Grigol Katamadze: We hope for the significant progress in creating of the Financial Investigation Service.

In the beginning of the yet another article on the prospects of creating of the Financial Investigation Service, a future body to combat offences in the field of finance and economy, I want to remind the current government of the short history of its «creation», without looking back at the «efforts» and «promises» of the previous government since 2013, which have never been fulfilled.

Back in 2019, the spokesmen for the government of the newly elected President of Ukraine — Volodymyr Zelensky, announced that in order to fight corruption, the government plans to create a separate body to investigate cases of economic crimes and to submit a bill regarding the Financial Investigation Service. The relevant item was in the political program of the winner of the presidential elections (of the current President of Ukraine).

Back then, the ex-Secretary of the National Security and Defense Council of Ukraine — Oleksandr Danyliuk, said that the President of Ukraine Volodymyr Zelensky considered the establishment of the Financial Investigation Service as the matter of priority. The Service is aimed to be an analytical center, not an enforcement center, designed to prevent the commitment of crimes in the financial sphere, in particular, it will deal with the determining, impeding, detecting and pretrial investigating of crimes.

Even by the order of the Head of State, the draft law on the Bureau of Financial Investigations was submitted to the Verkhovna Rada of Ukraine on August 30, 2019 as an urgent project. However, on October 2, 2019, it was withdrawn from being reviewed. Meanwhile, on October 2nd, 2019, in the first reading, the Verkhovna Rada of Ukraine adopted another bill № 1208-2 authored by the People’s Deputies of Ukraine — Olga Vasylevska-Smaglyuk and Denys Monastyrsky, which was refused an approval on January 17, 2020.

Honestly, I can not understand the reasons for such «delaying» of the matter by the authorities.

For almost 5 years I have been studying and analyzing a lot of useful information from various sources on the issue of the establishing and operating of similar bodies in other countries, offering the authorities both publicly and consistently the Concept of the Financial Investigation Service of the Taxpayers’ Association of Ukraine.

And, I am once again getting convinced that now it’s a matter of principle. Everything must be done to finally end the «epidemic» of pressure on business. Such a new body in Ukraine is extremely necessary and should be created in the nearest future. With the transition from the punitive functions to the functions of analysis and investigation with a clear determining of the main tasks and competencies of the newly created body, the government will undoubtedly restore public confidence in the law enforcement bodies.

International experience has shown that reduction of the number of the state bodies of financial control and financial investigations would only increase the efficiency of their activities.

Thus, on May 26th, 2017 the International Conference on Financial Investigations took place at the University of the State Fiscal Service of Ukraine in commemoration of the 20th anniversary of creation of the Faculty of Training, Retraining and Advanced Training of Tax Police, in which I personally participated, as well as representatives from: Italy, Belarus, Georgia, the United States and the United Kingdom. The conference provided examples of successful work in the field of financial investigations by representatives of the US Internal Revenue Service, the Financial Guard of Italy (Guardia di Finanza), Her Majesty’s Revenue and Customs, the Investigative Service of the Ministry of Finance of Georgia, the Financial Investigations Department of the State Control Committee of the Republic of Belarus.

The Deputy Head of the Investigative Division of the Investigative Service of the Ministry of Finance of Georgia Merab Gamkrelidze noted that thanks to the work of the Financial Investigation Service, Georgia can acknowledge the absence of smuggling, counterfeiting and cigarette trafficking. Their Financial Investigation Service has such functions as: the detection of crimes and violations in the financial and economic sphere, operational and investigative activities, full investigation of crimes within the body’s competence, as well as prevention of administrative offenses, prevention of the violations of customs procedures, money laundering and infringement of the intellectual property rights.

For the record, I am deeply convinced that a thorough examination and balanced implementation of positive European experience, in particular of the experience of Lithuania, is important for the establishment of our own model of the role of our state in the regulation of financial and economic security issues, and that is the guarantee of the independence and integrity of our country and the condition for ensuring of its financial and economic security. Today I will briefly dwell on the experience of the Republic of Lithuania regarding this issue.

It is well-known that in the context of effective formation and maintenance of the economic security system of Lithuania, the Financial Crimes Investigation Service (FCIS) was established, the purpose of which is the development of methods of combating criminal activity against the state financial system. FCIS is responsible for the prevention and the analysis of money laundering and terrorist financing and has a public relations strategy in which it actively engages the society in the prevention of financial crimes.

Thus, the Money Laundering Prevention  Department of the Analysis and Prevention Committee is the main unit of the FCIS. This is the Lithuanian branch of financial intelligence service, which is obliged to carry out the following activities:

• collect and record the information concerning cash transactions and transactions of the customer, and concerning the customer who performs such operations and transactions;
• collect, analyze and publish information related to the implementation of measures to prevent money laundering and terrorism financing;
• to inform law enforcement agencies and other state institutions regarding the information on monetary transactions and transactions carried out by the customer;
• provide financial institutions and other entities with the information regarding the criteria for determining possible money laundering and terrorist financing and suspicious or unusual monetary transactions;
• report to the financial institutions, law enforcement agencies and other government institutions the results of the analysis and the study of their reports on the presence of the suspicious or unusual monetary transactions and transactions of the observation of possible money laundering and terrorism financing or violations;
• evaluate legal acts and submit proposals for their improvement in accordance with international standards and recommendations.

