Recovering Criminal Assets: Government Approves Strategy for 2023-2025

On August 1, the Cabinet of Ministers approved the Asset Recovery Strategy for 2023 and 2025, developed last year under the coordination of the Asset Recovery and Management Agency (ARMA). This is the first step at the state level to recover the assets that were stolen from Ukraine. 

Why is this strategy important? 

To overcome crime, it is necessary to eliminate the prerequisites for its existence. One of them is financial gain because a considerable number of crimes are committed for selfish purposes. Therefore, there is a consensus in the international community that measures should be taken to find, seize, and confiscate criminal assets, as well as recover them to the state from where these funds were illegally withdrawn.

This is, in particular, defined in a number of international treaties that deal with crimes of a cross-border nature — drug trafficking, terrorist financing, corruption.

The process of asset recovery is complex and requires not only international cooperation, but also high-quality national legislation. Therefore, by these international treaties, the states agreed to use common tools to recover assets into their country, for example, mandatory criminalization of certain acts, universal jurisdiction, conditions for disclosure of bank secrecy.

The quality of Ukrainian legislation in the field of asset recovery is far from perfect, and this strategy should determine the key principles for its improvement. 

The number of cases when property was actually recovered to Ukraine from abroad illustrates the problem. According to the Ministry of Justice, as of June 2023, there are only two cases (according to court decisions made in 1998 and 2004). 

One of them concerns EUR 692,000, which was confiscated by the Mykolaiv Regional Court in 1998 from the head of the Black Sea Shipping Company Kudiukin. The case concerned the theft of funds of the Black Sea Shipping Company due to forgery of account details in a letter to a foreign enterprise on the return of overpaid funds. They were recovered to Ukraine from Kudiukin’s bank account opened in Frankfurt am Main. 

From such a meager number of asset recovery cases, it is obvious that there are still problems. But earlier, they were simply not fixed and not solved. This especially complicates the situation with the illegal withdrawal of assets from Ukraine by the Russians.

In addition, the European Commission, in its opinion on granting Ukraine the status of a candidate for accession to the EU, noted the need to improve legislation in terms of asset management and adopt a strategy for their recovery.

What does this program document provide for?

Development strategies should determine the course of policy formulation and implementation in the relevant area and contain a description of the problems that led to the adoption of the strategy, an analysis of the current state of affairs, strategic goals and indicators of their achievement, etc.

 The strategy approved by the Government states that its goal is not only to increase the efficiency of the national sphere of finding, tracing, seizing, and confiscating assets, but also to introduce effective mechanisms for the recovery of such assets to Ukraine, payment of compensation, indemnification for losses or damage caused to Ukraine, etc.

It also defines strategic goals and objectives to be achieved through the implementation of special measures. The strategic goals include:

1. improvement of legislation in the field of asset recovery;
2. enhancing the institutional capacities of law enforcement agencies and public authorities, whose activities are aimed at implementing measures to recover assets;
3. enhancing interagency cooperation and data exchange;
4. strengthening international cooperation;
5. improving the representation and protection of the rights and interests of Ukraine in national courts and foreign jurisdictional bodies.

The Government has also defined an operational plan of measures to implement the approved Strategy, which contains fairly general stages of the Strategy introduction.

The Strategy also states that the Cabinet should form an interdepartmental working group that will coordinate the actions of public authorities to implement the Strategy and the action plan for its enforcement. Then, within three months, it should develop an action plan for the implementation of this document. It should identify specific actions that will help achieve the defined goals and objectives. 

The same working group will monitor the implementation of the action plan. The ARMA, for its part, will report on the state of implementation of the Strategy annually no later than April 1 for the previous year.  

What needs to be improved?

Some provisions of the Strategy are quite general, and the implementation of certain tasks requires a balanced approach. 

For example, the imposition of civil forfeiture of unjustified assets should be limited to conventional crimes to prevent unjustified interference with a person’s property rights. Such a conclusion, in particular, can be drawn from the analysis of the ECHR decision in the case of Gogitidze and Others v. Georgia. In this case, the issue of the legality of civil forfeiture of property from a Georgian official was analyzed. 

For reasons of protection of property rights, a balanced approach should be taken regarding the introduction of “freezing operations,” that is, measures to temporarily prohibit the commission of any actions with property, or the temporary exercise of control over it. 

The engagement of specialized foreign detective companies, foreign lawyers, and/or forensic experts in finding assets should be regulated in a way that will prevent corruption and unnecessary expenditures from the national budget. For example, through the use of transparent selection procedures. 

The Strategy pays little attention to the mechanisms of compulsory expropriation of assets in accordance with the sanctions legislation. After all, certain decisions of the High Anti-Corruption Court on the application of sanctions in the form of confiscation may relate to assets located abroad. 

In addition, more attention can be paid to mechanisms for reporting to law enforcement agencies on the number of wanted and recovered assets. Then it would be possible to operate with official data that would allow assessing the effectiveness of asset recovery processes. 

All these points should be specified in the action plan for the implementation of the Strategy in order not to blur responsibility between different state bodies and to avoid duplication of powers and tasks. 

In general, Transparency International Ukraine welcomes the adoption of the Asset Recovery Strategy. After all, we have repeatedly stressed the expediency of its adoption. We hope for its effective implementation and, for our part, will closely monitor this process.

This publication was prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.