Problems that Remain in E-Declaration

Today, with 341 votes, the Verkhovna Rada of Ukraine has adopted draft law 9534 with the President's proposals after vetoing it. Earlier, MPs decided to restore e-declaration and resume the checks but sought to close the register of declarations for a year. This caused a huge public outrage. 

Can we assume that there is a happy ending?

Unfortunately, the ending is only partially happy. Before that, parliamentarians adopted a number of quite dubious amendments, to which the President did not react and did not propose to correct them. 

Some of the changes introduced by the MPs do not simplify the declaration system, as provided for by the memorandum with the IMF, but on the contrary, complicate it, adding many rules and exceptions. Other amendments unbalance and weaken the rules of declaration. In the future, this will require the resolution and adoption of a new version of the Law On Prevention of Corruption to correct this problem. 

So, which negative aspects of this law require our attention?

Firstly, it is now possible to conceal all information about the same asset, which can be specified only in one section of the declaration. For example, the money received as a gift can be specified in the section on cash, where one needs to indicate the amounts and currencies. At the same time, there will be no need to indicate this money in the income section, which requires disclosing the source of receipt of such a gift. This will be enough to fill out the declaration, while the public and investigative journalists will lose the opportunity to see part of the information on the origin of funds in the open register.

Secondly, MPs allowed not to indicate rented real estate up to 75 m2 in their declarations if the costs for it are compensated to them. This is another blow to the completeness of declarations in the open register. Earlier, TI Ukraine opposed changing the rules for declaring rented assets.

Thirdly, heads and deputy heads of separate units and branches of legal entities are excluded from the circle of declarants. While corruption at state-owned enterprises, in particular at tenders, has repeatedly become the object of public coverage and investigation by law enforcement agencies, the public will no longer see the declarations of the leadership of these autonomous "almost legal entities" in the open register (for example, of Ukrzaliznytsia or Energoatom). This happened because of the new wording of the term "official of a legal entity of public law," which, moreover, does not establish a clear permission for non-residents not to declare, which may become an obstacle to corporate governance reform.

Most of the newly created loopholes also relate to the renewed mandate of the NACP to check declarations. Thus, currently, the NACP is prohibited from checking the information from declarations that was already checked earlier without detected violations. Given that the quality and completeness of previous checks in some cases was very ambiguous, and the NACP could not use the full range of verification means, this will become in fact an indulgence for declarants. The conclusion of the Agency's external audit by international experts also revealed numerous deficiencies in the implementation of financial control mechanisms by the NACP.

Roughly speaking, if the NACP did not use to have access to the foreign register of one of the foreign states, and now it has obtained it and revealed undeclared corporate rights, this may result in no consequences for the declarant. The information in the section on corporate rights was once checked by the NACP, and no violations were found. Another example concerns the recently obtained right of the NACP to be granted banking information without a court decision, which hardly managed to become a systematic practice during the checks. We also had questions about the data received as a result of expert examinations, which were used by the NACP in previous checks.

Another loophole that may be used is that now the real estate and cars of declarants that they acquired before they officially became declarants will not be checked. In addition, there may be difficulties with the information taken from the state registers when filling out the declaration — due to their incompleteness and errors, as well as the novelty of the relevant legislation. 

One should not forget about another draft law — 9587-d, which is signed by the President and needs vetoing as well. TI Ukraine told more about the problems in it here.

Unfortunately, because of such a long-awaited law that has been adopted today, to some extent, the declaration system in Ukraine has become complex and unbalanced. This is unfortunate because in the past, its development was positively assessed by international organizations such as the OECD or GRECO. Therefore, we are convinced that it is necessary to correct all the shortcomings as soon as possible by adopting the relevant draft law, without waiting 2 months from the date of promulgation of the law, when the register will open.

Oleksandr Kalitenko, legal advisor at Transparency International Ukraine