Anti-Corruption Reform

Section 1. Monitoring of the implementation of recommendations on reform priorities for 2020– May 2021

1. To adopt a new law on the NABU and SAPO audit

Not done

NABU's independent external audit is an element of the institution's accountability and control. No audit has been conducted since the establishment of NABU, and attempts to appoint auditors have been manipulated and politicized. The audit procedure provided by law creates opportunities for significant political influence on this process and creates risks of unjustified interference in the activities of NABU. Therefore, it is necessary to improve the procedure for NABU audit and eliminate the risks of using the audit for political influence on the its activities. An appropriate external audit procedure should also be established for the SAPO.

2. To improve law on the NABU to eliminate provisions that could potentially be declared unconstitutional

Not done

The decisions of the CCU of August 28 and September 16, 2020 radically changed the situation, recognizing, among other things, the President's authority to appoint the head of the bureau as unconstitutional. In this regard, there is a need to fill the gaps in anti-corruption legislation. After 9 months of considering the bills, the Anti-Corruption Committee recommended the parliament to consider the law on bringing the status of the National Anti-Corruption Bureau of Ukraine in line with the requirements of the Constitution of Ukraine.

The absence of the President's influence on the work of the tender commission and, consequently, the reduction of the threat of crisis resumption due to the CCU's potential conclusion that the NABU head's election procedure is unconstitutional undoubtedly contributes to the independence and stability of the anti-corruption bureau.

3. To improve the competitive selection process of the Head of NABU with the involvement of international experts

Not done

The draft law on bringing the status of the National Anti-Corruption Bureau of Ukraine in line with the requirements of the Constitution of Ukraine does not solve the problems of early dismissal of the current director beyond the grounds provided by current legislation; of lack of decisive influence of independent experts nominated by international partners in the commission for the selection of the Head of NABU; and the need to submit to the government one instead of not two candidates for the position of the Head.

4. To change the competitive procedure for the selection of the SAPO leader with the involvement of international experts, and provide additional guarantees for the independence of the SAPO as a separate institution

Partially done

Last year, the MPs managed to appoint their representatives to the commission for the selection of the head of the Specialized Anti-Corruption Prosecutor's Office only on the third attempt. However, some of the elected members of the parliamentary commission do not meet the requirements of the law and have no certified experience in anti-corruption activities. Only in January 2021 the acceptance of candidates' documents started.

The threat remains, as the SAPO has been without a leader for more than a year, which due to the imperfection of the law on the prosecutor's office and limited powers of the acting SAPO Head allowed Prosecutor General Iryna Venediktova to repeatedly interfere in the course of high-profile NABU-SAPO investigations, calling into question the independence of those institutions. Thus, the Prosecutor General did not miss the opportunity to study and even influence the proceedings in the most high-profile top corruption cases of 2020 (cases concerning the Rotterdam+ scheme, Maksym Mykytas, Oleh Tatarov, Oleh Bakhmatyuk, etc.).

5. To adopt the law, which will allow for more effective implementation of the ARMA asset management function.

Not done

Since the amendments to the Law on Civil Service made by the Parliament in 2019, which led to the complete dependence of the head of the National Agency on the Cabinet of Ministers of Ukraine and the dismissal of the head of the organization – ARMA does not have a permanent head. In addition, the legislation that regulates the activities of the National Agency does not allow for the effective performance of some of the tasks assigned to ARMA. This requires a comprehensive approach to the institution, which should act as a service body with a systematic approach to preserving the economic value of the seized property.

6. To adopt a new law on the SSU to deprive the service of atypical law enforcement, anti-corruption, economic crime, and organized crime combatting powers by turning the SSU into a special service agency focused on combating terrorism and countering foreign intelligence.

Not done

In January of this year, the Parliament passed a bill on the reform of the Security Service of Ukraine № 3196-d in the first reading, which marked the beginning of the transformation of the main intelligence agency of Ukraine. The version of the bill submitted to the parliamentary committee for a second reading contains a number of risks, the failure to eliminate which will result in the failure of reform and Ukraine's departure from the implementation of best Euro-Atlantic practices and further integration with NATO.

An important element of the reform is the deprivation of the SBU of pre-trial investigation functions. This proposal is currently included in the draft law and deserves support, but in order to completely deprive the SBU of its investigative functions, the parliament must also adopt amendments to the Criminal Procedure Code. Unfortunately, such changes to the code are not considered by the Council.

Threats

7. To deprive the National Police of the right to investigate economic crimes.

Partially done

Due to the establishment of the Bureau of Economic Security, the National Police loses the function of pre-trial investigation of economic crimes. However, the relevant changes must also be enshrined in the Code of Criminal Procedure. The relevant bill №3959-1 is still under consideration in the Parliament.

8. To adopt a new BES law with the guarantee of an independent competitive selection procedure of its Head.

Done

The law "On the Bureau of Economic Security of Ukraine" was adopted, according to which the Bureau of Economic Security is created - the only body of state power responsible for combating economic crimes. In addition, parliament supported amendments that remove mentioning of uncharacteristic functions in the Law on the Security Service of Ukraine, as well as anti-corruption and counterintelligence units.

