranche of the MFA, it would neutralize arguments about the quality of the system and allow automated verification to be launched. Second, the NACP should be “re-booted” through the selection of new leadership via a new procedure that would ensure its independence and accountability. The new leadership should be able to do the rest, i.e. get rid of the special services as administrators of the system, change the regulations for verification and ensure its efficient verification — if, of course, its independence is ensured. A relevant draft law was submitted to parliament almost a year ago, but has never made it to the session hall.
The conditions on macro-financial assistance to Ukraine and the visa-free regime once made the anti-corruption reform happen. Now, they can preserve and strengthen what has been done until the new elites are strong enough to stamp out endemic graft once and for all.
Oleksandra Drik is head of the Declarations Under Control civil watchdog.
