It has been 5 years since the Asset Recovery and Management Agency came into operation. The ARMA has gone from a newly established institution to a body that has already shown results. But at the same time it also became a participant in corruption scandals, it was at the intersection of the interests of business groups, various stakeholders have already tried to reboot, paralyze or even terminate it.
What led to this during the 5 years of the Agency’s work?
It all made sense at first: until the end of 2015, there was no separate body in Ukraine that would take care of the recovery and management of assets. Seized property was kept by who knows how and who knows where, which is confirmed even by the decision of the European Court of Human Rights.
Prior to that, it was law enforcement officers who handled finding, tracing and recovery of assets in Ukraine, and it was so “effective” that you barely need the fingers of one hand to count the success stories. Kudiukin’s case on particularly grand embezzlement of property is almost the only “star case” of the pre-ARMA times. The verdict in this case was handed down back in 1998, and the money, with the help of foreign partners, reached the budget in 2005. Further, there were no equally effective investigations.
The second and main reason for the establishment of the ARMA was expert recommendations in the dialogue on visa liberalization and “motivation” from international partners from countries where there is legislation on effective management of seized assets. This gave a real impetus to launch a separate body in Ukraine accountable for recovery and management of seized property.
However, the five years after the Agency’s launch were not easy. Today, accusations of inefficiency, dependence and even corruption of the ARMA are heard from various spheres. To understand why this happened, we analyzed the main achievements and failures of this anti-corruption body throughout its existence.
Let’s start with the achievements, because the Agency really has something to be proud of:
- The ARMA took over the management of thousands of assets and demonstrated effective management of movable and immovable property.
For example, in 2017, the Agency received a 2013 Mercedes-Benz which had belonged to a company from the inner circle of a former minister of revenues and sold it for over UAH 1.4 million. The proceeds were put in a deposit account, and throughout this time they accrued a significant interest — more than UAH 425 thousand. Thus, the ARMA not only preserved the economic value of the asset, but also significantly increased it, which is a win both for the state and the owner.
Also, in 2019, the National Agency ensured that the budget received over UAH 6 million from the effective management of office facilities in Kyiv and UAH 600,000 from industrial facilities in Luhansk oblast. Prior to the creation of the ARMA, this seized property would never have brought income to the state, but instead would have just been useless, or would have remained under the control of the owner.
- The Agency started publishing information on asset management procedures.
Just looking at the official website of the ARMA, we can see that the institution is constantly looking for and engaging new managers for the seized property. In addition, the ARMA actively communicates the stages of management of high-profile assets, which has never happened before.
- The institution successfully uses over 300 automatic information systems, registers and data banks for finding and tracing of assets at the request of law enforcement. For example, during its search activities, the ARMA uses the State Register of Encumbrances on Movable Property, the State Register of Property Rights on Immovable Property, the Register of VAT Payers etc.
- The Resolution developed by the National Agency was adopted within the framework of the UN Convention against Corruption.This document contains a number of strategic recommendations for improving the search for illegal assets, as well as for the management of seized property. Ukraine has effectively introduced a strategic vector for the development of anti-corruption issues for all member states of the Convention.
- The ARMA conducts educational work on its activities.It promotes ARO/AMO institutions among law enforcement and lawyers. It has prepared and regularly updates recommendations on the management of seized assets which should help law enforcement, judges, and lawyers better understand the details of the National agency’s work on asset management and ensure effective management of seized assets.
But during this time there were also very noticeable failures in the work of the National Agency.
- The ARMA “has not learned” to work with high-profile and difficult assets.For example, the seized Odesa airport, which is 65 ha of property with an estimated cost of UAH 2 billion, has not been transferred for management in over a year under the ARMA’s control. Moreover, Yanukovych’s Mezhyhiria residence is also still waiting for its effective managers, although more than seven years have passed since the former president fled, and a competition for managers has been announced several times.
- Corruption scandals involving the AgencyFor example, there is a remarkable case when ARMA staff and the SE SETAM started selling things which could not be sold in the first place or sold seized assets for next to no money.
- Blocking of the National Agency’s work by Kyiv District Administrative Court through a decision to secure the claim.This way, the management of property belonging to the criminal organization of Yanukovych-Klymenko was blocked just a couple of months after these assets were transferred to the ARMA.
- The register of seized assets, which is supposed to work, has not been launched.The test version has not been showing anything properly for a year now, and there are no funds for a full-scale launch.
- Lack of effective communication with law enforcement and other parties to achieve effective and rapid asset management.Throughout its operation, the ARMA has not been able to build a full-fledged dialogue to ensure planning prior to receiving seized assets. The Agency receives used clothes or medical masks for management with no ability to sell them. It is also worth mentioning the lack of communication on high-profile news related to the management of seized assets. A striking example is the scandalous story of $400,000 that ARMA transferred under a forged court decision.
As you see, the ARMA has been through ups and downs throughout its existence. Coordinated and effective work went unnoticed by the average Ukrainian, and corruption scandals and failures spread rapidly, powerfully, are widely publicized in high-ranking media. And it is not only the enemies of the Agency who are to blame for this course of events.
In general, the Agency’s problems are due to several factors, including the imperfection of the legislation. The attempts to change it have been moving in two opposite directions for a few years now.
The first vector is the creation of an institution which should be a service body with a systematic approach to preserving the economic value of the seized property. This approach will help to manage seized assets more effectively. The second vector is to turn ARMA into a “storage room” for seized assets, which will bring losses to the government and will only benefit the owners.
It is hard to predict what the next five years have in store for the ARMA. This depends on two key aspects — the legislation and internal processes in the ARMA.
The publication is co-written by Transparency International Ukraine’s legal advisor Oleksii Danyliuk.
The project is supported by the EU Anti-Corruption Initiative (EUACI), a leading EU-funded anti-corruption support program in Ukraine, which is co-financed and implemented by the Danish Ministry of Foreign Affairs.