Restoring Criminal Liability for Declaration Violations: Legal Analysis

Updated on December 3, 2020. On December 3, a group of MPs on the Committee on Law Enforcement Policy, chaired by the head of the Committee who is also head of the respective working group, Denys Monastyrskyi, registered “Draft Law on Amendments to Certain Legislative Acts of Ukraine on Restoring Liability for Declaring Inaccurate Information and Failure to File a Declaration of a Public Official” No. 4460-d.

On the same day, the Committee recommended that the Verkhovna Rada of Ukraine include this draft law in the agenda and adopt it provisionally and as a whole.

The text of the draft law itself is almost identical to the text of draft law №4441, prepared by the working group, except for two points:

• the upper threshold for false declarations for the application of dangerously small criminal sanctions described in the analysis only increases. Now they will apply to lies in declarations not in the amount of UAH 1,135,000 – 6,810,000 (500 – 3,000 subsistence minimums for able-bodied persons), but in the amount of UAH 1,135,000 – UAH 9,080,000 (500-4,000 subsistence minimums for able-bodied persons).
• instead, a sanction of up to 2 years’ imprisonment is added to this raised threshold of UAH 9,080,000. The sanction in the form of imprisonment is still not provided in the entire draft law. This is completely contrary to the recommendations of Transparency International Ukraine, set out below.

Brief Conclusions

1. Both draft laws to renew the criminal article for false information in the declaration or intentional failure to file a declaration are imperfect. There is still room for improvement in the legal wording of the changes proposed by the authorities. Otherwise, there is a risk that electronic declarations will turn into an inefficient and pointless tool in the fight against corruption. Declarations are the foundation of the corruption prevention system in Ukraine.
2. The aspect that is common in both draft laws is the proposal to include the renewed criminal articles to the subject matter jurisdiction of the High Anti-Corruption Court and the investigative jurisdiction of the National Anti-Corruption Bureau detectives. This step deserves support and is justified.
3. Also, both documents provide for an increase in the upper limit which triggers administrative rather than criminal liability for the submission of knowingly inaccurate information in the declaration. Such changes are proposed in the note to Article 172-6 of the Code of Ukraine on Administrative Violations. If “lies in the declaration” amount to 100 to 500 subsistence minimums for able-bodies persons (as of December 1, 2020, it is UAH 227,000 to UAH 1,135,000), it entails administrative liability. This makes sense, since thresholds for criminal liability are also reasonably raised to take into account the CCU Decision.
4. At the same time, only part of the presidential draft law deals with imprisonment as a sanction for knowingly untruthful declaration (over UAH 4.5 million).
5. Especially dangerous are small fines (up to 3,000 non-taxable minimum incomes, i.e. up to UAH 51,000) for non-declaration or for inaccurate information from 500 to 3,000 subsistence minimums for able-bodied persons proposed by the working group.

Thus, it is necessary:

• to provide criminal punishment in the form of imprisonment for up to 3 (5) years at least for high-ranking officials (persons who hold responsible or especially responsible positions) for failure to file a declaration or intentional false information in declarations starting from UAH 1.135 million (500 subsistence minimums for able-bodied persons).
• to significantly raise criminal fines for intentional false information in declarations for amounts over UAH 1.135 million — to raise them to UAH 51,000 to 102,000 (3,000-6,000 of non-taxable minimum incomes), and if the false information exceeds UAH 6.81 million (3,000 subsistence minimums for able-bodied persons) or it is a high-ranking official — UAH 102,000 to UAH 136,000 (6,000-8,000 of non-taxable minimum incomes).
• to significantly raise criminal fines for intentional failure to file a declaration — to raise them to UAH 102,000 to 136,000 (6,000-8,000 of non-taxable minimum incomes), and if it is a high-ranking official who fails to file the declaration — then UAH 136,000 to UAH 170,000 (8,000-10,000 of non-taxable minimum incomes).
• to include new criminal articles to the list of corruption criminal offenses, as opposed to criminal misdemeanors.

More details are provided further.

What happened?

