On August 31, 2021, Oleksandr Novikov, head of the National Agency on Corruption Prevention, issued Order No. 553/21, registered with the Ministry of Justice on September 14. It significantly changes the entire approach to verifying declarations that has existed since the introduction of electronic declaration in 2016. This Order contradicts the law and introduces an inefficient procedure for checking declarations.
What does the law specify regarding such control?
The main approaches to monitoring and verifying declarations are defined in the Law of Ukraine “On Prevention of Corruption.” There are three types of control that should be conducted by the NACP regarding declarations:
- monitoring the timeliness of submission;
- monitoring the correctness and completeness of filling out the form;
- logical and arithmetic control.
In addition to these three types of control, the law also provides for full verification of declarations. Such a procedure is the most comprehensive: it checks the validity of the declaration and the validity of the assessment of declared assets, signs of a conflict of interest, of the unjustified nature of assets, and illegal enrichment.
How was the control carried out earlier?
Control over the correctness and completeness of filling out declarations was carried out automatically when completing the declaration form and was intended to help the declarant avoid mistakes. For example, not to let them skip any required fields in the declaration or specify incorrect characters. If the declarant made such mistakes or typos, the system would not allow to submit a declaration until they were corrected.
This control identified “red flags” for the declarant to help them avoid inaccuracies. This stage should not be underestimated because the better the declaration is filled out, the fewer problems the declarant will have later. Moreover, the NACP would not spend its resources checking for inaccuracies, and a thorough analysis would include really high-risk declarations.
How does the NACP see this control now?
The NACP artificially divided the only type of control, which sounds in the law as “control of correctness and completeness of filling out,” into two separate ones:
- “monitoring the correctness of filling out the form” will be conducted automatically when completing a declaration;
- “monitoring the completeness of filling out the declaration” will take place after submitting the declaration, it will consist in reconciliation check of the declaration with other Ukrainian state registers and databases.
As part of the same control, after the stage of automated verification through particular employees, the NACP will check each detected inconsistency in the “manual” mode. If there are signs of false declaration, the NACP will draw up a justified conclusion to the NABU or other law enforcement agency, or draw up a protocol on an administrative offense and refer it to the court.
The Law does not provide for any “control over the completeness of filling out declarations.” The Agency artificially divided one integral type of control into two, contrary to the law. This creates the first problem of formal non-compliance of the new procedure with the requirements of the Law.
Although, according to the law, the NACP determines the procedure for monitoring declarations, it does not have absolute discretion. Therefore, the Agency should consider both the law and its goals.
How will the new approaches of the NACP to this control affect other procedures for checking declarations?
First of all, the approach to conducting logical and arithmetic control (LAC) has changed. According to the law, inconsistencies identified during the LAC are the basis for full verification of the declaration.
The LAC used to involve two components: the first concerned internal reconciliation check of the declaration, for example, between different sections, and its comparison with previously submitted declarations. The second one involved comparing the declared information with other state registers and databases. After checking the declaration, the two components determined its risk indicator. Therefore, declarations should alternately be subject to full verification from the riskiest to the less risky ones.
Now the second component is made a sepaarte procedure of “monitoring the completeness of filling out the declaration.” That is, the NACP has made the component that was previously in the “logical and arithmetic control” a new “control of completeness of filling out.”
Accordingly, the risks identified during the verification of declarations with different registers will not be considered when determining the results of the LAC, and the risk indicator of the declaration will be determined on the basis of “internal reconciliation check.” The declaration will be subject to full verification only because of “internal” inconsistencies, while “external” inconsistencies between the declaration and other registers, as a rule, will no longer lead to full verification of the declaration.
And here the following problem arises: according to the law, the validity of declared information should be checked precisely within the framework of full verification of declarations. However, the NACP, having formally changed the verification of validity to the verification of the “completeness of filling out” of the declaration, actually began to duplicate these procedures. Moreover, under the new procedure, the NACP will not check declarations for signs of illegal enrichment or unjustified assets, conflicts of interest.
What are the risks?
The first and most obvious risk is the elimination of the procedure, approved by the NACP, and its results in the courts.
At the same time, the risks are much more serious that the NACP, limiting the new control only to checking identified inconsistencies with registers and identifying offenses only in this part, will allow other undeclared assets to pass through. After all, registers in Ukraine are incomplete and within the framework of a full check, the NACP is more likely to identify undeclared property (for example, assets on the right of use or property specified in foreign registers — none of this will be checked in the new procedure).
