Berezhny on Reconnaissance
The long discussions and struggle among various forces and government agencies for the right to manage so-called financial intelligence are over. As announced on May 13, President Leonid Kuchma has appointed former Deputy State Secretary for the Foreign Ministry Oleksiy Berezhny Finance Ministry state secretary and chief of the State Financial Monitoring Department.
The long-awaited and rather unexpected decision could be explained by Ukraine’s desire to be taken off the blacklist of the FATF, the international organization to combat money laundering. Apart from Ukraine, the list includes Russia, Israel, the Philippines, Egypt, Lebanon, Nauru, and the Cook Islands. Under present circumstances, diplomatic experience is even more desirable than, say, professional skills in fighting money laundering, especially in view of the visit to Kyiv this month by a group of FATF experts. According to Tax Police Chief Viktor Zhvaliuk, the aim of their inspection is to probe for the possibility of getting Ukraine off the list of countries conductive to currency machinations. Ukraine could be removed from the list as early as June, if it takes active steps to cope with this problem, primarily by adopting the required legislation.
The State Financial Monitoring Department functions within the Finance Ministry and is subordinated to it. The department’s main task is participation in implementing state policy to counteract the legalization of illicit income as well as the collection, processing, and analysis of information about financial transactions involving money laundering.
Assuming his post, Berezhny did not observe the traditional diplomatic silence. He stated at once that his department would be able to function effectively only with the immediate adoption of the law On the Prevention of the Legalization of Illegal Incomes. “Otherwise we will work in a recommendation regime,” he told Interfax-Ukraine. He said that the law was being drafted and expressed hope that the Cabinet of Ministers would soon approve and submit it to Verkhovna Rada as a bill that must be adopted. According to the State Secretary, the bill defines “the relations among all the government bodies which monitor commercial banks and other enterprises, introduces the term state financial monitoring and defines the status of the institution that will conduct it.” Berezhny also stressed that his department would use primarily information furnished by commercial banks. “Without legislatively established procedures of provision and processing of such information,” Ukraine’s chief financial investigator said, “we’ll have big problems, since the active legislation provides for bank confidentiality.”
But it will not be easy for the new law to make its way through the parliament. The week before last People’s Deputy Yuliya Tymoshenko announced the creation of Against Arbitrariness, a national people’s committee protect citizens against “the terror of the authorities.” The Committee states that “the STA has unleashed an unprecedented war against the nation’s business and turned into a real butcher of entrepreneurs.” The STA press service denies this accusation noting that “the number of tax verifications has reduced almost threefold since 1998 and that audits of small businesses have been practically discontinued.” According to the STA, statements by the people’s committee aim to confuse the people. It warns that when the law aimed against dirty money laundering is debated in Verkhovna Rada, similar steps might be made by former accomplices of former Premier Pavlo Lazarenko who is in US detention indicted of laundering millions of dollars. As a result, the exclusion of Ukraine from the FATF blacklist could be problematic, in spite of all efforts including the new appointments.
