Political Corruption in Ukraine

Por: Laura Paola Villa García | Posted on September 17, 2019

Context

Ucrania’s ex-president, Viktor Yanukovych, came to power as prime minister in the elections of 2004 after protests sparked all over the country, which were known as the Orange Revolution. The elections were declared fraudulent at the time and his reputation was badly damaged. Later Yanukovych was elected for a second term as prime minister from 2006 to 2007, time in which he became the most popular politician in Ukraine.

In 2010, he won the presidential elections but on February of 2014 Yanukovych and his family fled the country after a series of protests led to profound social unrest (BBC, 2014).

Facts: Who gave what to whom and why?

After Yanukovych left Ukraine, authorities found a series of documents in his property that showed that showed just how he financed a luxurious life at the expense of Ukraine’s . Yanukovych used nominees as frontmen in a complex web of shell companies from Vienna to London to Lichteinstein in order to syphon off Ukraine’s public funds for personal gain citizens (Transparency, 2019).

In fact, one of the companies that participated in these transactions was Davis Manafort Partner’s company, which was associated to Paul Manafort, Donald Trump’s presidential campaign manager (Kozyreva, 2018).

Furthermore, documents found in Yanukovych property revealed that he and his associates syphoned off public funds to companies and bank accounts controlled by them (Kozyreva, 2018). In total, it is estimated that Viktor Yakunovych and his associated disappeared USD $40 millions (Kozyreva, 2018).

Soon after Yaunovyc fled his country, U.S government announced that it would aid Ukraine to recover the assets stolen by Yakunovych and his associates as part of his acts of corruption. For this reason, the U.S government shared relevant information of several bank accounts belonging Yakunovych and the following transactions were a linked to those bank accounts (Kozyreva, 2018):

  • A conglomerate known as MAKO, which was controlled by Yakunovych’s son received USD $74 million in obscure transactions made by subsidiaries in Ukraine, Netherlands and Switzerland.
  • A dozen of public officials made a series of transactions and among them there a transaction made by, former Ukraine’s energy secretary, who syphoned off USD $400 million to purchase an oil platform with an estimated value of USD $248 million.
  • A group of oligarchs obtained USD $ 5,000 million through energy companies.
  • A company called Prosperity Developments, controlled by a friend of Yakunovych’s son was involved in a suspicious USD $550 million transaction.

In 2017, a court in Ukraine declared that the criminal organization known as “The Family”, which was controlled by Yakunovych laundered public funds through 400 companies, among them, Prosperity Developments (Kozyreva, 2018).

Applicable Law

  • United Nations Convention Against Corruption.
  • Criminal Code of Ukraine (Chapter XVII)
  • Law of Ukraine “On Prevention of Corruption”

Why the case is relevant?

Ukraine’s case if relevant as it is a case of political and grand corruption that involves a complicated web of nominees, shell companies and bank accounts in tax havens. Even though Yakunovych has not been arrested nor sentenced for corruption charges, he has been sentenced for treason as he asked Vladimir Putin in order to invade Ukraine after he fled the country (Siusel, 2017).

 

Lessons learned

Corruption can create complex and even bigger webs of criminal activities that can go from the use of nominees to the creation of shells companies and money laundering. These criminal activities can be used to perpetrate abuses not only against the nations which are used to commit these activities but also against the global financial system.

What type of corruption is it and what are the crimes involved?

Ukraine’s case is very complex because it is a case political corruption as well as grand corruption due to a series of corrupt activities that as mentioned before involve the use of nominees, the creation of shell companies and money laundering.

First, it is a case of grand corruption because the sums of money involved in the transactions among shell companies and Yakunovych bank accounts were huge (Abogados, s.f.).

Secondly, it is a case of political corruption because there was a manipulation of institutions in the allocation of public funds that in these case were used to enrich Yakunovych and his associates (Abogados, s.f.).

Thirdly, Yakunovych and his associates used shell companies, which are moral persons that have no physical presence in their jurisdiction or commercial activities and are created in tax havens with the only objective of protecting their beneficial owner from taxes (Abogados, s.f.).

Furthermore, the shell companies used in the transactions were headed nominees (commonly known as strawmen), who act on behalf of the beneficial owner in order to hide his or her identity (Abogados, s.f.).

Let’s not forget that “The family” was also sentenced for money laundering, which occurs when trying to hide the origin of resources obtained in an illegal manner (Abogados, s.f.).

References (Harvard – Anglia)

Abogados, D., s.f. Glosario de Derecho Anticorrupción. [Online]
Available at: Ebook

Convention, U. N., s.f. Grand Corruption occurs when. [Online]
Available at: Grand corruption occurs when. [Ebook]. Oficina de las Naciones Unidas contra la Droga y el Delito. Recuperado de https://bit.ly/2momz6s

Kozyreva, T. &. L. J., 2018. BuzzFeed News. [Online]
Available at: https://bit.ly/2lYuI1h

Roth, A., 2019. The Guardian. [Online]
Available at: https://bit.ly/2DW92br

BBC, 2014. BBC. [Online]
Available at: https://bbc.in/2k0nucv

Siusel, I. &. M. M., 2017. Global Compliance News. [Online]
Available at: https://www.globalcompliancenews.com/anti-corruption/anti-corruption-in-ukraine/

International, T., 2019. Transparency International the global coalition against corruption. [Online]
Available at: https://bit.ly/2kh6ajF

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"Political Corruption in Ukraine"; Laura Paola Villa García, México, 2019.