Ukraine faces numerous very serious issues at present – ensuring domestic stability and security is key. Understandably, punishing the excesses of the Yanukovych regime and asset recovery, whilst very important, may not be an immediate priority for Ukraine at the present time, or an agenda item to which sufficient resources can be devoted. Whilst Ukraine focuses its efforts on defusing numerous internal crises, it is incumbent on other countries, particularly those that may host stolen assets siphoned from Ukraine, to proactively assist with and even instigate asset recovery initiatives.
The UK and the US, amongst other countries, appear to have learned lessons from the past when assisting post-revolutionary countries. On 29 and 30 April 2014 the UK hosted a high level international meeting, jointly coordinated with the US, to support the Government of Ukraine in recovering corrupt assets unlawfully acquired by regime members of former President Yanukovych (“the UFAR meeting”). The two-day meeting was arranged to bring together senior representatives of key international financial centres and international organisations to reinforce collective action, encourage direct exchange between agencies and to strategise a plan to ensure that Ukraine recovers its stolen assets.
The key objectives of the summit were to:
- reaffirm the political commitment of the international community in tracing and recovering stolen assets;
- facilitate international cooperation for the early tracing of such assets;
- enable sharing of best practices, lessons learned and available tools;
- address ways of tracing assets hidden behind complex corporate structures;
- facilitate networking and trust-building among practitioners across jurisdictions; and
- identify specific capacity building needs for Ukraine.
The British Home Secretary and the US Attorney-General were ad idem in emphasising that the UK and US were committed to providing leadership and assistance to Ukraine in identifying and recovering assets looted under the Yanukovych regime. These words had already been reinforced by action with the UK and US sending asset recovery expert teams on the ground in Kyiv to assess the needs of Ukraine’s investigators and prosecutors, to provide assistance with document review and preservation, and to assist with coordinating efforts required by any further investigations.
The opening day of the UFAR meeting was also met with very welcome news from the UK’s Serious Fraud Office - it has opened a criminal investigation into possible money laundering arising from suspicions of corruption in Ukraine, with $23m of assets already subject to restraint in the UK using the Proceeds of Crime Act in connection to the case. This development matches the efforts of other countries such as the US which has targeted individuals connected to the Yanukovych regime, and Switzerland which has opened a standalone money laundering investigation in relation to the former President’s close associates. Of course other assets connected to former Yanukovych regime members have been restrained pursuant to US and EU-wide sanctions, however, it must be remembered that these assets are simply frozen and criminal proceedings will need to be successfully brought to ever recover them demonstrating that they are the proceeds of crime.
It is clear that certain lessons have been learned by the UK and others, as a result of the difficulties of the Arab Spring asset recovery initiatives. The UFAR meeting was an important step in ensuring that Ukraine is provided with the best platform from which to launch its own asset recovery programme. The UK and the US should be applauded for bringing together international participants that will be needed for Ukraine to have any chance of success in returning stolen assets back to its people. It appears the two day meeting did achieve some key deliverables:
- the advancement of investigations bilaterally and multilaterally;
- recognition of the important role played by pre-MLA international cooperation through asset recovery practitioner networks. Contacts between police agencies, prosecutorial offices and Financial Intelligence Units were recognised as being valuable;
- the publication of Asset Recovery Guides, in Ukrainian, by many States to support an increased understanding of their asset recovery tools;
- consensus towards a proactive approach to asset recovery even before mutual legal assistance is requested;
- several countries vowed to review their legal frameworks to benefit from best practices in other jurisdictions and to ensure they can act diligently, effectively and efficiently in asset recovery;
- commitments were made by G-7 countries and other jurisdictions to take steps to require that companies obtain and hold information on their true beneficial owners and ensure that this information is available in a timely fashion to law enforcement;
- participants reaffirmed that key topics for technical assistance should include asset recovery strategies, domestic coordination, complex financial investigations assistance, asset tracing, asset freezing and confiscation, requesting international assistance, asset recovery and seized and confiscated asset management, and other topics identified by Ukraine.
