17 June 2024 –
A new report authored by the Institute of Legislative Ideas finds that Ukraine has made notable progress in adopting anti-corruption legislation in recent years. However, shortcomings in enforcement and implementation in practice, especially in recent years with sporadic suspensions in legislative implementation due to the Russian war on Ukraine, presents a serious challenge to the prevention of corruption and asset recovery (UNCAC Chapters II and V). The report is intended as a contribution to the UNCAC Implementation Review Process in its second cycle, produced with technical and financial support from the UNCAC Coalition and the EU Anti-Corruption Initiative (EUACI).
Ukraine’s preventive anti-corruption legislation is largely compliant with UNCAC provisions, but those provisions are often not or only moderately implemented and enforced. The National Agency on Corruption Prevention (NACP) has sufficient independence and transparency, but faces resource shortages and external pressure from authorities, hindering its efforts. There is also a lack of regulations on whistleblower reporting channels, and ineffective whistleblower protection tools. On a positive note, public procurement in Ukraine is deemed to be open and transparent, with effective application of the e-GP, “ProZorro”, system. However, as with many other areas, the Russian invasion of Ukraine resulted in temporary backsliding to pre-war public procurement practices, diminishing these efforts.
Ukraine has comprehensive anti-money laundering and asset return legislation in place, consistent with the UNCAC requirements. However, there have been few cases of asset return, and little evidence of active international cooperation in asset recovery.
The official UNCAC review process in Ukraine began in 2019, but due to the Covid-19 pandemic, the country visit by peer reviewing countries Latvia and Paraguay has been indefinitely postponed. The self-assessment report was provided to civil society upon request, however was superficial in content and quickly became outdated. According to the NACP, the self-assessment report is currently being updated. Other competent state agencies are involved in the process. As soon as the report is ready, it will be published on the NACP’s official website and the UNCAC Implementation Monitoring Platform, which Institute of Legislative Ideas has co-created with the government.
For all the detailed findings, read the full civil society parallel report in English.
Main findings
Preventive Anti-Corruption Policies and Practices
Ukrainian legislation and implementation of anti-corruption policies is largely compliant with the UNCAC. Among the challenges are the absence of key strategic documents (the Anti-Corruption Strategy and the State Anti-Corruption Programme – SAP) since 2018, which was only addressed in 2022-2023. The implementation of the measures envisaged by the SAP is currently underway. The progress can be tracked online.
Preventative Anti-Corruption Body or Bodies
Ukraine’s preventive anti-corruption body (NACP) was “re-launched” in 2019, with an updated organizational structure and management that has enabled it to have a sufficient level of independence and transparency. Information on the NACP’s activities and numerous registers it operates are open to the public and up to date, facilitating public engagement and monitoring of anti-corruption efforts. However, the NACP suffers from staff shortages and pressure from the authorities, as well as threats posed by the Parliament and the courts to its independence. It also lacks a presence throughout the county.
Public sector
Ukraine’s national legislation concerning the public sector is consistent with the civil service standards enshrined in Article 7 of the UNCAC. However, the enforcement of legal provisions is a difficult task, due to external factors, among other things. First, due to the Covid-19 pandemic, and then due to the full-scale invasion, competitions for the positions were first not held at all, and then held under a simplified procedure. This had a negative impact on the civil service. The public service also lacks effective professional development mechanisms for civil servants.
Political Financing
Whilst Ukrainian law includes limitations on political party financing and election campaigns, financial reporting requirements, as well as state funding of political parties, legal requirements are not always complied with in practice. On a positive note, party reports are transparent, open, and accessible allowing the public to exercise effective control over party finances. Due to the Covid-19 pandemic, and now Russia’s war against Ukraine, reporting requirements for political parties were suspended but reinstated in 2023, temporarily depriving the State and the public of the ability to track political finances. Political finance regulation can be easily circumvented; and sanctions for violations are not effectively enforced and do not have a deterrent effect.
Conflict of interest and declarations of assets and interests
Ukrainian legislation on asset declarations and conflict of interest is commendable, establishing a wide range of declarants and assets to be declared, as well as sufficient ways to carry out effective control of declarations. The legislation sets forth sufficient safeguards to prevent conflicts of interest and envisages a variety of measures to eliminate them, and the full scope of declarants, the all-embracing range of assets to be declared, and the availability and openness of declarations exemplifies the well-functioning system. However, due to insufficient resources, the verification of declarations is not fully effective in practice. The NACP, which is the authority responsible for verifying declarations, identifying and resolving conflicts of interest, and in providing methodological assistance on these issues, should be commended. However, whilst the NACP conducts sufficient verification of declarations, this is only with respect to those of high-level officials. Despite the constant improvement of the legislation, there are still ways of hiding assets in declarations. After a temporary suspension of disclosure obligations, resulting in a decline in effective control over assets and possible conflicts of interest of officials, the requirements were reinstated with pressure resulting from a civil society campaign in October 2023.
