Michele Sciurba - Implementation of State Anti-Corruption and Anti-Money Laundering Policy in the EU Member States

One of the integral components of national plans to fight government corruption is measures to prevent and combat money laundering, which is a serious problem at all levels of public administration, the economy and social life. The monograph provides a model for improving structures of public administration of agencies responsible for unshadowing financial flows in Ukraine. This model optimizes the processes of state agencies and public authorities, updates the state financial services unit, improves the service of local government agencies, and contributes to self-government and responsiveness of public officials (“public service”). The model implements a new anti-corruption policy within the context of the development of the Ukraine’s political system and optimizes the work of special management agencies in combating corruption.

The research for this monograph is part of the postgraduate program at the Interregional Academy of Personnel Management in Kyiv to obtain the Degree of Doctor of Sciences in Public Administration. This academic work is based on Ukrainian academic standards, including the structure and citation format.

Michele Sciurba

10 January 2018

The systematic diversion of profits from illegal activities from the shadow to the real economy through tax evasion, corruption or bribery inevitably results in a loss of investment income and a reputational loss for the economies concerned. Corruption robs local communities and resident populations of valuable human and natural resources. The resulting loss of confidence can lead to political destabilization of entire regions. In some cases, it can lead to government collapse or regime change or even to a failed state. One recent example of how the political backlash against corruption can lead to a change in government is the 2014 Maidan protests in Ukraine. The “Revolution of Dignity” forced former President Viktor Fedorovych Yanukovych to flee the country and contributed to a political reorientation by Ukraine leading to the signing of the Association Agreement between Ukraine and the EU. On the other hand, it led Russia, concerned with the loss of influence, to invade and annex Crimea in violation of international law.

The first cooperation agreement between Ukraine and the EU was concluded in 1994 and entered into force in 1998. Its core elements were the Ukraine’s increasing reproachment with the EU in the area of trade based on the principles of the General Agreement on Tariffs and Trade (GATT) of the World Trade Organization (WTO) and the passage of Ukrainian legislation on environmental protection and economic development. The Ukrainian President’s decree of June 1998 defined the Ukrainian integration strategy with the EU. A large number of necessary reforms in the social, political, financial, economic and educational fields were initiated thereafter until 2007. In 2005, the EU-Ukraine Action Plan aimed to democratize Ukrainian institutions and to implement effective anti-corruption and structural economic reforms within various sectors of the economy. This Action Plan has significantly expanded the cooperation between the EU and Ukraine at all levels and in 2007 led to an agreement which allowed for visa facilitation for Ukrainian nationals entering the EU. In addition, the Ukraine and the EU signed an agreement to jointly fight illegal immigration and organized crime. At the Paris Summit in 2008, Ukraine and the EU reached a political agreement that was the basis for the Association Agreement with the EU.

On 19 December 2011, negotiations on the Association Agreement with Ukraine were completed at the EU-Ukraine Summit in Kyiv and the Agreement was subsequently presented in March 2012. The Yanukovych Administration, however, interrupted this process of EU reproachment by suspending the signing of the association procedure. This was followed by protest, and ultimately the “Revolution of Dignity”, which led not only to Yanukovych’s expulsion, but sparked concerns by the Russian Federation that the Ukraine was receding from its sphere of influence. Consequently, Russia instigated anti-Ukrainian propaganda in Eastern Ukraine and Crimea, ultimately leading to Russia’s military intrusion into Ukraine and the illegal annexation of Crimea. Despite Russia’s massive interference, President Poroshenko signed the Association Agreement with the EU in 2014.

The Association Agreement has significantly increased the pressure on the Ukraine government to implement more transparency and anti-corruption measures. The EU established the European Union Advisory Mission, thereby providing broad support to the Ukraine for the reform of the civil and security sector based on the implementation of international and EU standards of good governance and human rights. In addition, the EU funded a project to help reform Ukraine’s judicial sector. This monograph offers a new approach to implementing an anti-corruption strategy in Ukraine and suggests how the fight against corruption within government can be streamlined using modern methods and a risk-based approach. Drawing on the experience of EU countries through a comparative analysis of the rules and procedures for structuring public administration policy, this work proposes developing recommendations to strengthen the Ukrainian AML and corruption policy. Corruption remains a widespread problem at various levels within Ukrainian public administration and it has significantly weakened public confidence in government and in the judicial system.

Corruption, money laundering and organized crime is a serious problem for the Ukraine. The Council on Prevention and Counteraction to Legalization (Laundering) of the Proceeds from Crime, Terrorism Financing and the Financing of Proliferation of Weapons of Mass Destruction (AML/CFT Council) led by the Financial Intelligence Unit (FIU) is in charge of coordinating and regulating all government agencies responsible for AML/CTF measures. An important function of the National Anti-Corruption Bureau of Ukraine (NABU) is the prevention of corruption and the investigation of corruption charges against high-ranking officials. In addition, a number of other investigative agencies and ministries are involved in the fight against money laundering and corruption. Ukraine has comprehensive AML/CTF legislation in place, including the Code of Criminal Procedure of Ukraine, the Code of Administrative Procedure of Ukraine, the Criminal Code, the Criminal Procedure Code, the Code of Ukraine on Administrative Offenses, the Civil Code of Ukraine, the Law of Ukraine “On Banking and Banking Activities”, the Law of Ukraine “On Insurance”, the Law of Ukraine “On State Regulation of the Securities Market in Ukraine”, the Law of Ukraine “On Financial Service and State Regulation of Financial Services Market” and other financial sector laws.

The Ukraine has implemented AML and anti-corruption measures under the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval) monitoring mechanism. In addition, Moneyval has been an associate member of the FATF since 2006. The National Bank of Ukraine (NBU) practices risk-based banking supervision and has made significant progress in creating transparency regarding the beneficial ownership of banks. In recent years, Ukraine has consistently removed criminal owners from the banking sector and established an efficient sanction regime in response to breaches of legal obligations, including the withdrawal of banking licenses. The establishment of a unified state register for beneficial ownership allows authorities to identify banking clients. In terms of mutual legal assistance on money laundering and corruption, the Ukraine has also made significant progress. In 2015, the NBU and the Ukrainain FIU – the State Financial Monitoring Service of Ukraine (SFMS) – as well as other supervisory authorities created an operating and training center, now led by the FIU, to better understand potential money laundering and terrorist financing risks.