What will happen if Ukraine lacks financial intelligence
The message given by Chairman of the State Tax Administration Mykola Azarov to representatives of regional mass media who gathered in Kyiv was that no additional body for financial intelligence is needed in Ukraine because this is the turf of the tax authorities. “When they start talking about the need to have financial intelligence I smile, for it has already been created by us quite some time ago,” the STA head maintains, recommending instead making use of his structure’s accumulated experience.
Recall that the decision to set up financial intelligence in Ukraine came in the wake of President Kuchma’s proposal when the National Defense and Security Council was discussing the action plan to combat terrorism and corruption. It was then that the tax authorities laid claim to this territory insisting on their preemptive rights, but they got no support from the NDSC. Quite unruffled, the STA continued to push on, trying to reach its goal by hook or by crook, with Mr. Azarov declaring soon that work has begun (apparently, again in the depths of his organization) to create a public committee to fight corruption. The committee’s objectives were to include developing public strategies and instruments, along with launching a public campaign to stamp out official wrongdoing, the STA press service report says. According to the initiators of the committee, public oversight can enhance the effectiveness of efforts to fight corruption.
This conclusion can hardly be questioned. Still, engaging the STA and its puppet public organizations in combating corruption is viewed by some experts as yet another attempt to talk a good fight and retain current STA turf, with the agency being unwilling to let the outsiders among the public organizations control how the financial pie is cut.
Azarov’s tactics are quite transparent. The high-ranking state official cum chairman of one election bloc’s core party is locking horns with a government bent on creating its own financial intelligence. The Ukrainian government has already made a proposal to Verkhovna Rada to create financial intelligence to accumulate information on illegal cash flows and make it available to law enforcement, Interfax-Ukraine quotes Vice Premier Vasyl Rohovy as saying.
No doubt, the variety of opinions voiced on the issue will be all but productive. Thus, National Bank Governor Volodymyr Stelmakh believes that the financial intelligence should be an independent structure affiliated with the NDSC and include representatives of the STA, Finance Ministry, Economy Ministry, etc. In a related move, on November 15 Verkhovna Rada passed its first reading of the bill to combat money laundering, which envisions the creation of a financial intelligence bureau, something the head of the tax authority so adamantly opposes, disguising his real motives by ever so plausible an excuse. The bill proposes creating a National Agency For Financial Security (financial intelligence) vested with the authority to oversee financial transactions. On the proposal by the prime minister and subject to Verkhovna Rada approval, its director would be appointed or dismissed by the president.
In the opinion of Deputy Chairman of the Verkhovna Rada Committee For Combating Organized Crime and Corruption Viktor Korol, the bill provides for the creation of an agency to control financial flows and pick out such financial transactions that could be qualified as dubious in legal terms. He said that with all the government agencies involved in fighting corruption separately, the present uncoordinated efforts simply cannot achieve the desired result. People’s Deputy Korol expects that the amendments made in the bill during its second reading will make the proposed oversight body independent, unbiased, and effective.
To sum up, two agencies are competing to father financial intelligence, the government represented by the Finance Ministry and the State Tax Administration. Since the heads of both state bodies are currently involved in the election campaign, experts are beginning to make assumptions as to whose bank accounts the would-be financial intelligence would go after first.
First Deputy Secretary of the NDSC and Chair of the Interagency Commission for Financial Security Trokhym Kovalchuk said, answering The Day’ s question on the likely consequences for Ukraine following rejection of the proposal to set up an independent financial intelligence, that Ukraine has been put by the FATF international organization on its blacklist of countries not effectively opposing the laundering of illegal capital. In Mr. Kovalchuk’s view, if Ukraine, bogged down in infighting, continues to drag its feet on creating a financial intelligence authority, it will not be accepted in FATF, which will react accordingly. As the result, Ukraine could face harsher terms in foreign trade and tougher handling by international financial organizations. According to him, similar structures (to provide financial intelligence —Ed.) exist in the world but their effectiveness hinges on their not being affiliated to any other government agency and their independent status. As his organization is a recognized corruption- free structure, the body to process financial information should be affiliated with the NDSC, Mr. Kovalchuk argues. “Since everyone in the world, we in Ukraine included, have realized that illegal financial flows are huge, we have to deal with them in a civilized way. I don’t think Ukraine will be allowed to view such common processes with skepticism,” he concluded.