Threats

The beginning of the procedure for appointing members of the tender commission for the election of the first Chairman is a matter of concern, as the procedure was non-transparent and politically dependent members of the commission were nominated.

9. To improve legislation on the parliamentary immunity.

Not done

There is currently a law in place that provides for the de jure abolition of immunity, however, it is necessary to abolish the monopoly of the Prosecutor General of Ukraine (who is a politically dependent official) to enter the information that may indicate a criminal offense of the MP (established by Art. 482-2 of the CPC) to the Unified Register of pre-trial investigations.

10. To the Ministry of Justice of Ukraine – to approve and implement an effective verification mechanism for beneficiary owners.

Partially done

Expert advice from the Council of Europe, Moneyval and OpenOwnership on the conceptual vision of the mechanism has been prepared and received.

The Cabinet of Ministers of Ukraine has determined the main vector for the next three years to ensure the openness of information about the ultimate beneficial owners, approved an action plan (Order of the Cabinet of Ministers of May 12, 2021 №435-r).

The first in the world educational course "Definition of the ultimate beneficial owner" was developed and implemented. Work on organizing and conducting an independent audit of state registers and databases required for the implementation of a single system of verification of beneficial owners has begun.

However, there is currently no technical task for creating a comprehensive mechanism.

11. To the Heads of central executive bodies and anti-corruption commissioners under facilitation and coordination by the renewed NACP – to focus on identifying and eliminating factors that make it possible to commit corruption offenses.

Threats

The main blow to the anti-corruption reform was the infamous decision of the Constitutional Court, which took away some of the powers of the NACP. The CCU exceeded its powers by this decision, took over the functions of the legislative branch of power, declaring criminal liability for providing false declarations as unconstitutional, violated the law on conflict of interest, while NACP lost its control over all authorities to verify the declarations, compliance with anti-corruption laws, resolution of conflicts and protection of whistle-blowers, monitoring of lifestyle, providing instructions and protocols on violations, etc.

However, the Parliament, by adopting Bill № 4470 on 15 December 2020, returned to the NACP the authority to prevent corruption and verify the declarations of officials, which allowed the verification of declarations to begin in 2021.

The Commissioners for the Prevention of Corruption, who are supposed to identify and eliminate sectoral corruption risks, continue to be dependent on the heads of governmental agencies who appoint them. Anti-corruption programs, which are supposed to describe ways to overcome corruption risks, are weak in their contents, and are not implemented in practice, while their external independent monitoring is not carried out.

Partially done

In 2020, MPs passed a law on the return of criminal liability for false declarations, although its text is more lenient than the previous version. The Parliament is currently considering the best version of the relevant bill with the President's proposals.

On June 29, 2021 the Parliament supported the President's proposals for Bill No.4651 on liability for false declarations, which were vetoed by President Volodymyr Zelensky due to questionable provisions. The law was adopted with the following proposals of the President: 1) the provision according to which declarants could not indicate information about the assets of their family members if they were not informed about it was eliminated. 2) The wording, which was previously approved by the MPs, referred only to a fine or community service or imprisonment. Now those who do not file a declaration will be imprisoned.

NACP has developed a new national anti-corruption strategy for 5 years. From September 2020, the bill №4135 "On the principles of state anti-corruption policy for 2020-2024" is being considered by the Parliament. It was submitted by the Cabinet of Ministers of Ukraine, and adopted on November 5, 2020 in the first reading.

The NACP conducted an analysis of the effectiveness of the commissioners for the prevention and counteraction of corruption of persons in the CEB and local self-government bodies and found their activities ineffective. A strategy for improving the coordination of anti-corruption commissioners/individuals has been prepared, a program of training activities for them has been planned, and ways to improve the anti-corruption programs of government/self-government bodies have been identified. For the first time, the anti-corruption strategy contains sections devoted to overcoming sectoral corruption schemes.

12. To the Parliament and NACP – to improve the general principles and features of private party financing; to increase the efficiency of the system of state financing of the political parties; to increase the effectiveness of state control and legal accountability related to compliance with party financing legislation; to restrict television political advertising (agitation) on the national and regional media

Partially done

The MPs voted on an alternative bill № 5253-1 on changes in the control over the financing of political parties. It does not contain a corruption risk of depriving the NACP of the function of checking party finances for fictitiousness.

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Section 2. The current major challenges in implementing the reform.

After seven years of working on the creation and development of anti-corruption infrastructure, we faced the threat of its destruction due to the abolition of legislation by the decision of the CCU. In addition, in the face of a completely new challenge in the form of the Covid-19 pandemic, we are facing a change of policy and a departure from the reform agenda. In March 2020, there were significant personnel changes in the government and among the state authorities in general. The passion for reforms and their results has significantly subsided. Nevertheless, work on legislative initiatives continued in order to overcome the crisis of the constitutional judiciary, restore the full functionality of the NACP and ensure the work of other anti-corruption infrastructure bodies.

