UKRAINE STEPS UP FIGHT AGAINST COMMERCIAL CRIME, BUT CONCERNS REMAIN
February 24th, 2025Ukrainian authorities, with the support of their European counterparts, are working to rid Ukraine of its former corrupt past – they are having mixed success. Dylan Carter reports.
While Ukraine battles an invading Russian enemy currently occupying approximately 18% of Ukrainian territory (1), it is also focused on its battle with the ‘enemy within’, namely elevated levels of corruption and other commercial crime.
Since the Revolution of Dignity in 2014, Ukraine’s pro-Western authorities have worked tirelessly to align themselves with European Union (EU) anti-corruption and anti-fraud efforts, notably establishing the National Anti-Corruption Bureau of Ukraine (NABU) in 2014, which prepares corruption cases for prosecution by a Specialised Anti-Corruption Prosecutor’s Office. It also created a State Investigation Bureau (SBI) in 2016, which investigates criminal proceedings involving law enforcement officers, judges, and high-ranking officials. And the government formed a Bureau of Economic Security (BES) in 2021, a pre-trial investigation body probing economic crime.
The efforts of Ukrainian anti-corruption and criminal services are reflected in the results of Transparency International’s Corruption Perceptions Index. In 2014, the country was ranked as one of the most corrupt in the world, with a score of 26/100; nine years later, the corruption situation in the country has improved, rising to 36/100, aligning with the scores of fellow potential EU membership candidates Bosnia & Herzegovina, Serbia and Albania, admittedly not the highest of bars.
Indeed, experts note that Ukraine’s battle against government corruption and business fraud schemes is far from complete. Wartime conditions provide Ukrainian criminals with new opportunities to exploit both state and European funds, and criminal groups still actively target overseas victims, largely thanks to insufficient policing.
Everyday graft
Oleksandr Kalitenko, legal advisor for Transparency International Ukraine, told Commercial Crime International that corruption in Ukraine can be divided into two categories: everyday graft and government-linked schemes.
Typical everyday corruption schemes include bribes for preferential service at Ukrainian administrative services, underreporting of taxes by businesses, or leveraging personal favours with government officials to defraud the state. In 2015, a survey conducted by American development agency USAID with Ukrainian respondents across the country found that more than two-thirds of people viewed corruption as a “solution” to issues, rather than as a problem. (2) Even in 2023, despite the launch of new anti-crime agencies, over 50% of Ukrainians reported that bribery was “widespread and hard to avoid” and was largely a practice of necessity. (3)
But there has been a shift in opinion, with Ukrainians less accepting of corruption than in the past: “Before the war, some people tended to justify their participation in corruption schemes and practices as a tool for solving their problems and achieving services from the state faster(…) Now we see that the perception has changed, less people see this as justified,” the TI expert noted.
Favourable attitudes towards small-scale criminal schemes are certainly now on the decline, especially in the context of Russia’s invasion. “Sociological surveys now say that corruption is the number one problem for the current state, alongside the war. People see that corruption is the internal enemy and 60% of people believe that corruption could be a big obstacle to further development as well,” he added Kalitenko added.
But while Ukrainians increasingly dislike corruption, many still practice it: “There are young people, coming from the IT business ‘new age’, who just out of principle prefer not to pay [bribes](…) But most people are hypocritical because they criticise the government but are themselves included to pay USD100 to speed something up. People quite often support corruption themselves,” Anatoly Yarovyi, senior partner at Interpol Lawyers, an extradition law specialist firm based in Cyprus and London, told Commercial Crime International.
High-profile corruption
Despite this, there has been an effort to tackle high-profile corruption cases, with arrests targeting corruption among high-profile officials and government officials. This is illustrated by the arrest last September (2023) of infamous Ukrainian oligarch Ihor Kolomoyskiy, a longtime confidant of current Ukrainian President Volodymyr Zelenskyy. (4) He is accused of forcibly taking over companies, threatening officials, buying off politicians and stalling anti-corruption reforms. His arrest indicated that there are no-longer any untouchable figures in Ukraine, especially from Ukraine’s efficient NABU authorities. Increased reports about Ukrainian corruption, Kalitenko argues, is evidence of greater legal enforcement in the top rungs of society.