Recently, the Parliament received two draft laws to restore criminal liability for false information in asset declarations or intentional failure to file a declaration:

• On November 27, 2020, President of Ukraine Volodymyr Zelensky registered his “Draft Law on Amendments to Certain Legislative Acts of Ukraine Concerning the Restoration of Liability for Declaring Inaccurate Information and Failure to File a Declaration of a Person Authorized to Perform State or Local Self-Government Functions” 4434.
• as soon as November 30, 2020, the MPs on the working group on issues of legislative support for effective activities in the field of prevention of corruption and improvement of legislative regulation of certain aspects of the Constitutional Court, which was established by order of the Deputy Speaker of the Verkhovna Rada, presented the results of their work in the form of “Draft Law on Amendments to Certain Legislative Acts of Ukraine on Restoring Liability for Declaring Inaccurate Information and Failure to File a Declaration” 4441 (though only 25 MPs are indicated as the authors of the draft law).

In both draft laws, the designated committee is the Committee on Law Enforcement, headed by Denys Monastyrskyi. He also chairs the working group. It is expected that the committee will consider both draft laws on December 2.

We remind you that Article 366-1 of the Criminal Code of Ukraine “Declaring Inaccurate Information” was ruled inconsistent with the Constitution of Ukraine (unconstitutional) by the Decision of the Constitutional Court of Ukraine No. 13-r/2020 of 27.10.2020 and thus became invalid.

What Is Proposed? Commentary.

The aspect that is common in both draft laws is the proposal to include the renewed criminal articles to the subject matter jurisdiction of the High Anti-Corruption Court and the investigative jurisdiction of the National Anti-Corruption Bureau detectives, as provided by amendments to Articles 33-1 and 216 of the Criminal Procedural Code. This step deserves support and is justified, as these cases indeed have to be investigated by the NABU and considered by the HACC, not by regular courts of general jurisdiction.

Also, both documents provide for an increase in the upper limit which triggers administrative rather than criminal liability for the submission of knowingly inaccurate information in the declaration. Such changes are proposed in the note to Article 172-6 of the Code of Ukraine on Administrative Violations. It has not been ruled unconstitutional and is currently meant to be applied if such information differs from truthful information by the amount of 100 to 250 subsistence minimums for able-bodied persons (UAH 227,000 to UAH 567,500 as of December 1, 2020). Both draft laws establish its use if the false information in the declaration constitutes 100 to 500 subsistence minimums for able-bodied persons (as of December 1, 2020, it is UAH 227,000 to UAH 1,125,000). This makes sense, since thresholds for criminal liability are also reasonably raised to take into account the CCU Decision.

However, it seems that a certain differentiation of such administrative liability could be considered while raising its upper threshold. Currently, the article provides for and will provide for a single joint sanction under these draft laws — a fine of UAH 17,000 to 42,500. It does not matter if the falsehood involved UAH 227,000 or UAH 1 million. A more flexible approach could be to impose a fine of UAH 17,000-34,000 for the current level of false information from 100 to 250 subsistence minimums for able-bodied persons, and a higher fine of UAH 34,000-51,000 for a new level of false information from 250 to 500 subsistence minimums for able-bodied persons.

The draft laws also have the same position on the specification of the subject of the offense in the form of the subject of the declaration under this administrative article, as well as in the new criminal articles. Although it is described correctly with correct references to the Law “On Corruption Prevention,” it should be noted that the current article of the Code of Administrative Offenses also provides for liability for late notification of significant changes in property status, which applied to a more narrow circle of declaration subject before being cancelled by the CCU, so the note can be made even more clear in the future with clear reference to the numbers of the relevant parts of the articles.

Additionally, in the note you can specify what is considered to be the objects of declaration that have value. They are already mentioned in the current version of the note to the administrative article. It would make sense to define objects of declaration which have value as property, assets and other items specified in Article 46, part 1, clauses 2-10 of the Law of Ukraine “On Corruption Prevention” and are subject to indication in the declaration of an individual entrusted with functions of government or local self-government under Article 46 of the Law of Ukraine “On Corruption Prevention” (the CCU did not take an issue with this article).

