When 100 armed agents from the Security Service of Ukraine’s economic crimes division raided YouControl’s office and seized hundreds of computer servers, Daniil Globa was surprised.
“They’re not relying on a single legal norm that concerns a ban on our equipment,” the YouControl attorney told the Kyiv Post, accusing the law enforcement agency known as the SBU, of incompetence.
YouControl publishes a searchable database of the ownership of Ukrainian companies, making the website a target for attacks by those who want the information to remain inaccessible.
Incompetence also plays itself out in other ways. Billions of dollars are spirited out of Ukraine each year into offshore havens, much of it untaxed in Ukraine. Moreover, Ukraine’s law enforcement authorities have failed to convict anybody of bank fraud despite $20 billion in losses from this sector alone in the decade. Almost $6 billion in embezzlement allegedly took place in one bank alone — PrivatBank, when it was owned by billionaire oligarchs Ihor Kolomoisky and Gennady Bogolyubov.
One solution touted is to create an elite Financial Investigations Service to take on the most complex white collar crimes.
The agency will unite the powers of the SBU’s economic crimes unit, the State Fiscal Service, Securities and Exchange Commission and Central Election Commission into one blockbuster agency.
But the attempt to create the new service has led to a power struggle over control.
Finance Minister Oleksandr Danylyuk, Interior Minister Arsen Avakov, Prime Minister Volodymyr Groysman, parliament’s tax committee chief Nina Yuzhanina and Prosecutor General Yuriy Lutsenko have all publicly expressed support for the idea. Each, however, is offering a different vision while demanding that it be subordinate to their organizations.
Competing proposals
Avakov publicly supported the idea at a February 2016 meeting of the Verkhovna Rada’s tax committee, saying “one agency should investigate financial crimes.”
Finance Ministry adviser Serhiy Kovalenko said his ministry is the natural supervisor “and already has the institutional capability for this.”
Interior Ministry spokesman Artyom Shevchenko told the Kyiv Post that it should “be formed as a separate, central organ of executive power within the National Police.” Under that proposal, the interior minister would coordinate the agency’s work, effectively bringing it under Avakov’s control.
Yuzhanina said that work is under way to draft a “law about a national bureau of financial investigations,” and that it would be presented next week.
Danylyuk, in comments to the Kyiv Post from the World Economic Forum in Davos, Switzerland, pushed back on Yuzhanina’s plan.
“Despite the fact that we already developed together with experts and representatives of the business community and international partners the government draft law on the Financial Investigation Service, we are nevertheless open to join the drafting of an alternative bill purportedly being done by the tax committee head.”
Lutsenko spokeswoman Larisa Sargan did not reply to repeated requests for comment.
Finance Ministry
Danylyuk has pushed the fastest and most aggressively for a Financial Investigations Service.
The Cabinet of Ministers approved a draft of the law created by the Finance Ministry and sent it off of the National Reform Council in October, while Danylyuk has kept a sharp focus on the issue.
Calling the country’s law enforcement outdated, the minister said that “honest business is most effective when its activity is not interrupted by people in masks and with machine guns.”
Danylyuk’s proposal envisions the elite unit as prosecuting fraud, regulating securities, monitoring election fraud and enforcing tax laws.
Kovalenko, the Finance Ministry adviser, told the Kyiv Post that “essentially, the FIS must become an indirect anti-corruption organ, as it often occurs that illegal currency conversion centers and other elements of illegal economic activities are in large quantities used by enterprises owned by high-ranking officials and politicians.”
He said that an independent commission should decide who staffs the agency, with detectives receiving Hr 34,000 ($1.175) monthly in order to cut down on the risk of bribery and attract high-quality candidates.
Danylyuk has also secured U.S. backing for his proposal. After a Jan. 15 meeting with U. S. Treasury Secretary Steve Mnuchin in Washington, D.C., the finance minister said he received a commitment to provide technical support from the Financial Crimes Enforcement Network, a U. S. Treasury body that monitors illicit cash flows. Danylyuk said “U.S. support is important.”
Dependence
Globa, the YouControl attorney, said Ukraine has too many law enforcement agencies attacking disparate problems, creating institutional chaos.
At the same time, these agencies have a poor record in solving the most serious financial crimes. Amid billions of dollars lost to theft and graft, not a single politician or oligarch has gone to jail in Ukraine.
“If you create one, two, or three separate agencies, then we’ll have more problems than solutions,” he said. “The most important things are competency, independence, and knowledge of the law.”
But keeping the agency politically independent will be a challenge, as the turf war over who controls the Financial Investigations Service shows.
“It will have to be controlled by someone,” said Dmitry Lazebnyi, an attorney with Ilyashev and Partners. “But if we want it to work democratically, then I think that it needs to be as transparent as possible. But I doubt that it will emerge without political control.”
