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« Brazil, Corruption, and the 2016 Olympics: Help Eight Law Students Find Answers. | Main | Three steps to better compliance in 2015 »
Thursday
Jan222015

Ukraine: New anti-corruption law aims to clean up “the garbage" 

Interpol red notice on former Ukraine President Viktor YanukovychAs the world focuses attention on the conflict in Ukraine, it focuses on corruption in Ukraine. In the words of Vice President Biden, Ukraine must “fight the cancer of corruption.” It appears that the government is now moving in this direction.

On January 25, a law creating a new anti-corruption bureau will enter into force. The Bureau will be empowered to investigate misconduct by high-level public officials “empowered to perform state or local government functions,” a category which includes the President, members of parliament, members of the Cabinet of Ministers and local governors among others. While Ukraine has seen its share of ineffective anti-corruption agencies, this one may be different.  

First, the law contains several provisions designed to ensure independence and transparency. One such provision relates to the selection of the Bureau’s Director. Pursuant to the law, the President, Parliament and Cabinet of Ministers have each selected three members of a nine member commission that will, in turn, select candidates for the Director position. The makeup of the Commission is encouraging – it includes distinguished human rights activists, journalists and academics, as well as an ad hoc judge at the European Court of Human Rights and an Italian prosecutor who is currently the Director-General of the Anti-Fraud Office at the European Commission.

The Commission will now select three candidates, and the President will choose one as Director. To ensure the Director’s political independence, candidates who have worked for, or had any contractual relations with, any political party during the previous two years, are ineligible. The Director will serve a seven year term without the possibility of extension and can be removed by the President only on certain grounds specified in the law, such as failure to submit an income declaration, or by a no-confidence vote of the Parliament.    

In order to further ensure transparency, the law provides that the Bureau’s work will be overseen by a special parliamentary committee responsible for combatting corruption and requires the Bureau to publish semi-annual reports on its work in open sources. It also establishes a “Council of Public Control” which will consist of 15 people selected on an open, competitive basis. In order to avoid conflicts of interest, public employees, relatives of past/present Bureau members and former members who left the Bureau within the previous two years may not serve as Council members. In order to prevent corruption, the law also provides for monitoring the lifestyles of Bureau members to ensure that their declared expenditures correspond to their declared incomes. Potential violations will be addressed by a special disciplinary commission, which will includes representatives of the Council.  

Second, the Bureau will have broad powers and resources, similar to those of a law enforcement agency. These include the power to:

  • initiate and conduct investigations
  • make arrests, pursuant to a court order
  • identify and freeze assets pursuant to a court order
  • obtain documents and information from other government agencies, including information regarding individuals’ assets, income and expenditures
  • obtain, pursuant to a court order, data from financial institutions regarding individuals’ bank accounts, deposits and money transfers
  • work with whistleblowers to obtain information from them about corruption, and
  • cooperate with foreign law-enforcement authorities and international organizations.

It will also have exclusive authority to investigate certain offenses, including receipt of improper benefits, “unjust enrichment” and abuse of position by certain specified high level pubic officials. It also appears that the Bureau will be well staffed, with as many as 700 employees spread throughout the entire country and prosecutors seconded from the General Prosecutor’s Office.

Third, the government is clearly committed. President Poroshenko recently said that all high-ranking government officials should be considered “potential clients” of the Bureau and added that he is in favor of “carrying garbage out of the house” (i.e. the Ukrainian language equivalent of “airing dirty laundry in public”)  because “it’s difficult to live in a house with garbage.” At the same time, Porosehnko’s government disseminated Interpol red notices for several members of the previous government suspected of corruption, including former President Viktor Yanukovych and his son, Alexander. According to Ukraine’s Minister of Internal Affairs, Interpol closely evaluated the Ukrainian applications and agreed to issue the red notices only after it was convinced that they were issued in good faith and not for political reasons. 

Of course, only time will tell whether Poroshenko’s government can  effectively combat corruption. But the new anti-corruption bureau appears to be a step in the right direction.

________

Thomas Firestone is a partner in the Washington, D.C. office of Baker & McKenzie. His practice focuses on international white collar criminal defense and compliance, with a special focus on Eastern Europe and the former Soviet Union. He previously spent 14 years at the U.S. Department of Justice, first as an Assistant U.S. Attorney in the Eastern District of New York and then as Resident Legal Adviser and Acting Chief of the Law Enforcement Section at the U.S. Embassy in Moscow.

Yuliya Kuchma is an associate in Baker & McKenzie’s corporate and investigations practice in Washington, D.C., focusing on business crimes and investigations. She also represents companies before the Department of Justice and the Securities and Exchange Commission in connection with possible enforcement actions. Prior to joining the Washington office, she worked in Baker & McKenzie's office in Kyiv, Ukraine.