Reporting Mechanisms and Whistleblower Protection
Whilst Ukraine has reporting and whistleblower protection mechanisms in place, there is a lack of legal regulation on specifications for reporting channels, and guarantees for whistleblower protection. The legislation is also not always enforced in practice. Despite the existence of a sufficient number of channels for reporting corruption, insufficient guarantees of anonymity, confidentiality and the possibility to report specific information inhibit their active use. The NACP, in charge of whistleblower protection, faces resource shortages, and due to numerous opportunities to avoid liability, the prescriptions of the NACP are not always executed. This practice, together with numerous violations of protection guarantees and occasional legal problems, are significant challenges to the effective protection of whistleblowers.
Public Procurement
Legislation and enforcement governing procurement is largely adequate: Public procurement processes in Ukraine are open and transparent, information about their conduct is known in advance and available to all stakeholders. The active application of the Prozorro e-procurement system, continuous improvement of public procurement procedures, and the effective appeals system to the Antimonopoly Committee of Ukraine, demonstrate the effectiveness of public procurement in practice. However, there are continuing attempts to exempt certain goods, works and services from the public procurement procedures to reduce the transparency of the use of budgetary funds – with occasional success. The capacity of the supervisory body, the State Audit Service of Ukraine, needs improvement, as the main supervision of adherence is currently carried out through public monitoring efforts by the media and civil society. Another challenge has been the temporary non-use of ProZorro procurement at the beginning of the Russian full-scale invasion of Ukraine and the gradual return to pre-war procurement procedures.
Access to Information and the Participation of Society
Ukrainian legislation provides for the necessary legal instruments and mechanisms for public access to information, albeit with certain restrictions, and mechanisms for contributions of the public to decision-making processes are in place. However, there are still cases of unjustified non-disclosure or restriction of access to information and decision-making processes by the state. This is especially notable at the regional level, due to a lack of understanding and commitment of authorities to the spirit of the law.
Following the full-scale Russian invasion in 2022, government agencies have restricted access to information and state registries, which has negatively affected transparency and accessibility of information. The institutional capacity of the Ombudsman, the most common mechanism for lodging access to information request appeals, also needs strengthening. The amount of information published by the state in the form of open data is inadequate for the scale of the public sector. Despite attacks, threats, and restrictions on anti-corruption activists and journalists, as well as inadequate protection by law enforcement agencies, civic activism remains high.
Judiciary and Prosecution Services
Legislation on judicial independence and anti-corruption in respect to the judiciary is mostly in compliance with Article 11 of the UNCAC. However, certain legislative provisions which grant excessive discretion to the judiciary need improvement. Compliance with the law in practice remains low and the judicial branch of power is constantly at the center of political and corruption scandals. Judges’ independence is often violated by other judges and judicial representatives themselves. For a long time, Ukraine’s High Council of Justice (HCJ), mandated to ensure the independence and integrity of the judiciary, has been publicly perceived as biased and corrupt. On a positive note, the HCJ is currently undergoing reform, and a new composition of the body has been elected to work on judicial reform. In addition, a specialized court for handling cases of corruption has been established through an open and transparent procedure involving international experts. While judges, unlike other officials, are obliged to submit three types of declarations instead of just one – asset declaration, a declaration of family ties and a declaration of integrity – these are not checked and there are no administrative or other sanctions for false declarations, except for asset declaration.
The organizational structure of the prosecutor’s office, established by law, does not ensure the independence of prosecutors, and the 2019 reform of the prosecutor’s office was ineffective at alleviating the lack of independence. Once dismissed, many prosecutors resume their positions, and in light of the definite hierarchy in the prosecution services, higher-level prosecutors have significant influence over lower-level prosecutors. Notably, the position of Prosecutor General is overly politicized due to insufficient safeguards in his or her selection and dismissal.
