Yanukovich Min­ing

Kyiv Post Legal Quarterly - - Contents -

The Gen­eral Pros­e­cu­tor of Ukraine, Yuriy Lut­senko, re­cently an­nounced that next year Ukraine will re­turn an­other UAH 5 bil­lion (less than $200 mil­lion) of the state funds stolen by Vik­tor Yanukovich and his en­tourage. This per­haps seems un­am­bi­tious given that most es­ti­mates of the to­tal wealth em­bez­zled by the Yanukovich regime range from $ 30 bil­lion to $ 40 bil­lion. The fact of the mat­ter is that there is no room to be more am­bi­tious at the cur­rent time. The ma­jor­ity of this em­bez­zled wealth is no longer in Ukraine. Much of it is likely gone for good, at best prop­ping up the lo­cal econ­omy in Ros­tov- on- Don or at worst, as some sug­gest, fund­ing sep­a­ratists in Don­bass. How­ever, given the vast quan­ti­ties of funds si­phoned off­shore through sham con­tacts by the ex- pres­i­den­tial clan, it is likely that a sub­stan­tial sum of money is sit­ting in com­mon law ju­ris­dic­tions such as the UK, US, Cyprus and BVI, which have judges ex­pe­ri­enced in rec­og­niz­ing a com­plex fraud lit­tered with nom­i­nees when they see one.

To date Ukraine has not had much suc­cess find­ing and seiz­ing as­sets lo­cated out­side its bor­ders. In Septem­ber there was men­tion by Lut­senko of half a ton of Yanukovich-linked gold be­ing found in a Swiss bank. While this is wel­come news we need to look soberly at its sig­nif­i­cance: were this to be re­cov­ered it would rep­re­sent less than 1% of the es­ti­mated stolen for­tune. So why is Ukraine not able to achieve more? I will present ar­gu­ments based on the chal­lenge­able premise that there is a sin­cere de­sire to re­turn funds on the part of the coun­try’s lead­er­ship. I imag­ine a lively de­bate could be had over this premise, but I will leave that for an­other time.

Firstly, Ukrainian law en­force­ment faces one key con­straint when try­ing to trace stolen as­sets: lack of money. Trac­ing bil­lions of miss­ing dol­lars can cost tens if not hun­dreds of mil­lions of dol­lars. Se­condly, should it lo­cate as­sets out­side the coun­try it faces the chal­lenge not only of ar­rest­ing them, but of re­turn­ing them in the frame­work of in­ter­na­tional crim­i­nal pro­ce­dure. As I am sure Mr. Lut­seko is find­ing cur­rently in his pur­suit of the gold sit­ting in a vault in Switzer­land, crim­i­nal for­fei­tures of this sort are slow. This is be­cause with re­spect to crim­i­nal for­fei­ture:

• As­sets can only be re­turned in the event a sen­tence has been passed in a crim­i­nal case re­lat­ing to the owner of the as­set;

• Ev­i­den­tiary stan­dards re­quired by crim­i­nal codices in other ju­ris­dic­tions can dif­fer greatly, mak­ing co­or­di­na­tion be­tween law en­force­ment com­plex (o en as­set freezes are achieved but for­fei­ture is not – think Pavlo Lazarenko’s as­sets still trapped in the US);

• Law en­force­ment agen­cies around the world tend to be too un­der-re­sourced to cope with their own work­load let alone as­sist an­other law en­force­ment agency with a ques­tion­able rep­u­ta­tion (in the case of many de­vel­op­ing mar­kets).

For these rea­sons Ar­ti­cle 54(1)(c) of the United Na­tions Con­ven­tion against Cor­rup­tion urges coun­tries to con­sider per­mit­ting Non- Con­vic­tion Based for­fei­ture of stolen as­sets. In this man­ner for­fei­ture can be achieved against an as­set rather than against a con­victed in­di­vid­ual, mean­ing an as­set can be re­cov­ered on the ba­sis that un­law­ful con­duct was proven on a “bal­ance of prob­a­bil­i­ties” and not “be­yond rea­son­able doubt”. In this in­stance the use of nom­i­nee as­sets hold­ers and the ab­sence of vi­o­la­tors does not pre­vent civil for­fei­ture as it o en does in the case of crim­i­nal for­fei­ture.

Ukraine would ben­e­fit from leg­is­lat­ing to al­low Non- Con­vic­tion Based for­fei­ture, es­pe­cially in its mis­sion to re­turn the Yanukovich funds. How­ever, Ukrainian law en­force­ment does not have the hun­dreds of mil­lions of dol­lars, as high­lighted ear­lier, needed to achieve this even if such leg­is­la­tion is adopted. This is where Ukraine can be pi­o­neer­ing on the global stage. I will make an anal­ogy with min­ing nat­u­ral re­sources, a pur­suit that is cap­i­tal-in­ten­sive and re­quires vast and dy­namic ex­per­tise. As a re­sult, in­ter­na­tional pri­vate cap­i­tal has all but wiped sta­te­owned mines off the global map, driv­ing up ef­fi­cien­cies and ben­e­fit­ting the global econ­omy through bet­ter pric­ing and clean­li­ness. As­set trac­ing and re­cov­ery is sim­i­larly cap­i­tal in­ten­sive and ne­ces­si­tat­ing dy­namism. Ukraine should there­fore pave the way not only for Non- Con­vic­tion Based for­fei­ture, but also for the at­trac­tion of third party fund­ing of state as­set trac­ing and re­cov­ery. Only with pri­vate cap­i­tal will Ukraine be able to ef­fec­tively and cleanly mine Yanukovich gold.

James Hart Part­ner, Hill­mont Part­ners

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