“This is not because of a rise of corruption. This is an indicator that the anti-corruption infrastructure is working. We are able to fight corruption even in wartime conditions. The fight really exists, and it is continuous,” the TI expert said.
He also pointed to positive recommendations received from the European Commission and the International Monetary Fund (IMF), nuancing that while Ukraine has still “yet to finish its homework” in this regard, it has at least started the task. Ukraine’s ultimate success will rest on its complete implementation in domestic law of EU legislation ahead of its expected EU membership, noted Kalitenko.
“Ukraine is showing improvement in tackling corruption in the public sector, especially through legislative reforms and the establishment of anti-corruption institutions,” said Yarovyi. “Nonetheless, challenges remain in fully implementing these reforms in sectors where corruption is deeply entrenched.”
Some areas, both in the public and private sectors, remain problematic in the eyes of experts. Despite heightened international attention, corruption schemes pertaining to public procurement, especially in the military, continue to defraud the state. In February 2024, Ukraine’s SBU security service uncovered “mass procurement fraud” in Ukraine’s ministry of defence, (5) which Transparency International denounced as “disheartening” and “undermining the effectiveness of the armed forces.” (6)
“Specific business sectors, such as defence, energy and infrastructure, have been more prone to commercial crimes, often linked to large-scale public contracts. The war has intensified the need for reforms,” Yarovyi noted.
Criminal schemes
Despite wartime damages and a large exodus of civilians from the country, organised Ukrainian fraudsters, often with the help of foreign nationals, continue to target European businesses and citizens. Ukrainian lawyer Yarovyi said, since Russia’s invasion, there has been an uptick in forex, cryptocurrency, and call centre scams, some of which media reports have claimed are protected or ignored by regulatory and law enforcement authorities.
Criminals continue to innovate, he notes, posing “huge” risks. “Law enforcement lacks innovation and skilled employees (…) Particularly dramatic is the situation in tackling cybercrime. The Ukrainian cyber police are weak and major Ukrainian cities have become a paradise for fraud groups and organised criminal activity, including related to crypto currency,” Yarovyi warned.
EU cooperation
On the plus side, closer links with the EU have delivered anti-crime expertise and experience, illustrated by recent interactions between the European Anti-Fraud Office (OLAF) and Ukrainian anti-fraud authorities such as NABU, the State Audit Service of Ukraine, the Economic Security Bureau of Ukraine and the Specialised Anti-Corruption Prosecutor’s Office. Also, information exchanges between Ukraine and the EU in tackling crime is ongoing, especially because of an influx in EU funds to Ukraine, with the European Public Prosecutor’s Office (EPPO) signing a working arrangement with NABU in 2023 (7).
During a training event on February 20, Ville Itälä, director-general of OLAF, said that EU authorities would work with Ukraine to protect the EU’s EUR50 billion Ukraine Facility investment (8).
Transparency International Ukraine believes that such engagements must go much further than training to create “real safeguards and legislative mechanisms to prevent corruption and to facilitate law enforcement to combat corruption.” There are concerns over the political will of Ukrainian authorities to implement such reforms, however, with Yarovyi warning that without results, current exchanges could be regarded as “window-dressing”.
“In conclusion, while Ukraine is making strides in combating commercial crime and corruption, especially in the context of EU accession, there remains significant challenges,” the Ukrainian lawyer summarised. “The fight against corruption is far from over and requires continued vigilance and comprehensive reform.”
NOTES:
1.https://www.nytimes.com/interactive/2022/world/europe/ukraine-maps.html
6.https://ti-defence.org/ukraine-military-corruption-defence-procurement-fraud-investigation/
ENDS
This article first appeared in the May 2024 edition of Commercial Crime International, published monthly by Commercial Crime Services, published monthly by Commercial Crime Services, of the International Chamber of Commerce.
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