UNCAC and article 31
We remain adhering principles of the UN Convention against Corruption and confirm our willingness to strengthen anti-corruption cooperation on freezing, seizure and confiscation as it is stated in article 31 of the Convention.
The commitment is specific enough for monitoring. Article 31 of the UN Convention against Corruption (UNCAC) has clear provisions on what countries are expected to do (to comply) when it comes to the freezing, seizure and confiscation of assets. This is a sufficiently narrow topic with some international standards being developed already.
The commitment is sufficiently measurable to be monitored. Article 31 of the UNCAC (in most of its provisions) identifies clear actions with adequate room for interpretation based on common international practices and the national needs to be addressed. This commitment targets the criminal justice field and asset tracing, management and confiscation.
Article 31 of the UNCAC has provisions that member-countries are expected to follow. They are aimed at building foundations (legislative and administrative) to find, trace and manage assets seized in cases of grand corruption. In 2015, Ukraine implemented all the necessary legislative changes to create the legislative background for asset tracing and management. Such legislative changes1 included the adoption of a specific law and amendments to the criminal code and the criminal procedure code of Ukraine, among others. The Asset Recovery and Management Agency (ARMA)2 was established to find, trace and manage assets derived from corruption and other crimes. This agency was created to fulfil the obligations of the visa liberalisation action plan, OECD recommendations and other international obligations Ukraine has, including those specified in UNCAC.
Even though ARMA is fully functional at this point, there is a need for legislative amendments to improve its work and fulfil its stated goals. ARMA is a unique and new agency for Ukraine, and when legislation for its creation was adopted it was impossible to predict all the necessary details. The most urgent matters that need to be addressed through amendments to the law are: i) the independence of the agency and its head; ii) management of assets; iii) and the need to make ARMA more efficient and transparent. A draft of this law3 has already been registered in parliament.
Challenges to effective commitment implementation
It took some time to establish ARMA since there was no other agency like it in Ukraine. Even though ARMA is fully functioning now, there are several challenges that prevent it from being more efficient.
For almost a year now, ARMA has been operating without a head of the agency, this is despite the fact that the Ukrainian law on civil service4 (Art. 31, clause 8) states that a vacant position in public office cannot exceed three months. This period has already passed three times over and continues to this day. As of 1 September 2020, and due to the unsystematic5 and unprofessional approach of parliament,6 no commission has been formed to select the new head of ARMA.
Attempts to limit the independence of the agency come from concerns about the removal of protection for civil servants in category “A” from the possibility of arbitrary dismissal. Thus, the head of the agency is directly dependent on the person who appointed them: the prime minister. After changes to the law on civil service from 19 September 2019, the Cabinet of Ministers of Ukraine may dismiss the head of the ARMA without any reason, at its discretion.7 The head of ARMA is currently not protected from unjustified dismissal. This is different from the heads of other anti-corruption institutions who can only be dismissed for pre-determined reasons, such as a negative review from an external audit.8
ARMA can and should work more efficiently, especially in asset management. Ukraine needs to amend legislation for ARMA to work more efficiently with seized assets. ARMA was supposed to ensure the preservation of the economic value of seized assets in criminal proceedings, but this has not happened for several reasons, namely: the inconsistency of the law and the criminal procedural code; the lack of a stable judicial practice; court decisions that do not recognise ARMA’s discretionary powers to choose how to manage assets; blockage of the agency’s work; and its inability to ensure effective management of certain types of assets.9 The legislation must, therefore, be amended to eliminate the existing problems in ARMA’s work.10
Opportunities to accelerate commitment implementation
Amendments of the Asset Recovery and Management Agency. The main areas of the legislation that need to be amended to improve ARMA’s efficiency:
- The legislation on ARMA is reviewed in parliament, and ARMA’s role in asset management in criminal proceedings could be reviewed and strengthened. According to current legislation11 and practice, the agency receives information about the transfer of assets for management after the relevant court decision has been made. In other words, ARMA is not involved in decisions on whether it makes sense to transfer assets, the amount of the seizure or the method of management, among others.12 This creates a situation where assets that are unsuitable for management or sale are transferred to ARMA. The inability to prepare for the management of specific assets before the actual transfer is made may cause inefficiency and ineffective management. Changes designed to introduce a planning stage before the transfer of seized assets to management and to grant the status of a participant in criminal and judicial proceedings for ARMA are needed to facilitate planning before the seizure or transfer of assets and to remove the unnecessary burden from law enforcement agencies in the judicial appeal for the transfer of seized assets.