At the UFAR meeting the UK Government issued some important language in accepting that: “Corrupt officials and their cronies who launder their proceeds abroad not only violate the public trust of the community they serve but undermine the integrity of the financial systems outside their nations”. It is right that foreign corruption is not something we should ignore, particularly where the fruits are laundered in or through the UK; it has a pernicious effect on our own society – corroding justice, good governance and even applying a straightjacket to domestic and foreign policy.
The UK asserts as part of its commitment to asset recovery that it has reinvigorated its fight against serious and organised crime, which includes corruption:
- the National Crime Agency launched in October 2013 has coordinated law enforcement’s response to the events in Ukraine, bringing together partners to provide support to the Ukrainian authorities, investigate cases and build the intelligence picture.
- the Home Office has published a Serious Organised Crime Strategy which includes measures to crack down on those who facilitate serious and organised criminals in using, hiding and moving the proceeds of crime.
- The Home Office intends to bring forward legislative measures on asset seizure.
There was a general consensus and understanding by all attendees at the UFAR meeting that asset recovery is difficult, complex and pain-staking work – cases can take years (sometimes decades) to reach a successful conclusion which must include repatriation. Obstacles will be encountered legally, politically and diplomatically, including the fact that certain assets will be located in, very likely, non-cooperative jurisdictions such as Russia (a fact that has been emphasised by the Acting Prosecutor General Makhnitsky). Existing and new mechanisms, both criminal and civil, will need to be explored to ensure that assets are returned to the people of Ukraine at the earliest opportunity whilst ensuring the rule of law is respected:
- new mechanisms may need to be introduced in Ukraine including non-conviction based asset forfeiture, and to ensure they are compatible with other jurisdictions;
- any stealth laws enacted in Ukraine under Yanukovych’s regime that may have served to economically favour close associates may need to be reviewed in order to unravel the industry of ‘legalised corruption’ - how to then find the hook based on Ukrainian law to recover corrupt proceeds will be complex;
- public procurement contracts and sales of state assets will need to be scrutinised to ascertain whether they were properly and lawfully awarded, and a decision taken as to whether they should be unwound and assets recovered;
- state entities will need to be audited to uncover whether looting has taken place;
- foreign jurisdictions hosting the suspected proceeds of corruption will need to find links between the assets and criminal conduct which will inevitably require bilateral and multilateral support, and find ways to freeze them quickly;
- not only will corrupt assets need to be identified, but the investigative net must be cast wider to uncover the close associates, intermediaries, financial institutions and professional service firms who will have assisted in laundering those assets on behalf of the corrupt.
Ukraine represents a real opportunity for a country that has been the victim of endemic corruption to make meaningful recoveries of its stolen assets. Ukraine’s political will to push forward both domestic and foreign asset recovery initiatives will be central to a successful programme – but that will require a number of issues and hurdles to be addressed including ensuring stability through a democratically elected Government, building capacity and capability within its law enforcement and removing destablising elements, introducing new proceeds of crime legislation, and ensuring the citizens of Ukraine are informed, to the extent possible, about progress and obstacles to ensure continued public support and engagement from the people. These are not easy feats. The biggest hurdle for Ukraine will of course be finding a solution to the major crisis in the east of the country - that will understandably be a priority for Government and law enforcement in the immediate future. What Ukraine hopefully can count on in the meantime is that certain Governments, such as the US and UK, will provide tangible and proactive support, and will learn lessons from the past to guide Ukraine. This asset recovery initiative has a real shot at success provided the strategic and holistic approach established at the UFAR meeting is continued with vigour, and, of course, Ukraine hopefully finds some stability and peace.
The German philosopher Georg Hegel once pronounced:
“What experience and history teaches us is that people and governments have never learned anything from history, or acted on principles deduced from it.”
Perhaps Ukraine represents a genuine opportunity to prove him wrong.