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Systemic Anti-Corruption Changes or the New Monster: How to Stop the Illegal Cash-Flows ofPoliticians and Public Servants?

Friday, 26 September 2014 540
Politicians and bureaucrats at the highest positions often arethe mere servants for theshady cashflows of billions of hryvnias. Time and againthey seek to control these flowsor create the new ones. The anti-corruption reforms are supposed to block the shady flows and dismantle the rent-based political system rather than create the new anti-corruption monster. Unfortunately, none of the existing legislative meets this condition adequately.

The newspaper ‘DzerkaloTyzhnya”, issue 34 as of September 26, 2014, has published an article by IvanSikora "Systemic Anti-Corruption Changes or the New Monster: How to Stop the Illegal Cash-Flows ofPoliticians and Public Servants?".

The hardest thing is to start with yourself

Thereview of politicians’ income statements demonstrates the incredible job of the lawyers and the ineffectiveness of the current anti-corruption policy.

The politicians keep forgetting a simple truth: the effective corruption combat requires public confidence. Demonstrating dry income declarations and deliberately flying abroad in economy class is not enough. It is much more important to publicly explain where their cousins, brothers and fellows got the property, where did the offshore companies appear from, and how they‘accidentally’ became rich during their previous term in office. These should be explained to the press, but also proven in court.

Why are the family fortunes of many prominent public officials much larger (often exceeding in times) than their declared revenues? For example, during the last term in office, the familyincome of the Deputy Prime Minister Yuriy Boykohas increased several times. Oleksander Yefremov, the leader of the Party of Regions, has declared an income of half the revenue of his family. Who has benefited from the Yefremov’sdecisions? The enormouscash flows maintained by Boyko and Yefremov (and many others) have become a common knowledge. The income declarations a scertain the quality oflawyers’ joband do answer the questions of the voters. Who has benefited from the MP’sdecisions? What benefits did society get?

The size of an ‘army’of the involved actors, which are not directly relatedto the public officials, yet can easily benefit from the budget allocation and property, is growingstill. It does not matter what journalists and civil society activists have to say or publish. No matter whatthe newly created anti-corruption bodies reveal. The real progress is impossible without declaring an income of related parties, opening the registers of real estate and land cadastre, and ensuring the fair courts and prosecutors. As we say,"the dogs bark, but the caravan of shadow cash-flows moveson".

The government-suggested changes to the basic anti-corruption legislation preserve the concept of ‘related parties’, which enables the officials to hide the final beneficiaries. The same reasoning implies,namely the secrecy of information on related parties and property and landregisters.

The objectivity of the new anti-corruption agencies remains questioned without radical reform and lustration of judicial and prosecutorial systems. In addition, they act under the fierce political struggle with no effective tools for public monitoring of corrupt officials and related parties.

Finally, the anti-corruption reform is not intended to eliminate some oligarchs in the interests of the others through the redistribution of property and financial flows. It should create a favorable business climate and ensure any investor the stability of property rights and the legal protection. Another goal is providing the declared citizens’ rights to participate in public and community lifeand perform the public control. Yet, this control is very limited.

Despitethe general public gets more tools, these are not enough for radical changes.

What do we havesix months after the ‘Revolution of Dignity’?

To fight corruption one must lead it. This famous saying is not new for the Ukrainian establishment.

The political elite still regards the fight against corruption as an instrument of political reprisals. Thus, the representative of a political party chairing the law enforcement authority creates a variety of dividends.

For example, according to the current draft anti-corruption legislation KlyuevJunior is not a related person to Klyuev Senior. However, thefacts of the Klyuev’s ownership of partsMezhyhirya [former President Yanikovych’s residence- translators’ note] and monopolization of the ‘green’ energy market became a common knowledge. Under given conditions they can only be considered a related party if one proves it. It’s not an easy task, since the‘incorruptible’ Ukrainian courts and the Antimonopoly Committee will deal with this case for ages. Add the practice of corruption ‘case disorganization’ during the enforcement investigation. It seems that justice to corrupt officials is possible only if they fall into disgrace of the more powerful ‘wolves’.

What recipes do political parties offerto overcome this‘cancer’? They are plenty, andone can also expect such promises forautumnearly parliamentary elections.