In turn, this will create risks for declarants to avoid more serious liability. For example, undeclared assets may be found in registers for an amount that entails administrative liability. Later, other undeclared assets may be identified that together with the first ones would exceed the threshold for criminal liability. In this case, after the declarant is held administratively liable for non-declaration of the first assets, taking into account Article 4 of Protocol 7 of the European Convention for the Protection of Human Rights and Fundamental Freedoms and the ECHR practice, they can hardly be considered for the occurrence of criminal liability. The same applies to the establishment of signs of false declaration for the main and qualified composition of the relevant crime (the latter provides for imprisonment, but the former does not).
The new procedure of the NACP unreasonably prioritizes identifying the simplest cases of non-declaration of assets before working to identify unjustified increases in employees’ assets or identify conflicts of interest in them. It is these goals that the electronic declaration system, introduced in Ukraine, pursued. Rhetorical is the question of what will have a greater impact on the state of corruption in Ukraine — the identification of officials who did not declare the asset indicated in the register, or those who were unreasonably enriched in their position and hid such assets through more complex steps.
How does the NACP justify a change in approaches to verifying declarations?
First of all, with the introduction of this approach, the NACP wants to identify more cases of deliberate non-declaration and “check more declarations.” However, it is still impossible to guess whether these expectations will come true. Previously, when the control procedure was already approved, the NACP did not yet have final risk indicators that would be activated when inconsistencies were detected between the declaration and other registers.
Earlier, the NACP reported that it analyzed about 100 declarations that had the highest risk indicators when testing the rules. In half of them, signs of offenses were found. At the same time, this sample is clearly insufficient to confirm the effectiveness and relevance of the new procedure, the percentage of declarations with violations will decrease with a decrease in the risk indicators of declarations.
Another argument of the NACP is the limited number of declarations that can be fully checked. In a year, according to representatives of the body, there may be approximately 1,000 such checks of declarations.
However, their number should increase next year, considering the already existing provision in the procedure for conducting full verifications. Previously verified assets do not need to be checked during subsequent full checks in the absence of new information or new data sources.
In other words, if the NACP annually conducts a full check of each declaration submitted by the president, the body will not need to verify objects that are checked in previous similar procedures. In this case, a full check would apply only to new objects of declaration.
Conducting full verifications can improve their efficiency by further optimizing business processes in the NACP itself. In this way, you can find a more balanced approach to checking small, insignificant inconsistencies in declarations, if they do not entail any legal liability.
According to the NACP, with their chosen approach, more declarations of middle- and lower-level officials will be “checked” because they would have hardly been subject to a full verification at all. However, in the absence of final risk indicators and the results of their test application, it is impossible to be sure of this. It is possible though to ensure that such declarations are fully verified by properly defining the rules of logical and arithmetic control. It is worth noting that the National Agency illegally restricted access to such a list.
The new procedure, according to the NACP, should be much faster compared to full verifications. However, the approved procedure provides for a control period of 35 working days, which is at least 47 calendar days. At the same time, the main period for conducting a full verification is 120 calendar days, and the volume of verification is much larger and significantly reduces the risks of “missing” certain undeclared assets or signs of other offenses.
In conclusion, the NACP appealed to the need to meet its “performance indicators.” At the same time, all these indicators regarding the effectiveness of declaration checks are linked precisely to the full verifications conducted, and the violations identified based on their results.
What should be done next?
In our opinion, the NACP should abandon the chosen approach with the division of “control over the correctness and completeness of filling out declarations” into various procedures that are not formally or essentially consistent with the provisions of the Law of Ukraine “On Prevention of Corruption.”
Instead, it would be appropriate to return to the original concept of the declaration verification system. This type of control is holistic, takes place when filling out declarations and determines “red flags” for the declarant, so that the latter avoids errors and inconsistencies. Reconciliation check with registers should be part of the logical and arithmetic control and lead to full verification of the declaration.
At the same time, efforts should be focused on further improving the procedure for full verification of declarations, for which there is still potential and the quality of their implementation can be improved at the Agency level.
Joint legal analysis of Transparency International Ukraine and the Anti-Corruption Action Centre