Let’s consider the differences between draft laws in this comparative table:

Most of these amendments make sense and have a logical explanation, since Article 50 of the Law of Ukraine “On Corruption Prevention,” which defined the list of people who hold responsible and especially responsible positions for the purposes of this article (mandatory full verification of declarations) has been rendered invalid. That is why, to improve legislation, it makes sense to stipulate that officials holding a responsible or especially responsible position in this Article and Article 366^-3 of this Code are persons holding positions specified in the note to Article 56 of the Law of Ukraine “On Corruption Prevention,” adding new updated positions to the general list, as provided by the draft laws.

However, on December 1, 2020, at the meeting of the Verkhovna Rada Committee on Anti-Corruption Policy the conclusion on the anti-corruption examination of the presidential draft law was supported, which excludes positions to be held by high-ranking military officers from the list. The Committee disagreed with such exclusion, because it will also apply to special verification of candidates for such positions. We should note that the draft law filed by the working group does not exclude these positions.

As we see, neither draft law, apart from a part of the presidential draft law, provides for imprisonment as a sanction for knowingly false declarations or intentional failure to file a declaration. It is crucial to provide effective deterrent sanctions for failure to declare assets. Adding only restriction of liberty is not enough. We insist that the sanction for failure to file a declaration or false information in a declaration in the form of imprisonment must remain. In addition, without the sanction of “imprisonment” there may be problems with obtaining / blocking international legal assistance (responses to NABU requests from foreign law enforcement agencies, extradition, etc.). We should also mention Article 45 of the UN Convention against Corruption, of which Ukraine is also a member, directly indicates transfer of “persons sentenced to imprisonment or other forms of deprivation of liberty.”

A especially dangerous factor is the small amounts of fines (under 3,000 non-taxable minimum incomes, i.e. up to UAH 51,000) for failure to declare or declaring false information about assets for the amount of 500 to 3,000 subsistence minimums for able-bodied persons, proposed by the working group.

Under Article 12, part 2 of the Criminal Code of Ukraine, a criminal misdemeanor under the Code is an act (action or omission) which should be punished in the form of a fine in the amount of no more than 3,000 of non-taxable minimum incomes or another punishment not connected with deprivation of liberty. Therefore, these criminal offenses will become criminal misdemeanors.

Under Article 49 of the Criminal Code of Ukraine, part 1, clause 1, an individual is granted a discharge if 2 years passed between the commission of a criminal offense and the day when the court verdict enters into force if the individual has committed a criminal misdemeanor, which stipulates a less severe punishment than restriction of liberty.

Let’s imagine a situation when a dishonest high-ranking official files an untrue declaration in January 2021. The NACP begins its four-month inspection first (after all, it makes no more sense to check something other than the declaration for the last year), on April 2021 (if by that time the NACP will have the right to check something). It then sends the results of the inspection to NABU in September 2021 (again, if the NACP has such authority).

The NABU initiates an investigation, tries to take action to prove the use of the declarant’s undeclared apartment or other property of a third party. This will also take some time before the case gets to the HACC, where hearings will take some time, and the defendants will surely make attempts to stall the judicial process. Quarantine restrictions will not help with the timing, either. And then even if the verdict is delivered, the defendant can file an appeal, which will also take a while. As a result, it is entirely possible that the court verdict will not enter into force by January 2023. And the unscrupulous official will not face criminal liability completely.

Did MPs understand that the format of a criminal misdemeanor in the restored articles will not be enough to ensure any criminal liability at all, or did they intentionally try to pretend to retain sanctions just to report that the problem is solved while they just tried to put up a smokescreen?