In 2012 ‘Batkivshchyna’ promised the "anti-corruption lustration of officials, starting with judges, prosecutors and investigators" and "creation of the National Anti-Corruption Bureau, which will break the backbone of corruption in the government, especially in law enforcement." ‘Svoboda’ which formed the basis of the Yatsenyuk’s government along with ‘Batkivshchyna’, has promised to hold the lustration and "introduce the principle ‘the higher the public office, the higher the responsibility for the crime’in the criminal law".

Fulfilling the campaign promises, however, is much more difficult than declaring them. Here, the former opposition forces use the trick of the‘predecessors’and fight corruption for partisan political and business goals.

Over seven post-Yanukovychmonths four draft laws were introduced to establish a new independent body with enforcement powers. One draft law was developed before the ‘Revolution of Dignity’. Two projects, 3042 and 4573-1, were rejected in spring. Three draft laws, 4780 on the establishment of the National Bureau of Anti-Corruption Investigation (UDAR), 4780-1 of the State Service for Combating Corruption (‘Batkivshchyna’) and 5085 "On the System of Specially Authorized Subjects in Combating Corruption" (initiated by the President and based on previous UDAR project) –were failed by the MPs on September 16th (all three draft laws faced problems with the registration in VerkhovnaRada). However, the anti-corruption fight is not over. The creation of the Anti-Corruption Bureau and revising the fight against corruption were requiredby the IMF. Ukrainiangovernment can barely make it without the support of this institution.

All mentioned initiatives are reforming the corruption fight among the senior officials. There is also a new governmental anti-corruption strategy and the draft law on the establishment of the preventive anti-corruption body. These are to be addressed in another article.

Despite the importance of basic the anti-corruption policies (related persons, conflict of interest, access to property information, etc.), the major political players aim to create a body to combat the high-level corruption.

In the current parliament, the former opposition trio (‘Batkivshchyna’, UDAR and ‘Svoboda’) have the opportunity to carry out the anti-corruption reforms. However, the much-demanded political initiatives face strong political ambitions as to "who will control the new anti-corruption law enforcement agency."

The mentioned five ‘failed’draft lawswere focused on a separate independent body with enforcement powers. Their goal was to identify and investigate the criminal corruption offenses committed by senior officials.

The officials of 1-2 or 1-3 categories (in different draft laws) are the usual subjects to investigation. In particular, these are ministers, MPs, judges, the Prosecutor General, military senior officers and directors of large state enterprises.

The senior officials in the National Security Council, the government and the presidential administration fight over the leadership in the high-level corruption fight. Each draft law provides for a different procedure for appointment of such a leading body. According to the ‘Batkivshchyna’ proposal, the newly created body should be subordinated to the National Security Council (the corresponding document was registered in the parliament at a time when the National Security Council was led by AndriyParuby, ‘Batkivshchyna’ representative, but given the new political configuration and resignation of Parubiy the faction isunlikely toinsist on this proposal).

Two other draft laws (the one initiated by the President and 4780) were presented by the head of the Anti-Corruption Committee of the Parliament Viktor Chumak. In fact, they are very similar. The fundamental difference between them concerns theleader of an anti-corruption agency–be it the President or the Prime Minister.

Aside of the content of the draft laws, the prevention of the emergence of the new tool for political inquisition and political reprisals against competitors is crucial. It is important to change the lifestyle of the political elite and start the real decomposition of the rent-based political system, rather than paying continuous lip service to the anti-corruption fight. Among other things, this implies the willingness of politicians to be opened to the public and transparent to the voters.

Restore the justice with eyes closed

The impartiality of the independent law enforcement agency and its close interaction with preventive body to be created under the new law "On Corruption Prevention" are necessary to avoid the discrediting anti-corruption efforts.In other words, the mutual control and prevention of the transformation of the anti-corruption fightinto the mechanism for political killings and double standards in assessing the evidence of corruption are necessary. Providing the public with the effective monitoring toolsover politicians and bureaucrats is even more important for confidence in these state efforts. Extending the concept of ‘related parties’ allows better identification of the conflict of interest. Transparency and publicity of the real estate registers and land cadastre improves public monitoring capabilities. The radical reform of the judiciary helpsrestoration of justice. The international donors, supporting the community initiatives in Ukraine, do so to create a monitoring system of checks and balances within the anti-corruption policy. In theory this was supposed to be implemented by all kinds of Ukrainian charity funds, supported by Ukrainian business, but there arein factnone of these.