The Lithuanian FCIS pursues its goal — to take operational measures, detect and conduct pretrial investigation and prevent criminal acts, take measures to combat money and funds laundering which ensures the legitimacy of obtaining and using financial support from the European Union and other countries, by examining their commercial and financial activities and giving opinions to the specialists on this issue, as well as taking measures to reimburse hidden taxes, seeking to show as much as possible the influence on this activity of the actual revenue paid to the state budget.

Interesting is the information with reference to the Financial Crime Investigation Service [Electronic resource] on the practical constituent of the FCIS. Thus, the most resonant criminal offenses solved by the FCIS are the disclosure of:

—  the groups of Lithuanian and Latvian citizens that engaged in the illegal trade of the petroleum products;

— the two organized groups involved in the illicit trade of petrol and diesel engines in Vilnius and Mazeikiai;

— the group of people, including one Lithuanian citizen, engaged in cryptocurrency trade;

— the company selling plastic doors and windows in Klaipeda.

Here are some figures on the work of this Service for 2019 from the official website of the FCIS at the Ministry of the Interior of the Republic of Lithuania:

pretrial investigations initiated — 352;

353 pretrial investigations were completed (of which 259 were sent to court and completed, of which 555 criminal offenses were investigated) (+35 to the 2016 figure — 540);

the damage determined during the investigations is more than 49.9 million euros (28.4 million euros in the complete period and 21.5 million euros in the current period (+10.9 million euros to the 2016 figure — 39 million. euro);

during a closed investigation — 28.4 million euros (+6.7 million euros compared to 2016 — 21.7 million euros); when conducting investigations — 21.5 million euros (+4.2 million euros compared to 2016 — 17.3 million euros);

voluntary compensation to the state budget — 4.9 million euros in pretrial investigation cases;

The attempt to illegally obtain EU financial assistance — 14.5 million euros was explained and a study of economic and financial activities was conducted and the conclusions of experts were presented — 662 (+37 to 2016 — 625) and others.

I think that the statistics clearly speak for itself — the FCIS of Lithuania works successfully and very effectively.

By the way, at the end of my article I will remind to my dear readers that back in February 2018 Ukraine and Lithuania agreed to establish a Coordinating Committee for the implementation of the reform of the State Fiscal Service of Ukraine and to create the Financial Investigation Service, which, at the proposal of the Lithuanian party, was to be headed by the Minister of Finance of Ukraine, for the coordination of cooperation with the EU.

One of the key issues then, as a part of the State Fiscal Service reform, was the final elimination of the tax police and the creation of a single body to combat financial crimes against the state. Former Minister of Finance of Ukraine Oleksandr Danyliuk already then noted that the Ministry of Finance is ready to cooperate with all stakeholders regarding the establishment of a body to combat financial crimes against the state, provided that the transparency is ensured at all stages of this process. And it all unfortunately resulted in just a «desire» and nothing more.

I and most likely many Ukrainians ask a logical question: what prevents the current government from finally putting a «fat» period to this issue and create a new single body to combat financial crimes against the state — the Financial Investigation Service? I just don’t understand why the government lacks political will? The question is open, at least for me.

I want to notice that the position of the President of Ukraine is clear to me personally, as it was announced by Mr. Zelensky on September 19th, 2019 at the meeting with the leadership of the newly elected Verkhovna Rada of Ukraine and of the Government, where the issue of adoption of the law on the establishment of the SFR was among the top priority ones and it was necessary for to adopt the law by December 2, 2019.

I want to publicly address the people’s deputies of Ukraine — do not delay, there is no time for this. The State Budget provided for the establishment of the Bureau of Financial Investigations with — 1 288 141,4 hryvnias, after changes – funds that are left — 649 348,1 hryvnias. (50,4%). Given that it is already May, and there are 7 months left until the end of this year, I am sure that this is enough for the establishment of the Bureau (Service) of Financial Investigations and for the start of the work of the new single body. Although as far as I understand these funds are redistributed and used by the tax police.

In conclusion, I would like to note that the Taxpayers  Association of Ukraine will continue to discuss in its articles the prospects of the work of the future body combating crime in the field of finance and economy, the creation of which has long and purposefully been advocated by the Association together with the Ukrainian business. We hope for the significant progress in this matter in the nearest future.

President of the UNGO TAU

Vice-President of the Taxpayers Association of Europe

Ambassador Extraordinary and Plenipotentiary Grigol Katamadze