How to Remove Ukraine from Black List
The State Tax Administration of Ukraine is preparing for a meeting with FATF international experts who are to visit Ukraine in April or May. According to head of the tax police Viktor ZHVALIUK, during the course of this visit tax servicemen will press for removing Ukraine from the blacklist of countries not supporting the fight against money laundering. In Mr. Zhvaliuk’s opinion, measures currently taken by Ukraine to prevent legalizing criminal money can by no means be considered inadequate. “Is any country doing it better?” Mr. Zhvaliuk asked rhetorically. In the first quarter of 2002 alone, tax militia stopped the activity of 46 converting centers and revealed 1,300 fictitious commercial structures, bringing the budget almost 7 million hryvnias. From the beginning of this year, 276 criminal cases have been brought on money laundering, resulting in revealing legalized money and property totaling over 90 million hryvnias.
Mr. Zhvaliuk believes lack of a law on fighting the legalization of criminal money the only problem in this sphere. Therefore tax men pin hopes on the new Verkhovna Rada convocation, which is to pass such a law. According to Zhvaliuk, a significant role in fighting money laundering was played by Clause 209 of the Criminal Code envisioning criminal liability for this crime. Mr. Zhvaliuk also opined that there should be legal responsibility for financial control organs’ officials for not meeting requirements regarding identifying persons conducting financial operations or any refusal to present such information to law enforcement structures. The tax service also intends to initiate introducing a regulation into the Criminal Code specifying the amount of dirty money entailing criminal liability. It is hard to say whether these initiatives will find support from deputies. Certainly the tax service is well aware of the specter of interests forming in the new Verkhovna Rada. However, when asked by The Day whether the number of deputies of interest to the tax militia has increased, Mr. Zhvaliuk had no comment.
On April 4 commercial banks handed over lists of accounts of those of their clients whom they view as dubious. Banks based their opinion on the documents submitted by clients to open account because bogus companies typically are registered using lost documents or papers of deceased persons. What the NBU will do with this information remains to be seen. Still, it is unlikely that commercial banks have submitted complete information to the state because bankers often act as accomplices in shady transactions.
Meanwhile, the National Bank has patched up a popular loophole for funneling money abroad, pre- paid travelers’ payment cards primarily, with the major victim being the widely advertised Visa Travel Money cards. Now the maximum amount which can be placed on this card and taken out of Ukraine equals $5,000. This NBU resolution came into effect on April 8.
In line with NBU instructions all Ukrainian banks must submit information on combating crime in the banking sector in the first quarter, primarily in the area of money laundering. Banks have been requested to draw up lists of clients who regularly transfer large sums of money abroad, namely, banking transactions involving over 50,000 euros and over 10,000 euro cash transfers.
Along with the police, the State Tax Administration is also involved in the campaign to combat shadow capital. The statistics are very impressive: in the first quarter the STA exposed 1.300 bogus entities, seizing about UAH 7 million from their accounts. In the same period 299 attempts to launder money via banks have been thwarted, with 276 criminal suits filed for illegal money laundering. As a result, the STA pinpointed over UAH 90 million in previously laundered money and assets. The Slovyansky, Andriyivsky, and Corral Banks are faced with accusations of wrongdoing involving money laundering.
Director of the STA Main Investigation Department Sviatoslav Piskun said his service will step up checks of dubious financial transactions in April. He is confident that by May Ukraine will submit to FATF its detailed action plan to curb money laundering. According to him, at its London forum FATF singled out Ukraine as a most likely candidate to be dropped from its blacklist.
Ukraine should strive for a clean record especially since in the current fight against terrorism the countries blacklisted by FATF are among the potential suspects. In a related move, the EU recommended its banks to sever ties with countries whose legislation has been found ineffective in curbing money laundering. Earlier, the United States also adopted similar guidelines. If the antiterrorism campaign picks up steam, Western experts predict financial isolation for countries on the FATF black list.
Premier Anatoly Kinakh had earlier announced plans to submit for new Verkhovna Rada approval draft laws tightening up control over dubious transactions. Most likely, the government will do this in late April. The government might also make an effort to push through legislation to give muscle to the Financial Intelligence Department set up by President Kuchma within the Finance Ministry. Due to wrangling among government agencies and lack of cooperation from banks, it is so far a structure that is not carrying out its functions.
It remains to be seen, however, whether Verkhovna Rada will join in the efforts to crack down on money laundering as the information on dubious transactions gathered by banks could become a formidable political weapon. We know only too well that large scale political campaigns cannot be implemented without financial assistance from offshore or domestic bogus companies. According to tax inspectors, about a quarter of all dubious transactions are in the fuel and energy sector widely represented in parliament. All this makes it possible to assume that a radical acceleration of efforts by oversight agencies to curb money laundering will receive little legislative support. Therefore, the present high-profile campaign, even if it lets Ukraine off the FATF hook, might produce only short-term results.
