EU must give aid to Ukraine in its battle against corruption
THE VIEW FROM UKRAINE ANDRIY LAVRYK
FORMER Soviet mafia adore tax havens. They are keen on “offshore zones” in the whole of the European Union – but they are especially drawn to British ones. Corrupt officials, business people and politicians in Ukraine use offshore companies to conceal their ownership of assets.
Their wealth – often created through not entirely legal means – is constantly under threat of seizure.
But they can make it harder for authorities to freeze their assets by hiding their ultimate beneficial ownership through a complex web of corporations in, for example, a British offshore jurisdiction.
In Ukraine there was (and probably still is) a tried-and-tested system for skimming from government international contracts using tax haven intermediaries or consultants.
Usually the services of such middlemen consist of nothing more than a signature from a front man. However, such firms receive between 10 and 20 per cent of the value of the deal. In the courts it is very hard to prove that there were no real services provided and that some bureaucrat simply stole the money. But at the same time a government clerk responsible for the deal suddenly acquires some luxury out-of-town real estate.
So why does the Ukrainian mafia use European offshore firms?
Well, first, in many countries, such an investment comes with the right to remain in that country and the ability to move around the Schengen zone. Our corrupt officials love the high life in Monaco, loud parties in Ibiza and, above all, London.
Second, European offshore companies escape tough financial monitoring, because our state watchdogs do not suspect anything dodgy when they encounter a little-known firm with an office in London or Edinburgh.
In fact, regulators in Ukraine will only twig what has happened after money has been stolen and evapo- rated into complex offshore schemes. Right now it is impossible to calculate exactly how much money has been funnelled out of Ukraine using offshore structures registered in the EU or Commonwealth, but it is probably billions.
Basically, this is money stolen from the people of Ukraine and which could have been spent on infrastructure, education, science and health. In the final analysis, people can die because of this.
Moreover, criminal capital undoubtedly seeks to corrupt officials in the EU. This has already happened in, for example, Spain.
But there is also another side to the coin of why EU “tax havens” are booming.
Thanks to rife corruption throughout the post-Soviet space – where property rights are not always respected – legal businesses do not always feel their assets are safe.
So they try to find some shelter for their property in those places where there is rule of law, such as European offshore zones.
And we should not forget that offshore firms are used by legal Western capital to invest in Ukraine.
So I do not think Europeans should close down their offshore zones.
But they must tighten controls on the companies that work in them. They should demand that such firms show who their ultimate owners are. They should carefully monitor their business.
But Ukrainian corruption is ultimately our problem, not that of the EU or Scotland. So we have to fix it ourselves. And that is what we are doing. Despite stiff opposition from a corrupt bureaucracy, Ukraine is carrying out anti-corruption reforms. And not just because this will please the European Union, which we aspire to join.
Simply the country, effectively at war with a nuclear power, cannot afford to let its treasury be robbed.