After $20 billion in unpunished theft from the country’s banking system and scores of other frauds, the chorus has grown for Ukraine to establish an elite group of financial investigators.
But legislation pushed by Nina Yuzhanina, a member of parliament with close ties to President Petro Poroshenko, doesn’t cut it, many who have analyzed her proposal say.
Some argue her plan may create an even more repressive and arbitrary law enforcement agency.
Yuzhanina heads the tax committee in parliament, is part of the president’s 135-member bloc and used to be his chief accountant at the billionaire leader’s Roshen confectionery.
Yuzhanina’s version — called the Financial Security Bureau — has run into criticism from Ukraine’s foreign backers and the local business community, who fear that broad provisions in the law and changes to the criminal code would turn it, in the words of one critic, into a “pseudo-tax police monster” aimed at shaking down businesses to finance the 2019 presidential and parliamentary election campaigns.
A group of business associations sent Yuzhanina and Rada Speaker Andriy Parubiy a letter on April 18, withholding support until key changes go through.
“What matters to us is the final text of the document,” said Business Ombudsman Algirdas Semeta.
The bureau will have the right to decide which financial crimes are investigated in Ukraine, and will also have automatic access to the credit history of all legal entities.
“Right now, we have the political will, and so we need to pass the law at its first reading,” Yuzhanina said in an interview about the bureau. “If it’s not passed now, there won’t be anything like this again.”
Get fiscal
Western backers of the Ukrainian government like the International Monetary Fund have been pushing for the creation of a specialized white-collar crime investigative service for years.
The idea is that the body would provide Ukrainian law enforcment with data and analytical expertise in investigating economic crimes.
The capability is sorely needed in Ukraine: overthrown former President Viktor Yanukovych and his associates stole as much as $40 billion from the country’s budget.
Fraud is still a common and largely unpunished crime.
Ukraine has multiple investigative agencies with separate, overlapping authorities to probe white-collar crime. These bodies, however, are often more interested in shaking down businesses over bogus allegations of wrongdoing, extorting money from the innocent while letting the real crooks get away.
These reasons led Ukraine to try to liquidate its tax police in 2016, an agency notorious for raiding companies with officers toting machine guns, wearing balaclavas, and demanding cash payments to “resolve” the investigation.
Broad powers
2018 began with a turf war over the creation of the new agency, with the Finance Ministry competing for control over the new service with others.
But the version proposed by Yuzhanina gained the lead in February after Poroshenko signaled his support, asking the Rada to immediately consider the bill.
Yuzhanina’s bill envisions a Financial Security Bureau that will have jurisdiction over the “theft of state funds,” she said.
The agency will have access to all of the data collected by the Ukrainian state, and will be responsible even for collecting biometric information such as fingerprints, DNA, and blood samples. Additional databases available to the bureau, all without a court order, include the electoral registry and the country’s database of the credit histories of all legal entities.
“All state bodies that create databases will be able to provide information that the bureau can use,” Yuzhanina said, arguing that a body responsible for preventing the theft of state funds should have access to all government data.
The bill also alters the country’s criminal procedure so that an internal committee at the bureau will decide what economic wrongdoing deserves to be officially registered as an investigation, effectively giving the agency the power to decide which financial crimes are investigated and which are not.
And according to Yuzhanina’s version, the bureau will be managed by a director appointed and fired by the president through a selection commission.
Pushback
But the draft legislation has generated intense pushback from various sectors of civil society and the business community.
“It’s a big monster that will have a mandate for everything, to collect everything,” said Zlata Simonenko, a lawyer with Solodko and Partners and member of the Reanimation Package of Reforms’ law enforcement group.
“It’s not a bad idea to centralize financial crime investigations,” said Pavel Shershnov, a Kyiv attorney. “But Ukraine is not ready for Yuzhanina’s project.”
Shershnov added that “If the bureau has automatic access to banking secrets, then it will inevitably cause pressure on business.”
The law’s articles on access to data — and biometric information — have provoked consternation from the business community as well.
“If it happens that the old staff who dealt with similar crimes for many years, and who have very specific habits jump over to this new institution, then the powers going to this institution could be misused very easily,” said Semeta.
However, Yuzhanina told the Kyiv Post that she had answered the business community’s concerns and denied that there were any further points of disagreement.
“I don’t know where you heard such a thing,” she said in response to a question about worries that the bureau would be used for shakedowns. “All the business associations, all the Ukrainian ones, all the experts that we have been working with, they have looked at all these details. None of them have made warnings like that about the bureau putting pressure on business.”
Pavel Shershnov, a Kyiv attorney. (Kostyantyn Chernichkin)
Tax police return
Another issue comes down to the investigators who will work in it.
Dmytro Lazebny, an attorney at Ilyashev and Partners who said he has a “positive impression” of the bill, cautioned that the bureau’s personnel will determine whether it becomes a stronger instrument for future shakedowns.
“If this ends up being a mass transfer of the old tax police to the newly created bureau, then it seems like we’ll be trading bad for worse,” Lazebny said.
Both of the bill’s chief drafters — Vyacheslav Nekrasov and Vadim Melnyk — used to work in the tax police, where Melynk was the chief of the agency’s investigative division.
The bureau will also have jurisdiction over the same crimes that the National Anti-Corruption Bureau of Ukraine has, allowing Prosecutor General Yury Lutsenko to transfer cases away from NABU and to the Financial Security Bureau, explained Simonenko.
“It’s a big risk for NABU that their cases will be kicked over to the bureau,” Simonenko said.
