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 (often 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 often 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 state-owned 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.
