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Multinational Efforts Focus on Recovering Billions of Ukraine Loot

In this framegrab provided by Russian TV Channel Vesti24 via The Associated Press Television News, showing Ukraine's fugitive president, Viktor Yanukovych speaking on Russian state television in Rostov-on-Don, Russia, Sunday, April 13, 2014

In this framegrab provided by Russian TV Channel Vesti24 via The Associated Press Television News, showing Ukraine's fugitive president, Viktor Yanukovych speaking on Russian state television in Rostov-on-Don, Russia, Sunday, April 13, 2014

Viktor Yanukovych and his “kleptocrat” inner circle took massive sums of cash and other assets from Ukraine since his presidency began in 2010.

Now the challenge is locating and recovering that loot.

And, experts say the task is daunting, and that it will probably take years to accomplish.

There’s no official figure as to the size of Yanukovych’s theft. But Ukraine’s acting Prosecutor General, Oleh Makhnitsky, has said it could be as much as $100 billion. That would be more than half of Ukraine’s 2013 GDP.

Makhnitsky told Reuters that up to $32 billion of that was cash transported in trucks to Russia as Yanukovych’s grip on power was crumbling.

Some of that money, he said, “is being used to finance the separatist actions in the east of Ukraine.”

Hiding massive amounts of cash and other assets is relatively simple, thanks to the structure of the world’s financial system, banking secrecy laws, and the use of anonymous shell corporations to move funds around.

“It is at the moment very easy to create legal entities, making it impossible to know that it’s one of these corrupt officials, or their associates, or their representatives, who de-facto [in fact] control these assets,” said Jean Pesme, Coordinator of StAR, the Stolen Assets Recovery Initiative run by the World Bank and the United Nations Office of Drugs and Crime.

“They can easily move money around without this being easily detected,” Pesme said, adding this tactic has been used in many countries.

The hunt for Yanukovych’s loot, according to Pesme, uses tools that are widely applicable in most financial crimes cases.

“You need a starting point,” he said, “and then, you unravel the process [sequence of financial transactions]. And what is absolutely critical to that is international cooperation, because, obviously, all of these transactions jump from one jurisdiction to another.

“It’s complicated, and it takes time, because it’s technically complicated for one to trace.” Pesme said. “The second challenge is to prove that the assets that you have been able to identify and trace are actually the proceeds of corruption.”

StAR is one of a number of participants in UFAR, the Ukraine Forum for Asset Recovery, which met in London last month.

The United States was represented by Attorney General Eric Holder. Britain’s Home Secretary Theresa May was also there, as were delegates from a number of European and other countries.

Holder told participants that within days of the February departure of Yanukovych, he sent a U.S. Justice Department team to Kyiv “to assess the needs of Ukraine’s investigation into any stolen assets belonging to its people.”

He also pledged that “the United States will never stop fighting alongside Ukraine and its partners to ensure accountability.”

Support for UFAR also comes from former U.S. Ambassador to Ukraine John Herbst, now Eurasia Center Director for The Atlantic Council.

“For over 20 years,” he told VOA, “elites in the [countries of] the former Soviet Union have robbed their countries’ assets and deposited them in Western financial institutions. This meeting suggests that, at least in some instances, Western countries will take concerted action to stop such looting.”

Ukraine’s transparency and accountability advocates applaud the internationally-led recovery effort.

“UFAR is crucially important for Ukrainian law enforcement to maintain [the] right focus on complex money laundering investigations,” said Daria Kaleniuk, executive director of the Anti-Corruption Action Center in Kyiv.

“With such support,” she said, “Ukraine has no right to fail on the asset recovery task. We as [elements of] civil society will keep pressure on law enforcement and government in Ukraine to ensure we don’t lose this opportunity. We are ready to be partners and assist them.”

One nation absent from the UFAR meeting was Russia, a signatory to the United Nation’s Convention on Corruption - one of the international community’s frameworks for collective action. Kaleniuk was not optimistic that Moscow would assist Kyiv.

“This country hides criminals like Yanukovych, [and] accepted billions in cash looted from Ukraine,” she said and makes it “unlikely we will recover these assets.”

But Herbst said it is hard to predict Russian President Vladimir Putin’s reaction to UFAR and Ukraine’s recovery efforts.

“He might decide that it is important to take a stand on principle, to send a signal to his team [cohorts] that he will take all measures to protect their ill-gotten gains by not allowing a precedent to be set with Mr. Yanukovych’s assets,” he said. “Alternately, as a small gesture to the west, or as part of an effort to build support for his puppets in East Ukraine, he could take a stand against Ukrainian oligarchs, including Mr. Yanukovych.”

The London meeting, while focused on Ukraine, also encouraged participating nations to improve their own anti-corruption laws and structures.

UFAR’s “Chairs Statement” notes “efforts by several countries to review their legal frameworks to benefit from best practices in other jurisdictions, and to ensure they can act diligently, effectively, and efficiently on asset recovery,” adding “both for preventing corruption and money laundering, and recovering assets.”

While UFAR is focused on Ukraine, many of the problems there are experienced in many other nations.

Raymond Baker, president of Global Financial Integrity, a Washington-based transparency and good governance advocacy organization, said a collective international response is needed to combat "this shadow financial system comprised of anonymous shell companies, tax haven secrecy, and trade-based money laundering techniques,” which he says, “siphons roughly a trillion dollars out of developing and emerging economies each year, decimates government revenues, facilitates corruption, and propels transnational crime.”
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    Jeffrey Young

    Jeffrey Young is a Senior Analyst in VOA’s Global English TV.  He has spent years covering global strategic issues, corruption, the Middle East, and Africa. During most of 2013, he was on special assignment in Baghdad and elsewhere with the Special Inspector General for Iraq Reconstruction (SIGIR).  Previous VOA activities include video journalism and the “Focus” news analysis unit. He also does journalist training overseas for VOA.