NEW DOOR TO FRAUD
The goal was to make Ukraine more friendly for investors by reducing red tape. But reforms that loosened the rules for registering ownership of assets have left companies prey to fraudsters who can swipe entire businesses at a pen stroke. The new laws, which took effect in December, give thousands of private notaries new powers to record changes of ownership of assets at registries around the country.
According to the government, on at least 250 occasions so far, fraudsters have taken advantage of the changes to seize control of shopping malls, building sites or other businesses, sometimes emptying bank accounts before they are discovered.
The fraud outbreak shows how steps taken by Ukraine’s pro-Western government to open the country up to investment can instead backfire, providing more opportunities for criminals.
The government says it is planning new legislation to tackle the problem, but those changes are months away, and meanwhile the authorities have few tools to stop the thefts.
Something was wrong when an accountant for Ukrainian real estate developer Stolitsa Group tried to log on to the company’s online filing system one Monday in July. The login credentials didn’t work. But that turned out to be just the first hint of a much bigger problem. The company, it transpired, was no longer the owner of a $50 million subsidiary running one of its main projects. A few days earlier, someone had walked into a registrar’s office in Baryshivka, a village of about 10,000 people, 74 km outside the capital.
The man presented forged documents, and re-registered the title to the subsidiary. According the register, the new owner was now a 21-yearold living in territory controlled by separatists in eastern Ukraine, who had bought one of the highest-profile real estate projects in Ukraine for $400. Stolitsa says the whole transaction was fake.
“It happened out of the blue and we rushed to Baryshivka to that registry office,” Valentyna Radionova, a senior manager at Stolitsa, said.
Stolitsa, which has built hotels, shopping malls and office buildings across Kiev, was eventually able to recover control of its subsidiary, and the case is now the subject of a criminal investigation.
Managers agreed to discuss the fraud on condition that the project that was targeted not be identified, to avoid undermining confidence in it.
The government says it responded as quickly as possible, helping Stolitsa recover its property.