The presidential draft law does not have this critical shortcoming as of now. According to this draft law, such offenses will be considered minor offenses. Under Article 12, part 4 of the Criminal Code of Ukraine, a minor offense is an act provided by the Code (action or omission) which is punished by a primary punishment in the form of a fine in the amount of no more than 10,000 non-taxable minimum incomes or deprivation of liberty for a period of no more than five years. The CCU-cancelled Article 366-1 of the Criminal Code of Ukraine was also a minor offense. Under Article 49 of the Criminal Code of Ukraine, part 1, clause 2, an individual is granted a discharge if 3 years passed between the commission of the criminal offense and the day when the court verdict enters into force if the individual has committed a minor criminal offense, which stipulates punishment in the form of deprivation of liberty for a period of no more than two years. At the same time, it makes sense to increase imprisonment in the new articles to 3 (5) years, so that the statute of limitations could be 5 years. This will increase the number of declarations available for verification and make the institution of e-declaration more effective, especially bearing in mind the danger of declaring the HACC unconstitutional as well.

It is also necessary to include new criminal articles on the list of criminal offenses of corruption defined in the note to Article 45 of the Criminal Code of Ukraine. Part 1 of this Article stipulates that the person who has committed a criminal offense or a negligent minor crime for the first time, except for criminal offenses of corruption, shall be relieved of criminal liability if they sincerely repented after the commission of the criminal offense, actively assisted with solving the criminal offense and fully compensated or remedied the damage. This is another loophole for criminal avoidance left by the working group of declarants, which will definitely come into play if the new articles are a criminal offense without adding them to the list of corruption offenses.

The disposition and names of the new articles can also be improved to mitigate the risk of their recognition as unconstitutional in the future. Terminology should be kept in line with the Law of Ukraine “On Corruption Prevention” down to such minor details as filing vs. indication or failure to file a declaration vs. non-declaration.

Thus, both draft laws to restore the criminal article for false declaration or intentional failure to file a declaration are imperfect. There is still room for improvement in the legal wording of the changes proposed by the authorities. Otherwise, there is a risk that electronic declarations will turn into an inefficient and pointless tool in the fight against corruption. Declarations are the foundation of the corruption prevention system in Ukraine.

Recommendations:

Regarding the improvement of criminal liability for non-declaration:

• to provide criminal punishment in the form of imprisonment for up to 3 (5) years at least for high-ranking officials (persons who hold responsible or especially responsible positions) for failure to file a declaration or intentional false information in declarations starting from UAH 1,135,000 (500 subsistence minimums for able-bodied persons). UAH 1,135,000 is a fairly reasonable amount, which approximately correlates with the rules on confiscation of unexplained assets;
• to significantly raise criminal fines for intentional false information in declarations for amounts over UAH 1,135,000 — to raise them to UAH 51,000 — UAH 102,000 (3,000-6,000 of non-taxable minimum incomes), and if the false information exceeds, for instance, UAH 6,810,000 (3,000 subsistence minimums for able-bodied persons) or it is a high-ranking official — UAH 102,000 to UAH 136,000 (6,000-8,000 of non-taxable minimum incomes);
• to significantly raise criminal fines for intentional failure to file a declaration — to raise them to UAH 102,000 to 136,000 (6,000-8,000 of non-taxable minimum incomes), and if it is a high-ranking official who fails to file the declaration — then UAH 136,000 to UAH 170,000 (8,000-10,000 of non-taxable minimum incomes).
• to include new criminal articles to the list of corruption criminal offenses;
• to specify dispositions and names of the new criminal articles and coordinate them with the Law of Ukraine “On Corruption Prevention”;
• not to make new criminal articles criminal misdemeanors.

Regarding the improvement of administrative liability for non-declaration and other things:

• to retain positions to be held by high-ranking military officers on the list of responsible or especially responsible positions;
• to provide for an administrative fine between UAH 17,000 and UAH 34,000 for intentional false information in the declaration in the amount of 100 to 250 subsistence minimums for able-bodied persons (between UAH 227,000 and UAH 567,500) and a higher administrative fine of UAH 34,000 to UAH 51,000 for intentional false information in the declaration in the amount of 250 to 500 subsistence minimums for able-bodied persons (UAH 567,500 to UAH 1,135,000);
• to improve the note to Article 172-6 of the Code of Administrative Offenses: 1) to take into account different subjects of declarations vs. significant changes in the property status (if the obligation to file such changes is restored; 2) to specify what is understood under declaration objects which have value.

The legal analysis has been prepared by TI Ukraine’s legal advisor Oleksandr Kalitenko