February 23, 2016
Parliament Votes to Weaken Ukraine’s Key Anti-Corruption Law
By Josh Cohen
In October 2014, parliament passed a law mandating that Ukrainian public officials file an electronic declaration disclosing all of their financial assets, including their ownership of shares in Ukrainian companies and properties. This law—commonly called the e-declarations law—allows authorities to identify corrupt officials by looking for discrepancies between their known income and their actual assets. The law requires the identification of assets directly held by officials, as well as those held by family members, making it much more difficult for officials to hide ill-gotten gains under the names of relatives. Critically, the law also makes public officials criminally liable for filing false information.
Unfortunately, a new bill passed by parliament on February 16, bill 3755, significantly waters down the disclosure requirements of the original law. Dmytro Kotlyar, lead anti-corruption expert for the civic group Reanimation Project of Reforms (RPR), explained that bill 3755 contains the following provisions designed to allow corrupt officials to continue pillaging the state budget:
- It delays public officials’ criminal liability for submitting false information in their electronic declarations until 2017.
- It removes from the financial disclosure’s scope parents and children not residing with the declarant. This permits corrupt officials to transfer their illegal assets to close family members without fear of exposure.
- The bill limits disclosure of valuable movable property such as cars, jewelry, and expensive gifts to those items acquired after the launch of the new e-declarations. This will allow officials to claim they obtained declared property before the new filing requirement begins.
- It significantly increases the threshold over which any assets must be declared, from UAH 66,000 to UAH 197,000 (approximately $2,447 to $7,305). This will make it easier for corrupt officials to launder ill-gotten gains by making a series of smaller transactions which fall under the UAH 197,000 threshold. Prosecutors in the United States call this technique “structuring” or “layering,” a technique many will likely employ.
“Taken together, the clauses in 3755 effectively destroy any possibility to hold public officials criminally liable. This undermines the entire purpose of the original e-declaration law and makes it practically useless,” said Kotylar.
While the substance of bill 3755 would devastate reformers’ anti-corruption strategy, the procedure by which the bill passed parliament is also troubling. First, the bill was introduced in oral form only, and the vote was rushed through parliament without any public discussion or debate. According to RPR, the bill was introduced by Andriy Denysenko, an MP from President Petro Poroshenko’s own bloc. Moreover, adds Kotlyar, “Bill 3755 was actually prepared the night before the vote in the President's administration itself. This means that these changes were endorsed at the highest level.” For a president elected on an avowedly reformist agenda, this is very disturbing.
While the bill’s proponents stated that international partners and NGOs agreed with the bill's amendments, the head of the European Union's delegation to Ukraine condemned the draft law the next day.
Iegor Soboliev, who heads the anti-corruption committee in parliament, also emphasized the procedural irregularities used to pass the bill. “This law was written and read out in parliament, bypassing all legal procedures, and I only found out about it fifteen minutes before it was read out,” said Soboliev in a February 18 interview.
Soboliev—who described the law as “a step backwards for Ukrainian anti-corruption legislation”—echoed Kotylar’s assertion that the bill originated with Poroshenko’s circle, noting that “as far as I noticed, this law was inspired by two key allies of the President.”
While anti-corruption reformers are understandably disheartened by the passage of 3755, Poroshenko has not yet signed it. It is now time for Ukraine’s Western partners to weigh in. Kyiv remains heavily dependent on financial assistance from the International Monetary Fund, the European Union, and the United States, and Poroshenko should be told in no uncertain terms that further aid to Ukraine will remain frozen until Poroshenko officially vetoes 3755.
To be clear, this type of intense pressure is exactly what Ukrainian reformers want from the West.
Ukraine's Anti-Corruption Action Center recently pleaded, "We beg [the] West to help us fight government impunity,” while adding that aid should be frozen if anti-corruption conditions are not met.
During his recent trip to Kyiv, Vice President Joe Biden reportedly demanded that Poroshenko fight corruption, noting that "patience is close to running out." To help Ukraine’s brave reformers, the West must now turn Biden’s words into action.
Josh Cohen, an ex-USAID project officer who managed economic reform projects throughout the former Soviet Union, is a business development professional. He also contributes to foreign policy-focused media outlets and tweets at @jkc_in_dc.