Billions of dollars have been stolen from Ukrainians through various abuses of the banking system over the past decade, and many of the crooks remain unpunished, according to a Feb. 4 press release by the Deposit Guarantee Fund of Ukraine.
Citing one example, the fund, the state body responsible for overseeing the operation and liquidation of banks in Ukraine and refunding depositors, said Hr 2.3 billion, or $82 million, was smuggled out of Khreshchatyk Bank prior to the bank’s bankruptcy in 2016, with the money being transferred to shell companies.
Altogether, nearly Hr 7 billion, or $245 million, were lost due to Khreshchatyk Bank’s poor management and allegedly corrupt schemes. An audit showed that over Hr 2.3 billion was invested in shell companies a few months prior to the introduction of temporary management. The public relations officer at the fund said other details of the report could not be revealed due to there being an ongoing investigation into the fraud.
According to the report, the bank purchased shares in fake companies that had little or no real value. The fund said many of the companies were registered at the same address, had zero assets and only a few employees.
Despite the fact that on paper the value of corporate loans exceeds Hr 4 billion ($142 million), according to the audit, the real value of loans was much lower, estimated only at Hr 834 million ($30 million).
In January, the fund stated that over Hr 2.5 billion ($89 million) were lost due to actions by the supervisory board and the owners of the bank that “were not aimed at making a profit or increasing financial stability, but had signs of being risky, and aimed at siphoning off financial assets from the bank,” the report reads.
Twenty-five percent of Bank Kreshchatyk was owned by the Kyiv City State Administration, which meant that the city lost significant funds due to the bank’s bankruptcy.
The fund paid out Hr 2.8 billion ($100 million) to the bank’s depositors, but it was able to recover only under Hr 1 billion ($35 million) from selling off the bank’s assets and property. The fund is financed by the state — taxpayers’ money — and by the sale of assets of banks that have been liquidated.
The fund was unable to provide the names of those involved in scheme, citing the ongoing investigation.
Since 2014, 90 banks have declared bankruptcy in Ukraine. Among them are Finance and Credit Bank, Kreshchatyk Bank, and Platinum Bank. The largest Ukrainian bank, PrivatBank, was nationalized to prevent the institution’s from collapsing. The fund has since 2014 paid about Hr 90 billion ($3.2 billion) to creditors and depositors of bankrupt banks. The number of banks in Ukraine dropped from 180 in 2014 to 82 in 2018.
On Oct. 11, during a fund briefing, Kateryna Rozhkova, the deputy chairman of the National Bank of Ukraine, said that Ukraine will see a further reduction of the number of its banks.
“We see 15-18 banks whose business models we consider unviable,” said Rozhkova.
Currently, only deposits under Hr 200,000 ($7,140) are guaranteed by the fund in case a particular bank goes out of business, which puts off potential depositors. Ukraine’s association agreement with the European Union, which came into force in 2017, obliges Ukraine to comply with a European directive under which deposits worth up to 100,000 euros (Hr 3 million) are guaranteed by the state.
Only a handful of bank executives have been prosecuted for corruption. The latest scandal broke on Oct. 23, when the National Anti-Corruption Bureau of Ukraine detained 10 people allegedly involved in a $20 million embezzlement case involving state-owned savings bank Oschadbank and the family of lawmaker Stanislav Berezkin of the 19-member Volya Narodu parliament faction.
However, on Nov. 20 parliament failed to lift the lawmaker’s immunity from prosecution, with only 160 members of parliament voting in favor, and 226 votes needed for a motion to be approved.
