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(Ir) responsible Declarations

25.11.2016

Galyna Melnyk, lawyer at Ilyashev & Partners Law Firm
Source: Dzerkalo Tyzhnia

What will be the reaction of anti-corruption agencies to the vast savings in cash declared by the officials?

The first stage of the electronic declaration campaign has completed. The officials holding responsible and highly responsible positions filed more than 127 thousand electronic declarations for the period from January 1 to December 31, 2015. The public was shocked by the millions of cash in hryvnia and foreign currency. According to some reports, only MPs have reported in aggregate more than USD 12 bln of cash. Public anger gave way to the expectation of verification of legality of the origin of the declared money. However, we cannot expect the simple and quick decisions of the anti-corruption agencies.

The Law of Ukraine “On prevention of corruption” envisages a complete verification of all 127,165 electronic declarations that have been filed at the moment. It implies, in particular, clarification of reliability of the declared data and signs of illicit enrichment.

The above rules of the law can play a cruel joke with the declarants who decided to report the non-existent cash “with a reserve for the future” considering that it will facilitate their further proof of the source of costs. Indeed, it will be more difficult for the anti-corruption agencies to prove illegal origin of the funds, which have been declared as cash savings generated by the proceeds of the previous periods not covered by the electronic declaration.

However, as a complete inspection implies that the declarant must be checked for illegal enrichment, the National Agency for Prevention of Corruption (NAPC) is required to ascertain the legal origin of the declared assets, including cash. And the larger is the amount specified in the declaration, the more questions it should prompt from the NAPC, and the more grounds there will be for initiating the investigation. Moreover, as a complete inspection implies finding reliability of the data declared, if the availability of such substantial amounts is not confirmed, there are grounds for bringing the declarant to administrative or criminal liability for declaring the deliberately false information.

The Prosecutor General’s Office has already announced that they will check the declarations, which have cash in excess of USD 100 thousand, and even hinted at the basic methodology for determining the legality of the origin of such assets. Thus, the PGO plans to apply to the State Fiscal Service of Ukraine with the request to provide information on taxes paid, and then compare these figures with the cash declared. The GPU states that inconsistencies will be an indicator of illegal origin.

Obviously, the declarants will put forward arguments in their defense, which are quite difficult to refute in terms of the evidence base. For example, to substantiate that the declaration reflected the actual amount of cash, they can asset that the money is deposited in various safe-deposit boxes abroad, because the declaration does not oblige to specify exactly where the cash savings are deposited. Or that the money existed at the end of the reporting period (December 31, 2015), but in 2016 the declarant presented it to his first-degree relatives (that does not require them to pay taxes).

To support the legal origin of funds, the officials can rely on receipt of gifts or inheritance from the first-degree relatives (that, again, does not result in taxation) or, at the very least, that the funds were obtained decades ago, which gives raise to the question of the statute of limitations for bringing to criminal liability.

N. Korchak, the Chairman of the NAPC, reported that they will first check the declarations of people’s deputies, judges, prosecutors. However, recall that all declarations are subject to a complete verification, and it will have to be done by the employees of the NAPC almost manually, as meanwhile there are no technical capacities, or the software, or connection to databases of other departments for automatic comparison and verification of the declared data, or regulatory mechanisms of interaction with the NAPC and other public authorities to verify the declarations. It is also important to note that the specific terms of verification have not been set in terms of legislation.

With regard to the possible liability of the officials who declared millions, different options are possible in this case.

The official can not confirm the origin of the declared assets: criminal responsibility under Article 368-2 of the Criminal Code of Ukraine (illegal enrichment) is set for acquisition by the official in ownership of assets, which legality of acquisition has not been sufficiently confirmed by evidence. Such offense is punishable by imprisonment for up to two years, with disqualification to hold certain positions or engage in certain activities for up to three years with confiscation of property. More severe punishment is envisaged for the persons holding responsible and highly responsible position. Criminal liability under this article occurs only when the amount (value) of income/assets with unconfirmed source of origin exceeds one thousand non-taxable minimum personal income (about UAH 700 thousand).

The official specified in the declaration the money that really do not exist: criminal liability under Art. 366-1 of the Criminal Code (declaration of deliberately false information) comprises a fine of 42.5 thousand to 51 thousand hryvnias, or community service, or deprivation of liberty for up to two years; the said penalties may be combined with deprivation of the right to hold office up to three years. The sanctions are possible if the false information differs from the reliable in excess of 250 minimum wages (344.5 thousand hryvnias in 2016). If such information differs from the reliable in the amount of 100 to 250 minimum wages (137.8-344.5 thousand hryvnias in 2016), it incurs administrative responsibility under Art. 172-6 of the Code of Administrative Offences of fine of 17-42.5 thousand hryvnias. If the difference is less than 137.8 thousand hryvnias, responsibility does not occur at all.

The results of a complete verification of declarations can serve as a basis for initiation of criminal cases on tax evasion, abuse of authority and official position, obtaining of illegal benefits (bribes), etc.

In conclusion, we note that due to immature regulatory and technical basis verification of electronic declarations can be stalled for years. Single indicative trials in relation to specific individuals are not excluded to show anticorruption efforts to the public and the IMF.

 
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