Private Sector Transparency
Whilst Ukraine’s legislation is consistent with Article 12 of the UNCAC, its enforcement is not always adequate. Due to the lack of an anti-corruption culture, compliance systems develop slowly and have not yet become an effective and popular mechanism for combating corruption in the activities of legal entities. The introduction of the mandatory requirement to disclose information about the ultimate beneficial owners is commendable. However, despite the introduction of an open Unified State Register containing information about all legal entities in Ukraine, the information therein is not always relevant and reliable. The Business Ombudsman Council does important work operating as a mechanism against the improper influence of the state on business, issuing comprehensive reports highlighting the problems businesses face.
Measures to Prevent Money Laundering
Ukraine’s Financial Intelligence Unit (SFMS) is functioning, and the necessary tools have been created for prompt response to detected violations related to money laundering. The legislation is up to date and was positively assessed by MONEYVAL in 2020, and the activities of the SFMS and its cooperation with internal and external stakeholders is notable. However, the inadequacy of law enforcement agencies in investigating possible violations identified by the SFMS is inconducive to systematic investigation and prosecution of identified violations.
Anti-Money Laundering
Ukrainian legislation comprehensively regulating money laundering contains specialized terminology, procedures and regulations that have been implemented, and a national financial intelligence unit has been established. There is a ban on dealing with shell banks, and the process of bringing the status of politically exposed persons (PEPs) in line with international standards is ongoing. Furthermore, the information exchange between the State Financial Monitoring Service and foreign FIUs is sufficiently established. Nonetheless, problems remain with keeping data up-to-date on ultimate beneficial owners in the national register.
Measures for Direct Recovery of Property and Confiscation Tools
Ukrainian legislation provides for the possibility of confiscation of property and assets derived from crime, and a special confiscation and non-conviction-based forfeiture (NCBF) has been introduced. The approach of recognizing and enforcing a foreign judgment and a foreign request for international legal assistance on confiscation issues is applied. However, there is no settled practice of applying special and civil confiscation mechanisms. In terms of civil forfeiture, this is largely attributed to the absence of an obligation to file electronic declarations. Whilst foreign court decisions are enforced, there are few cases of this. Ukraine also does not seek enforcement of its decisions abroad, and there is currently no practice of returning assets confiscated in Ukraine to foreign countries.
International Cooperation for the Purpose of Confiscation
International cooperation in the field of asset recovery is based on reciprocity, providing for the possibility of sending and executing requests for international legal assistance, and concluding multilateral and bilateral international agreements in this area. International cooperation is carried out through the exchange of international requests for legal assistance through authorized bodies. Ukraine’s Asset Recovery and Management Agency (ARMA) cooperates with foreign countries in asset tracing and participates in international investigations. In the course of cooperation, the parties are mainly guided by the norms of bilateral agreements.
Recommendations for Priority Actions
- Implement the provisions of the State Anti-Corruption Programme in the relevant regulatory legal acts (laws and bylaws) of Ukraine.
- Enhance the role of anti-corruption programmes in the activities of state authorities.
- Provide the necessary conditions for the formation of territorial offices of the NACP.
- Restore the procedure of full-fledged competitions for civil service positions.
- Adopt the law on the introduction of an administrative procedure to appeal the procedure or results of competitions for civil service positions.
- Eliminate legislative shortcomings that allow for bypassing the requirements for the financing of political parties, and increase the effectiveness of administrative and criminal liability for such violations.
- Increase the capacity of the NACP to conduct asset declarations verification. Apply the provisions of the legislation on the monitoring of red flags in public officials’ lifestyle.
- Expand the capacities of the whistleblower portal and involve all government agencies in its work.
- Abstain from the practice of excluding certain goods/works/services from the scope of the Law of Ukraine “On Public Procurement”.
- Enhance the capacity of regulatory authorities to inspect procurement.
- Enhance the protection of the rights of journalists and civil society activists.
- Perform a qualification assessment of judges and fill vacant judicial positions in the judicial system of Ukraine. Address the practice of informal influence on judges.
- Enhance the independence of the General Inspectorate of the Prosecutor General’s Office.
- Implement provisions on verification of information on ultimate beneficial owners (“UBO”) of legal entities and ensure liability for failure to update or enter data on UBOs into the Unified State Register.
- Intensify the work of the competent Ukrainian authorities on the recovery of assets from abroad.
- Recommend to the Ministry of Justice to file lawsuits with Ukrainian courts claiming recovery of foreign assets as well.
- Revise bilateral agreements on mutual legal assistance to include new asset recovery challenges.