Expert: When establishing the Financial Investigation Service, the appropriate investigative authority should be clearly determined

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Grigol Katamadze, Member of the Supervisory Board of the Ukrainian Business Council, President of the Association of Taxpayers of Ukraine on the Financial Investigation Service.

The Financial Investigation Service should become the state law enforcement agency for the prevention, detection, repression, investigation and detection of criminal offences classified by law as being under its investigation.

In Ukraine, the existence of various bodies empowered to investigate financial crimes raises problems of competence, cooperation and responsibility, which leads to conflicts of interest. As a result, evidence collected in violation of the rules of investigation may be deemed inadmissible.

It was therefore necessary to hold a discussion on the future activities of such bodies: the dismantling of the relevant units in the law enforcement agencies and the establishment of a single law enforcement agency, which will identify and address systemic threats to the economy and finance. It will take over from other law enforcement agencies and replace existing inefficient structures. This body should become the sole analytical centre for the concentration and analysis of information on the state of the state’s financial system, collected by state bodies and self-government bodies.

Representatives of the Ukrainian authorities have been declaring the foundation of the Financial Investigation Service (Bureau) for the past six years. Not surprisingly, this condition finally appeared in a memorandum with the IMF and the EU on macrofinancial assistance to Ukraine.

In many European countries, financial investigation bodies serve as operational and investigative units, covering a wide range of functional responsibilities. The establishment of specialized units has been successfully implemented in all developed countries under different names and with different institutional affiliations.

It is not enough for Ukraine simply to adopt a law and to create such a body; it is necessary to propose a model for the organization of its activities that can meet the modern requirements and expectations of society. In order to do this, it is necessary to take into account as much as possible all the nuances of its functioning: structure, investigative jurisdiction, competence, authority, subordination, principles of operation, anti-corruption mechanisms and so on.

The concept of «economic or financial crimes» does not exist in the legislation today. At the same time, the criterion for assigning crimes to this category can be considered the sphere of economic activity, which is created by economic relations and which is encroached upon by each such crime. The Criminal Code of Ukraine provides for a special section VII, «Crimes in the sphere of economic activity». It contains offences against social relations in the sphere of economic activity arising from the production, distribution, exchange and consumption of goods, work and services. However, economic and financial crimes are often complex in nature, i.e., they can be committed in conjunction with other criminal acts for which liability is provided for in articles of various sections of the Special Part of the Criminal Code. Economic crime is very often closely linked to organized crime, corruption and clandestine economic activities. It would be useful to include in the list of offences in the economic and financial sphere and a number of other offences in other chapters of the Special Part of the Criminal Code, but they are also committed in the sphere of economic activity and cause the damage to economic relations. Having analyzed the content of the various articles contained in the various sections of the Special Part, it can be concluded that the crimes which, under certain circumstances, can be classified as economic are:

  • Embezzlement or acquisition of property through abuse of authority;
  • Abuse of authority or official position;
  • Abuse of authority by an official of a legal entity under private law, regardless of its organizational and legal form;
  • Forgery;
  • Professional negligence, etc. provided that such offences are committed in the sphere of economic activity.

Therefore, I consider it appropriate to place the following crimes under the Service’s main investigation:

  • The illicit manufacture, possession, sale or transport for the purpose of marketing excise goods;
  • Forgery of documents that are filed for the state registration of a legal person and natural persons-entrepreneurs;
  • Obstruction of legitimate economic activity;
  • Unlawful seizure of the property of an enterprise, institution or organization – if the investigation of this offence by the National Anti-Corruption Bureau of Ukraine is not under its jurisdiction;
  • Inappropriate use of budget funds, implementation of budget expenditures or the provision of loans from the budget without established budget allocations or with their excess; if the investigation of this offence by the National Anti-Corruption Bureau of Ukraine is not under its jurisdiction;
  • Promulgation of laws and regulations that reduce budget revenues or increase budget expenditures contrary to the law – if the investigation of this crime by the National Anti-Corruption Bureau of Ukraine is not under its jurisdiction;
  • Evasion of taxes, fees (compulsory payments);
  • Failure to pay a single contribution to compulsory state social insurance and insurance contributions to compulsory state pension insurance;
  • Illegal manufacture, counterfeiting, use or sale of illegally manufactured, obtained or counterfeit control marks;
  • Making the bank insolvent;
  • Pushing into insolvency;
  • Breach of procedures for maintaining a depositor database or for reporting;
  • Falsification of financial documents and accounts of a financial organization, concealment of the insolvency of a financial institution or grounds for revocation (cancellation) of a licence of a financial institution;
  • Fraudulent use of financial resources;
  • Manipulation of the stock market;
  • Forgery of documents that are filed to register the issuance of securities;
  • Violation of the procedure for keeping a register of the holders of personal securities;
  • The manufacture, sale and use of counterfeit non-state securities;
  • The illegal use of the mark for goods and services, the brand name and the qualified indication of the origin of the goods;
  • Unlawful collection for the use of information constituting commercial or bank secrecy;
  • Disclosure of commercial or bank secrecy;
  • Illegal use of insider information;
  • Concealment of information on the activities of the issuer;
  • Illegal privatization of state and communal property.

However, during the investigation of the crimes mentioned above, there is a possibility of identifying others. The latter in this case will also be investigated by the Service, so they should be referred to its additional investigative authority. The following offenses may be found:

  • Fraud;
  • Embezzlement or acquisition of property through abuse of authority;
  • Infliction of property damage by deceit or breach of confidence;
  • Manufacture, storage, purchase, transportation, shipment, import to Ukraine for use in the sale of goods, sale or sale of counterfeit money, government securities, state lottery tickets, excise tax stamps or holographic security features;
  • Illegal actions with transfer documents, payment cards and other means of access to bank accounts, electronic money, equipment for their production;
  • Development of a criminal organization;
  • Forgery of documents, seals, stamps and forms, sale or use of forged documents, seals, stamps;
  • Abuse of authority or official position;
  • Abuse of authority by an official of a legal entity under private law, regardless of its organizational and legal form;
  • Forgery;
  • Professional negligence.

When establishing the Financial Investigation Service, the appropriate investigative authority should be clearly determined that would include the powers of existing economic units in the structure of the SBU, the National Police and the SFS. Meanwhile, the newly created structure should not be overloaded with cases of minor crimes, and should not engage in administrative proceedings. At the same time, it should be considered that its powers should not duplicate the powers of other law enforcement agencies.

President of the UNGO TAU (Ukrainian National-wide Non-governmental Organization Taxpayers Association of Ukraine), Vice-president of the European Taxpayer Association, Member of the Supervisory Board of the UBC (Ukrainian Business Council) , Board members of the STS (State Tax Service) of Ukraine and Ambassador Extraordinary and Plenipotentiary Grigol Katamadze.

Translated by Maxym Valko

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