The European Union, Switzerland, Liechtenstein and the United States imposed personal sanctions on Yanukovych and his associates, which allowed their assets abroad to be frozen. As a result, this gave Ukrainian law enforcement agencies time to prepare grounds for their seizure.
However, the government shouldn’t expect to recover even a penny of stolen assets from abroad if Ukraine doesn’t properly do its homework: effectively investigate the origin of illicit funds, prosecute financial crimes and obtain confiscation orders in courts.
Importantly, not all of Yanukovych’s funds are kept abroad. There is also the need to ensure the on-time identification, seizure and confiscation of ill-gotten funds kept within the country.
In order to identify legislative loopholes and barriers towards effective national asset recovery, President Petro Poroshenko in March established the Inter-Agency Task Force, which includes representatives of key governmental and law enforcement agencies involved in the process.
The group has been consulting with leading national experts and practitioners, including investigators and prosecutors. They analyzed the current situation in Ukraine and best international practices and came up with a concept of a separate National Agency on Tracing and Managing Proceeds of Corruption and Other Crimes.
On Aug. 19, the Cabinet of Ministers of Ukraine approved the draft law which, if passed in parliament, will establish the above-mentioned agency. The bill is based on European Union standards.
The agency, while not replacing thework of law enforcement offices of Ukraine, will help investigators and prosecutors to timely trace ill-gotten assets and manage already seized and confiscated proceeds of crime.
Asset tracing
Effective investigation of white collar, financial and economic crimes depends a lot on early tracing and identification of suspicious assets. Currently, due to ineffective regulation, it may take weeks for an investigator or prosecutor to find the assets and link them to a person during criminal investigations.
An investigator has to make dozens of formal paper requests to different state agencies and wait at least a month for responses. It is expected that the agency will have access to key state registries and databases (e.g. the registry of business entities, registry of vehicles, and registry of real estate) and have analytical software performing quick simultaneous searches of information.
Thus, an investigator sends a single request to the agency and receives a report (which may be presented as evidence in court) in 2-3 days, or even hours. The data in the possession of the agency will be protected from any leakage and third-party access.
Another important function of the national agency is cooperation with similar asset recovery offices abroad.
Direct contacts between agencies will assist so-called “asset intelligence” that will help timely trace illicit assets all over the world and give Ukrainian law enforcers informal access to the information known to their foreign colleagues. This will enhance the quality and speed of criminal investigations involving several jurisdictions. In turn, the agency will receive requests from foreign asset recovery offices and will conduct quick searches of foreign suspicious assets in Ukraine.
Asset management
In January-July, Ukraine managed to officially recover the very modest amount of Hr 7,865, or less than $400, in proceeds from corruption crimes.
One reason for this this is that there is no system for managing seized and confiscated assets in Ukraine. In practice, the seized property is either of low value or it is not kept until the end of prosecution.
The general rule in Ukraine is that the burden of securing seized assets is on the accused party or third parties, which are of course not really interested in securing and preserving property that might be confiscated. A court can decide to retrieve assets from an accused person, but this would in turn make investigator/prosecutor responsible for storing them. Therefore, investigators are not very motivated to be responsible for seized assets, as at the end they will face problems securing them.
Finally, in certain occasions it is possible for the state to sell seized assets before the confiscation order, but the procedure is very vague and bears many corruption risks. Thanks to the broad media coverage, the general public knows about the sad destiny of the so-called “Kurchenko’s oil products,” which were first seized and then went unaccounted for long period of time, before finally being sold at a low price and under non-transparent conditions.
The agency will address all of the problems diagnosed above. It will maintain a national consolidated registry of seized assets and will manage them professionally. In Ukraine, which has five investigative agencies (the Interior Ministry, Prosecutor General’s Office, Security Service, State Fiscal Service, and the National Anti-Corruption Bureau) and will also have the State Bureau of Investigation in the future, no one can account for who seizes what, and what the value of the seized criminal assets actually is.
The agency will have the right to sell certain seized assets if the owner or court gives consent.
For example, seized cars, which usually depreciate significantly in value with time, and which require resources for storing, are to be sold soon after seizure. The proceeds of sale will go to a special deposit account of the agency and will earn interest, which in turn will go straight to the state budget.
Should the court decide to confiscate the asset, the state will immediately receive all the funds from the deposit, but if the defendant wins – they get their money back. Of course, a professional and non-biased market assessment of the value of seized assets and a transparent market procedure of its sale are crucial to guarantee the rights of both the defendant and the state. Thus, guarantees for the agency’s independence have become a cross-cutting issue in the draft law.
Guarantees of independence
The head of the agency will be selected transparently by a selection commission composed of eight people, three of them appointed by parliament, and five – respectively by the National Anti-Corruption Bureau director, the general prosecutor, the Ministry of Justice, the Ministry of Finance, and the Financial Intelligence Unit.
The professional staff of the agency will have competitive salaries and will be also hired through an open competition. The agency will have to provide regular comprehensive reports about its work performance. It will be audited annually by an international auditor and will have civic oversight.
Why one more agency?
First of all, the agency aims to coordinate and assist the work of all other state and law enforcement agencies in Ukraine towards effective asset recovery. Strong safeguards and guarantees of its independence will generate trust with well-intentioned investigators and prosecutors, both in Ukraine and abroad.
The body will not conduct criminal investigations, but will serve all other law enforcement agencies who are willing to properly and effectively investigate and prosecute complicated crimes involving big assets.
Secondly, the agency will be small (not more than 100 employees together with territorial units) and self-funding, thus almost not requiring any taxpayers’ money.
Quite to the contrary, the agency will ensure that the state receives a decent return from proceeds of recovered assets. A special budget fund will get 25 percent of all assets recovered by the agency, which in turn will be spent on the work of agency on asset management, and used for the needs of criminal justice of Ukraine (including payment for protecting whistleblowers). There will be a threshold established for the estimated value of assets that go under control of the agency (tens of thousands of U.S. dollars). This will help to avoid an overflow of non-valuable assets that are usually confiscated by Ukrainian courts (like old bicycles, useless vehicles, mobile phones, etc.) and allow investigators to focus on cases where serious assets are involved.
Finally, while the agency will not free law enforcement agencies of their job of carrying out a proper investigation and prosecution, it will significantly ease their work.
The draft law will make asset recovery simple and clear, which will hopefully lead to an exponential increase in the value of the proceeds of crime that are repatriated to the state.
Jointly with a comprehensive reform of the prosecution service of Ukraine and the launch of the National Anti-Corruption Bureau, the creation of the National Agency on Tracing and Managing Proceeds of Corruption and Other Crimes should ensure Ukraine does indeed do its homework on asset recovery both properly and professionally.
Vitaliy Kasko is a deputy prosecutor general and head of the Interagency Task Force on Asset Recovery.
