Why Financial Monitoring Matters in Corruption Investigations

After the Midas Operation, in which the NABU and the SAPO exposed high-level corruption in the energy sector, many questions arose about the effectiveness of involving the State Financial Monitoring Service in investigating corruption schemes. This was especially relevant in light of the NABU Director’s statement that detectives had faced instances where the State Financial Monitoring Service ignored their requests to trace funds.

For this reason, we want to take a closer look at the role that high-quality financial monitoring plays in uncovering organized crime and corruption.

What are financial investigations and how do they work?

Imagine a situation in which corrupt officials receive bribes, siphon off budget funds, or participate in other criminal schemes. But money does not simply disappear — it must be used, hidden, or laundered. This is where the State Financial Monitoring Service steps in.

The State Financial Monitoring Service (SFMS) is a government body responsible for organizing processes to prevent money laundering. For example, it monitors suspicious financial transactions in Ukraine. Its key function is to detect attempts to “cleanse” criminal proceeds through the financial system, i.e., to make them appear legal.

How Does it work in practice?

Banks, insurance companies, financial institutions, and even casinos are required to report suspicious transactions carried out by their clients. These may include large cash dealings, unusual transfers between accounts, or operations inconsistent with a client’s typical financial profile.

SFMS analysts then examine this information, find links between different transactions, and map out how money moves through various channels. If they detect signs of a potential crime — corruption, money laundering, or terrorist financing — the SFMS prepares a consolidated report and, after completing certain formalities, forwards it to law enforcement agencies: NABU, SBI, the SSU, or the National Police.

Similarly, law enforcement bodies may approach the SFMS to obtain information on the financial transactions of persons of interest in Ukraine or abroad.

Why is this necessary?

Financial investigations help to:

• expose the real scale of corruption schemes. A bribe in an envelope is only the tip of the iceberg. Financial footprints show how much was actually stolen, where the money went, and who else was involved;
• identify hidden participants. Funds often move through chains of shell companies and trusted intermediaries. Analyzing financial flows helps uncover the true beneficiaries — those who control the criminal activity;
• recover criminal proceeds. Punishing a corrupt official is not enough — the stolen assets must be returned to the state. Financial investigations make it possible to trace illicitly acquired property so that it can later be confiscated by court order;
• combat organized crime. Organized criminal groups earn millions from drug trafficking, corruption, smuggling, and extortion. Without tracing financial flows, it is impossible to dismantle these structures completely.

Thus, financial investigations can be a powerful tool for combating corruption and organized crime — one that enables investigators not only to expose offenders but also to return stolen assets to the budget. And this is precisely why effective work by the State Financial Monitoring Service can provide critical information in the most high-profile cases, making the true organizers of corruption schemes reachable by justice.