From Panama Papers to Cash Piles: Corruption in Ukraine

Ukraine has released a new set of anti-corruption regulations, which require even the most senior public officials to register their finances in a publicly available online database by 30 October. This includes more than 50,000 officials who would be investigated, and potentially prosecuted if they do not release and justify their financials to the anti-corruption authorities and the public. This includes positions such as ‘government ministers, lawmakers, judges, prosecutors and tax officers.’ Notably, 500 judges resigned rather than adhere to the mandatory anti-corruption regulations. The database was put in place as part of larger measures due to concerns over the level of corruption throughout Ukraine’s government. The Economy Ministry has estimated that 60 per cent of Ukraine’s economy is ‘in the shadows.’

Ukrainian Prime Minister Volodymyr Groysman has declared a large mansion, sizeable plots of land, an art collection, which ‘includes paintings by impressionists and surrealists, luxury watches, Mercedes-Benz and Jaguar cars and jewellery.’ In addition he declared ‘$27 million USD in banks and 800,000 hryvnia ($31,300) in cash.’ Other luxurious findings included diamonds, furs, expensive cars, Swiss watches, and acres of land in addition to large cash reserves. Goysman’s Facebook status claimed that the money was from his ‘property and my corporate rights…along with income from my wife’s business.’ He was amongst the last officials to ‘to file his declaration late Sunday.’ More obscure entries include bottles of wine worth $10,000 USD and an ‘antique copy of Russian novel Anna Karenina worth at least $5,500.’ Even Oleh Lyashko, who politically projects himself as one of the people, stated he had around $1 million USD in notes in his home. Calculations by Reuters of the declared goods show that ‘the 24 members of the Ukrainian cabinet together have nearly $7 million, just in cash’ alone. The Prime Minister claimed that giving this information to the public was like jumping from a plane. This is particularly shocking as an average Ukrainian earns merely $200 USD monthly.

Elena Penkova

Image courtesy of Elena Penkova, © 2015, some rights reserved.

Many believe that this database was created to foster Western support for Ukraine, both in stimulus packages and against Russia. A tweet from the UK Ambassador to Kiev, Judith Gough calling the anti-corruption campaign an ‘important step’ against corruption. Further, US Vice President Biden stated ‘If the people resign themselves to exploitation and corruption for fear of losing whatever little they have left, that would be the death knell for Ukrainian democracy.’ While this may have been intended to drive Ukrainian will, it also spells concern for Ukraine, which needs support from the United States. Many states have vested interests in Ukraine with the IMF approving an additional $1 billion USD in stimulus. The IMF is responsible for providing an essential $17.5 billion USD bailout for Ukraine.

It is important to remember that Ukraine’s President Poroshenko, previously known as the ‘Chocolate King,’ was involved in the Panama Papers scandal earlier this year. It was subsequently discussed if his government would impeach him. Throughout his 2014 campaign, he promised to liquidate his assets from his businesses in the chocolate industry. Instead, it appears they were transferred to be part of the Roshen Confectionary Group. Consequently, a Ukrainian bank that Poroshenko owns a significant portion of sent a letter of recommendation to Mossack Fonseca saying that his accounts had been ‘conducted properly up to our satisfaction’ in October 2014. In a Facebook post responding to the allegations, Poroshenko claimed ‘I believe I might be the first top office official in Ukraine who treats declaring of assets, paying taxes and conflict of interest issues profoundly and seriously, in full compliance with the Ukrainian and international private law.’ Poroshenko’s rating of public approval has plummeted from 55 per cent following his election to 6.4 per cent this year.

There is concern that Viktor Yanukovych, the former President of Ukraine, fostered this corruption and included individuals who support Russia in the on-going conflict. Further, the heaps of cash stockpiled by high-ranking public officials demonstrate a loss of faith in and general apprehension of the Ukrainian economy. Distrust of the economy seems to be widespread, with officials claiming broad-brush statements such as ‘Of course to EU countries it seems uncivilized that people hold cash… But it is linked to the fact that the banking system could, let’s say, be doing better. This is a problem for many Ukrainians who lost their savings in the bank.’

The online declaration system has not been without fault. Officials have complained of being unable to login, access previous entries, or data being lost. The Prime Minister claimed ‘we tried to log into the system until half two at night, but without success.’ The head of The Anti-Corruption Action Centre in Kiev, Vitaliy Shabunin, has expressed concern over ‘potential loopholes for some property holdings.’

Ukraine has established fresh anti-corruption government establishments, like the National Anti-Corruption Bureau, due to renewed political incentive from the West. Some of these establishments are preventative, including The National Agency on Corruption Prevention. Further, legislation for an anti-corruption court, as constitutionally mandated, will be evaluated by the Ukrainian Parliament in the next few weeks. According to the constitutional amendments, an anti-corruption court should have also been established. The Prosecutor General also combats corruption in addition to the Security Service of Ukraine.

Ukraine is ranked 130/168 countries on Transparency International’s Corruption Index. This is more corrupt than India, China, and Russia. Now that the declarations have been collected, they will be evaluated, but it is not known how soon the 100,000 forms will be verified.

Ukraine’s citizens have been devastated to learn of their government’s corruption. It has been widely assumed that corrupt government officials existed, but very few suspected the level of wealth that would be uncovered.