Following the results of 2020, NABU detectives once again broke their own record, issuing the suspicion to 201 people (in 2019 - 153 people). In the context of the two half-years of 2020, the first was more productive - 125 suspects against 76 in the second half of the year. A certain decline in the activity of investigations is explained by the absence of the head of the SAPO, who by law must sign the suspicions of a number of officials under investigation by NABU. In total, in 2020, NABU and SAPO prevented the theft of resources of state-owned enterprises by more than UAH 800 million, and more than a billion were returned at the stage of pre-trial investigation.

A significant challenge for Ukraine is the lack of an effective system of checks and balances, which can only be built by strengthening the efficiency and independence of institutions. Ukraine is a parliamentary-presidential republic and must meet all the criteria of this form of government.

Some of the challenges described in the 2019 Toronto Principles are still relevant. The NABU audit has not been conducted yet. Confidence in the SAPO needs to be restored. The head of the SAPO has resigned, the acting chairman is his deputy, but part of the powers are vested in the Prosecutor General, who makes the institution dependent on his Office. The current selection procedure provides for a crucial role in the competition committee with representatives of Parliament, so it is important to change it. Additional guarantees of the independence of the SAPO as an independent institution have not been introduced.

The cornerstone of the SBU's reform is to deprive the body of its pre-trial investigation functions. This proposal is currently being implemented in the draft law and deserves support, but in order to fully deprive the investigation, the parliament must also adopt amendments to the Criminal Procedure Code. Unfortunately, such changes to the code are not considered by the Parliament, which may indicate the intention to actually maintain the function of the SBU investigation.

The implementation of sectoral reforms should prevent corruption, as it is often the result of poor governance and lack of reform. However, such sectoral reforms are often unsystematic, incomplete, unsupported and not adequately funded due to institutional weaknesses in government, low salaries of civil servants, which leads to negative staffing, lack of a project approach to change, and weaknesses in institutions.

The unreformed judiciary remains the biggest threat to the sustainability of reforms in all areas. The Parliament passed Law № 193-IX of 16 October 2019 on the reset and cleansing of the judiciary, but most provisions of the law were later declared unconstitutional. Thus, from November 2019 to May 2021, no progress was made in this direction.

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Section 3. Recommendations on reform priorities for 2021-2022

1. The Parliament shall:

ensure effective cleansing of the judiciary from dishonest judges at all levels; unblock reform through the immediate adoption of laws that will restart the judiciary - the High Council of Justice and the High Qualifications Commission of Judges, reduce the influence of the High Council of Justice on the implementation of judicial reform and, consequently, minimize the possibility of its further sabotage. judicial authorities, change the procedure for dismissal of dubious judges of the Supreme Court;
pass a law on the principles of state anti-corruption policy for the years 2021-2025;
adopt a law on strengthening criminal liability for false declarations;
improve the law on NABU to eliminate provisions that could potentially be declared unconstitutional; to guarantee the impossibility of early dismissal of the current head of NABU;
improve the competitive procedure for selecting the Director of NABU, to ensure the involvement of international experts and giving them a decisive role in the selection process; to approve the election of one candidate instead of two candidates for the position;
change the competitive procedure for selecting the head of the SAPO, ensure the involvement of international experts and give them a crucial role in the selection process, provide additional guarantees of the independence of the SAPO as an independent institution;
launch a transparent competition for the head of ARMA and adopt a law for more effective implementation of ARMA's asset management function;
adopt a new law on the SBU to deprive it of uncharacteristic law enforcement and anti-corruption, economic crime and organized crime powers, turning the SBU into an intelligence agency focused on combating terrorism and countering foreign intelligence;
permanently deprive the National Police of the right to investigate economic crimes;
improve the legislation on the institution of parliamentary immunity by abolition of the monopoly of the Prosecutor General in terms of inclusion of information in the Unified Register of pre-trial investigations;
ensure the obligation to conduct and take into account conclusions of anti-corruption examination of draft regulations and current regulations.

2. To the Ministry of Justice of Ukraine - to approve and implement an effective mechanism for verification of beneficial owners.

3. To the heads of central executive bodies and anti-corruption commissioners, with the assistance and coordination of the renewed NACP - to focus on identifying and eliminating factors that allow them to commit corruption offenses.

The NACP needs to ensure its independence and strengthen the professional level and effectiveness of the Commissioners for Prevention and Combating Corruption. Develop and implement tools for effective involvement of the expert community in the development and monitoring of anti-corruption programs of government and local self-government.

4. To the Parliament and NACP - to improve the general principles and features of private party financing; to increase the efficiency of the system of state financing of parties; to increase the effectiveness of state control and legal responsibility for compliance with the legislation on party financing; to restrict televised political advertising (agitation) on national and regional media.

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Anti-corruption policy

Sectoral brief "Anti-corruption policy"