The notion of implementation is making another attempt to overcome the national mentality, albeit at a somewhat lower level, in terms of big-time politics, yet even more irksome, considering Ukrainian business interests. I refer to the legal implementation of the latest revised Berlin version of the FATF Forty Recommendations. Eventually. Serhiy Hurzhy, Chairman of the Finance Ministry’s State Financial Monitoring Department, initialed a bill introducing changes in a number of laws to combat money laundering. The document was submitted to the ministries and then to the Ukrainian cabinet.
Naturally, the Berlin recommendations were extended to Ukraine with good intentions, primarily meant to have Ukraine deleted from the FATF blacklist (it is still there, despite the lifting of FATF sanctions, and the fact is quite damaging to this country’s international image). Simultaneously this highest priority task also undoubtedly implies a desire to put one’s own house in order — yet the latter intent might well serve to retard the process. The trouble is that any semblance of law and order is loathed by many in Ukraine, which means that an attempt to establish such order according to European standards would be violently resisted. On the other hand, Ukraine, having lived for decades under rigid control, displays a rather tolerant attitude toward various innovations if they are somehow or other reminiscent of the old totalitarian system. Now that the bill is being discussed in camera, one can anticipate serious debates and strong objections to its individual principal clauses.
Most likely the proposed reorganization of the Finance Ministry’s Financial Monitoring Department as a “specially designated financial monitoring authority,” namely the Financial Reconnaissance State Committee of Ukraine, being a “central executive authority having a special status,” will cause the most heated debate.
The point is not all those additional central budget appropriations to sustain yet another flabby bureaucracy (especially considering that its functions would in many respects duplicate those of other executive structures, as when being authorized to “secure the implementation of a uniform state policy in preventing and combating the legalization of illicit profits — i.e., money laundering — as well as preventing the financing of terrorism, so as to exercise interdepartmental coordination of the efforts of state bodies in this sphere”). Most likely this will all boil down to placing the newly established authority under someone’s command. Its current leadership (within the Finance Ministry’s framework) made sure the bill contained the best proviso, reading that the new body would be rid of Finance Ministry control and instead be under the president’s personal supervision. How much is the Financial Reconnaissance State Committee idea in conformity with Leonid Kuchma’s latest political reform proposals? The proposals read that the head of state retains control over the Defense and Foreign Ministries, and that the president can appoint and dismiss the official in charge of that specially designated authority. Another point likely to draw fire is the proposed amendment to the law of Ukraine On the Prevention and Counteraction of the Legalization (Laundering) of the Proceeds of Crime, which reads that “political figures are persons discharging important political functions in Ukraine or abroad, heads of states or heads of governments, ranking government or judicial officials, as well as commanding officers of the military, ranking officials of bodies of the state, and those occupying or having occupied important posts within political parties. Business relationships with members of families and other relatives of such political figures fall under the risk which is identical to the risk befalling political figures.” The said law is also amended with a clause reading that subjects of preliminary financial monitoring (i.e., banks, financial, investment, insurance, real estate, and all the other state-run, private, joint-stock companies, pension and investment funds, stock exchanges, pawn shops, casinos, lotteries, etc.) “in addition to regular initial monitoring measures,” will be obligated to introduce procedures, with regard to such political figures, so as to establish that such individuals are political figures, and that, after receiving their superior’s permission to establish business relationships with such customers,” they must “take measures to determine the sources of income and finance [serving to enrich] such persons.”
How will political figures who vary in rank and position respond to the above, considering that the proposed amendment reduces them to what is perhaps best described as India’s lowest caste, the Harijan? Will they understand why other political figures, including deputies at all levels, are not included in that number? The latter are also likely to wonder whether they will be thus branded politically, should any of them appear to be or have been party leaders (thus, People’s Deputy Stanislav Hurenko once headed the Communist Party of Ukraine under the Soviets).
It would interesting watch the expression on a politician’s face when reading the proposed bill’s clause, namely that “a financial transaction shall be subject to financial monitoring and measures of caution shall be taken in regard therewith provided the said transaction has one or more indications specified in this Article.” Among the said indications is Clause 4, reading, “participation in financial transactions by political figures and their next of kin.”
Apart from the fact, that the stated bill envisages substantial social and legal guarantees for the financial reconnaissance staff, something no Soviet secret agent would have ever dreamed of, it also has an articled called “Special Fund to Finance a System of Struggle against the Legalization of Profits (Money Laundering) and the Financing of Terrorism” (quoted as laid down in a copy of the original text). The fund’s monies will, of course, be generated at the expense of proceeds from impounded or confiscated sums eventually transferred to a special state budget fund, to be used to finance that same system against money laundering... In other words, the said system is meant to work for its own benefit. Also, there are no guarantees so far that this system will not work on a selective basis.