Obviously, changing the principles of the political elite should become the main objective. This is not only about declaring transparency, openness and accountability, but also their implementation in daily activities. It's easy and difficult at the same time. If you work honestly, you have nothing to hide. At the same time the rent-based oligarchic political system necessarily involves the shadow incomes and their concealment, and the conflict of interests, all subject to administrative or criminal liability. The following things are fundamental for the success of the anti-corruption policy.

Firstly, expand of the concept of ‘related parties’ and ensure better identification of the conflict of interests.

The identification of the private interest of public official is problematic without expanding the notion of related parties. So far, the private interest ends with people living with the official and their incomes as adequately specified in his/her declaration.

Today, the officials frequentlystate that they live on the high income of the family (wife and children). What can one say about a situation whenthe private benefit from the official’s decision is obtained by close people who do not live with him/her? It can be brother, cousin, fellow or the offshore company.

No formal conflict of interests is present here. Yet, people who are close to public officials get illegally enriched. Afterwards, the very same ‘unallied’ people can provide the official the car for private use, cover the expensive education for his/her children, make a charitable contribution to the indicated foundation, etc. The options are many, and these are legal. Extended concept of ‘related parties’ and commitment to declare a conflict of interests on the part of the civil servant will prevent the numerous corruption risks. In the end, it will force the public officials to play with the formal and legally enforceable rules.

Secondly, reform the justice, criminal justice agencies and prosecutors.

Given virtually zero trust in judges, prosecutors and police because of their dependence on corruptrent-based cash flows, one may forget of a successful fight against corruption. It is impossible to do even with the perfect legislation. In case the courts and prosecutors will work as usual, the newly created independent law enforcement agency sooner or later will also seek for rent-payment to ‘close the case’ or turn into the punishmentinstitution for the political opponents. Moreover, the ‘presidential’ draft law provides for the removal of the head of the anti-corruption law enforcement agency from the office by the court. No matter how uncompromising the person intended to position is, the ‘fair Ukrainian Themis’ will do its work and persuade any anti-corruption agency head ‘to face the reality’.

Given the chance, it is worth mentioning the uncompromised Ukrainian court and the decision to prevent the disclosure of MP sin come statements’ copies despite the publication of these was expressly provided by law. Kyiv District Administrative Court ruled that Verkhovna Rada apparatus has the right not to provide the copies of income statements of parliamentarians, as the documents contain edconfidential information (personal data that can be provided only with the consent of MPs). Significantly enough, the head of the Parliament Oleksander Turchynov has recently instructed the staff to disclose all MP income declarations, which had violated the court's decision. What about the rule of law? Did judges bare responsibility for breaking the law? Did Turchynov violate the law?

Thirdly, publicizethe real estate registers and land cadastre.

Making the documents on property rights public, along with the expanded definition of related parties and published income declarations, is the key step towards combating corruption.

The draft law 4728 was introduced by a group of MPs led by Viktor Chumakon April 16, 2014, and aimed at amending some laws of Ukraine to expand the access to information on property rights for the purpose of prevention and protection of property rights. Yet, it has not been included in the agenda. Earlier, a similar proposal was registered (3378 as of October 8, 2013), which was also failed by the Parliament (on March 25,2014). 175 MP sonly have voted ‘aye’, 106 registered MPs did not vote at all, and no one voted ‘nay’. Although Oksana Kaletnik(the Communist party)and SerhiyTihipko(the Party of Regions) were in the team of authors, they were absent in the hall and, accordingly, did not vote. Eitherthe political elite will manage to smother its own voice and take the real steps to open the information about the land and property remains to be seen.


Despite the variety of anti-corruption policy proposals, one maynotice fragmentation, delay and sometimes blocking of the reforms. Each political party has its own game. Obviously, it is easier to make reforms to please the international donors. Itis much harder tounderstand of the finalneed for destruction the rent-based political system with total corruption. Otherwise, no lessons of the ‘Revolution of Dignity’ will be realized in Ukraine. Moreover, the successful work of (planned) anti-corruption prevention and law enforcement agencies, taken their mutual supervision and public control, will more likely show the real results of ‘drying’ the shadow financial cash-flows.

The article is based on the results of monitoring the legislative activity of the parliamentary political parties, performed by the Open Society Foundation experts ( and funded by the National Endowment for Democracy, USA (NED).

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