- As the new head of the agency has to be selected, it is an opportunity to accelerate ARMA’s effectiveness. ARMA has repeatedly faced attempts to block its asset management work as people with vested interests (owners of seized assets or related persons) use provisional injunctions on assets transferred to ARMA,13
which is only aided by the ingrained problems in the judicial system. Administrative and economic courts interfere in the implementation of ARMA decisions of criminal courts on asset management by prohibiting ARMA from managing assets seized in criminal proceedings at the request of asset owners. Problems in Ukraine’s judicial system due to corruption allow asset owners and stakeholders to seek a ban (with the help of administrative and commercial courts) on ARMA’s asset management activities by arrested criminal courts.
Improve the efficiency of asset management to preserve economic value. Sale as a method of asset management is essential to preserve the economic value of the seized property. The mechanism provided for by current legislation for selecting the seller of seized assets does not allow for engaging specialists in public bidding and selling assets quickly and at the highest price.14
- Verkhovna Rada, Проект Закону про Національне агентство України з питань виявлення, розшуку та управління активами, одержаними від корупційних та інших злочинів, http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?pf3516=3040&skl=94 September 2015
- ARMA website, https://arma.gov.ua/en/·
- Verkhovna Rada, Проект Закону про внесення змін до деяких законодавчих актів України щодо вдосконалення діяльності Національного агентства з питань виявлення, розшуку та управління активами, одержаними від корупційних та інших злочинів, , http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=687394 May 2020
- Verkhovna Rada, Про державну службу, https://zakon.rada.gov.ua/laws/show/889-19#Text2016
- Ukrainska Pravda, АРМА без голови: ризики, проблеми та причини затягування конкурсу, https://www.pravda.com.ua/rus/columns/2020/09/21/7267048/21 September 2020
- Verkhovna Rada Anti-Corruption Committee, Про продовження відбору представників від Верховної Ради України до складу конкурсної комісії з відбору кандидата на посаду Голови Національного агентства України з питань виявлення, розшуку та управління активами, одержаними від корупційних та інших злочинів, http://crimecor.rada.gov.ua/news/main_news/74300.html3 November 2020
- TI Ukraine & USAID, Research of Capacity, Management and Interaction of Anti-Corruption Infrastructure Bodies of Ukraine, pp.136-139 https://drive.google.com/file/d/1wvDL3FcF6eVrkDho7hbNFxlNF_8rESmJ/view29 October 2020
- TI Ukraine, Are Anti-Corruption Institutions Capable and Effective: Research,
- ARMA, Legislative Changes to Increase the Efficiency of ARMA: Infographics, https://arma.gov.ua/news/typical/zakonodavchi-zmini-schodo-pidvischennya-efektivnosti-arma-infografikaMay 2020
- Pravda, Owners of Seized Assets and Courts: Three Schemes of Interaction, https://www.pravda.com.ua/rus/columns/2019/04/5/7211333/5 April 2019
- Verkhovna Rada, Criminal Procedural Code of Ukraine, https://zakon.rada.gov.ua/laws/show/4651-17#Text·
- Yur Gazeta, ARMA Can and Should Work More Efficiently: the Bill Has Been Registered in the Parliament, https://yur-gazeta.com/publications/practice/inshe/arma-mozhe-ta-mae-pracyuvati-efektivnishe-v-parlamenti-zareestruvali-zakonoproekt.html24 April 2020
- TI Ukraine, Власники арештованих активів і суди: три схеми взаємодії, https://ti-ukraine.org/blogs/vlasnyky-areshtovanyh-aktyviv-i-sudy-try-shemy-vzayemodiyi/5 April 2019
- ARMA, Report on the Results of the Operational Audit of the Activities of the National Agency on the Issues of Detection, Search and Management of Assets for 2018, p. 40 https://arma.gov.ua/files/general/2020/01/28/20200128091657-30.pdf2020