Archive for October 29th, 2016


E-declarations Ukraine – The cash issue

October 29, 2016

The end of October sees the deadline for tens of thousands of Ukrainian politicians, civil servants and other assorted holders of high public office to submit their e-declaration returns relating to their wealth (and as previously inferred, perhaps in far too much detail available to all and sundry – transparency is not necessarily the same thing as unrestricted public accessibility).

On the whole it is nevertheless a law behind which there is the right spirit of transparency and accountability despite its shortcomings (as expected with any Ukrainian law, it is not perfect), and of vital importance is the criminal liability carried with regard to deliberately misleading and/or recklessly erroneous statements.  (No reader would expect any serious attempt at diligently completing such an e-declaration without criminal responsibility when considering those required to complete it.)

To be fair, with little over 24 hours to go (at the time of writing) before the mandatory submission date expires, there are no major surprises forthcoming from the declarations submitted.  There are some very rich people running and managing the country.  It would be needlessly shallow to pretend to be shocked by the accumulated wealth of either politicians or leading civil servants, or heads of State Owned Enterprises.

Indeed some would appear poorer than “collective wisdom” rated their wealth to be – albeit there are certainly areas within the declarations that can be massaged upward or downward as those completing such declarations see fit.

Whatever the case, and regardless of the systems legislative short-comings, the as yet unproven ability to provide evidence for prosecutions, or alternatively to allow for the legalisation of questionable assets, there is notably a lot of physical cash (in numerous currencies) outside of the banking system held by almost every individual required to make e-declarations.


It has to be acknowledged that the vast majority of Ukrainians, be they billionaires, millionaires, the average Joe, or paupers, historically have very little faith in the domestic banking system.  It also has to be acknowledged Ukraine remains very much a cash economy – much of it grey/black in nature.  The net result is a very large percentage of the population, what ever the scale of their fiscal wealth, physically hold, and physically hide, their cash rather than use the banks or have it officially recognised somewhere in the system as being held.

It is somewhat pointless in trying to guess where some very large sums of cash have come from, whether a reader chooses to believe it has accumulated over time or is the result of a big “under the radar” transaction.  To be blunt, it is perhaps Utopian to think that NABU will have the time, energy, or finances to investigate all but the most questionable.

For most, the legalisation of these large cash sums, whatever its provenance, will be the result.  If so, perhaps having legalised it, these large sums may then enter the banking system for there is no longer a requirement to hide it.

Indeed, a reader may consider that a soldier fighting the war in the east, expected to defend the nation and perhaps die doing so for about $300 per month, notwithstanding the organised crime groups, may seek to relieve some of those making public declarations of such large cash holdings outside the banking system.  Personal security firms may now see a further uplift in business not only around dwellings of the affluent public office holders, but also around family members – for kidnapping and ransom would appear to become an increased possibility.

As previously inferred, if the bodged introduction of the e-declaration system does prove to prevent prosecutions then the entire event may prove to be the biggest, albeit one-off, government sponsored (and internationally backed) money laundering operation in memory.  Something akin to an unspoken “drawing a line in the sand”, ergo forgiving and legalising many past misdeeds but clearly laying down that henceforth there will be far less room for accommodation of such nefarious and criminal shenanigans.

Such an outcome is certainly not ideal, but is arguably better that continuing with the existing status quo where internally and externally of Ukraine it is expected that some major figures will be jailed for corruption – and yet thus far none have been.  Many readers are used to the wheels of justice turning slowly – yet the anti-corruption wheels of justice in Ukraine are clearly approaching glacial.

All of that said, just because a lot of cash is held by an individual far beyond their official salary (and other declared incomes), it does not mean it was (all) acquired through the dirty deeds – those dirty deeds have to be proven to have occurred.

For example, when the buying and selling of houses and cars historically has occurred in cash (in $ six figures frequently) – and that can still occur despite legislation that now seeks to makes such high value asset purchases electronic transactions – it is still necessary to prove not only that the cash isn’t the result of a land/house/asset sale in 2003 and the proceeds were retained in cash because the recipient didn’t trust the banking system then, and doesn’t trust the banking system now, but also to prove they are the proceeds of a criminal act.

It is a matter of what can be proven – and not a matter of what is perceived or asserted.

Looking forward, if Mr/Mrs X declares $500,000 in cash for this e-declaration period, and $750,000 in cash at a subsequently required declaration what is to be done – if anything?

As money in the bank and other hard assets will become increasingly less difficult (albeit still not easy) to trace, it follows therefore that one significant question going forward is how to account for the large amounts cash in hand (quite literally) when it comes to those individuals holding public office if the giving and/or receiving of bribes, or the otherwise facilitation of corruption via cash, is to be managed far more effectively?

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