THE STRATEGIC

VIEW

Expert perspectives on international law

Business Crime

2016

Legal analysis, forecasts and opinion by

leading legal experts in key jurisdictions

SEPTEMBER 2016

THE STRATEGIC

VIEW

2016

Contributing Editors
Ryan Junck and Keith
Krakaur, Skadden, Arps,
Slate, Meagher & Flom LLP

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TABLE OF CONTENTS

Business Crime

96

BUSINESS CRIME 2016

Volodymyr Bogatyr
BOGATYR & PARTNERS

UKRAINE

Volodymyr Bogatyr examines Ukraines police and

prosecution office reform, investigation challenges and
political interest in Ukrainian law and legal framework

1. What trends, in terms of activity or focus, have

you seen in the prosecution of business crimes in
your jurisdiction in the last 12 months?
Business crimes in Ukraine are regulated by
section 7 of the criminal code, articles 199235.
It should also be noted that not so long ago
Ukraine passed the law on decriminalisation of
economic crime, which envisages the imposition
of sanctions in the form of a fine for committing a number of economic crimes, instead of the
sentence of imprisonment. In case of failure to
pay the fine within the time limit set by a court
decision, it may be replaced by a court with
another penalty.

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This law also cancelled criminal responsibility

for certain acts in the sphere of economic activity,
and translates these actions into plain administrative offences, so that they are no longer classified as
criminal offences. Therefore, the following actions
are no longer classified as criminal offences: violations of the order classes of economic activities
and the activities of financial services; engaging
in forbidden types of economic activities; illegal
opening or use of foreign currency accounts
outside Ukraine; fictitious bankruptcy; deception
of buyers and customers; illegal actions regarding
privatisation issues; and introducing into circulation, or selling, products that do not meet the
required standards.
The number of murders and kidnappings has

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SEPTEMBER 2016

[A]t this time, law

enforcement officers
rarely investigate business
crimes such as a fraud
and embezzlement
because they are focused
on other crimes

our fellow lawyers, as currently mass searches

in the offices of lawyers are being conducted,
which violate the basic principles of advocacy.
Unfortunately, increased pressure is being put
on businesses by law enforcement officers who
continue to perform the orders of individuals
in business circles close to the president and the
other power structures.
In this regard, we expect that many Ukrainian
businesspersons will be forced to leave Ukraine
and seek political asylum in other countries.
As before, the most effective way of defending
a clients interests is through the courts despite
the fact that selective justice is part of Ukrainian
reality. We have to challenge a big enough volume
of proceedings made by investigators directly in
the examining court.
2. Are enforcement agencies particularly focused on
any specific industries or crimes?

increased in Ukraine during the recent period.

We most often represent the interests of injured
parties and our practice is closely linked to the
representation of victims. We must mention
the observance of the increase in the number of
unlawful seizures of enterprises and frauds with
respect to both domestic and foreign investors.
This is facilitated by an imperfect judicial system
according to the ratings and an increase in the
uncontrolled proliferation of weapons, provoked
by military actions in eastern Ukraine. Many
demobilised fighters are returning to their homes
from the ATO zone with illegal weapons in their
hands, which are then resold at inflated prices, and
this impacts the general increase in all crime rates
in Ukraine. Since the beginning of the conflict in
ATO, Ukraine has lost around 240 million dollars
from business crimes in the Donetsk and Luhansk
regions.
Unfortunately, due to the recent unsuccessful
police and prosecution office reform, crime is
only logged (recorded), but not followed by any
investigation. This in fact leaves us, as lawyers,
to personally conduct the investigation, acting for
the victims of fraud and other crimes. Frankly
speaking, we have become accustomed to this
mode of operation and we ensure that we provide
a wide array of information for the investigation by
making requests and providing evidence collected.
It is often said that lawyers have to support prosecution while representing victims in the courts,
essentially replacing the prosecution, because of
the insufficient level of skill provided by the prosecutor office.
We also have to represent the interests of

Unfortunately, at this time, law enforcement

officers rarely investigate business crimes such as a
fraud and embezzlement because they are focused
on other crimes related to killings and injuries.
We also consider the data collected by
researchers in the Global Economic Crime Survey
2016 concerning Ukraine, which is included in the
list of top 15 countries who believe their local law
enforcement agencies are not adequately resourced
to combat economic crime. Ukraine is positioned
seventh with 57% of respondents agreeing to this
statement.
Crimes committed in most cases are classified
as follows: misappropriation of assets; bribery and
corruption; manipulation of financial reporting;
unfair competition; cybercrime; violation of intellectual property rights; tax fraud; insider trading;
and money laundering.
3. Are enforcement agencies more or less focused on
pursuing cases against corporations or individuals?
Usually this occurs in spite of political interest;
cases where businesses are being put under pressure by law enforcers are not singular. Sometimes
law enforcement officials act out their competency,
especially regarding the tax police. This issue
is closely related to crony capitalism in Ukraine.
According to the daily chart of The Economist,
billionaire wealth as a % of GDP has the index of
7.8 in Ukraine and crony-sector wealth makes up
6.7 of this number.
It should be mentioned separately that violations made by the newly established bodies in the
form of NABU (National Anti-Corruption Bureau
of Ukraine) led to unlawful interference with the
advocacy. These events, during the last half of the
year, concerned the advocates and made them talk
about numerous instances of abuse of procedural

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BUSINESS CRIME 2016

rights by law enforcement authorities. Such practice roughly violates client-attorney privilege
and international standards and guarantees of
advocacy.
Such practice can be opposed by examining documents and storing them in different
jurisdictions.
4. Does the legal framework concerning the prosecution of business crimes allow for extraterritorial
enforcement? Are such matters being pursued?
We are currently investigating crimes associated
with the misappropriation of funds from Ukrainian
banks to companies in the Baltic region, Cyprus,
the US and the UK. We successfully cooperate
with agencies such as MOKAS (Unit for Combating
Money Laundering), FBI (Federal Bureau of
Investigation), SOCA (Serious Organised Crime
Agency), SFO (Serious Fraud Office), Prosecutors
Offices and others. Furthermore, we use mechanisms such as worldwide freezing and piercing the
corporate veil, discovery orders and other types of
injunctions. Moreover, we find ways to investigate crimes related to attempted murder, working
with the jurisdictions to which there is no mutual
legal assistance agreement such as with the US or
Liechtenstein. The main difference with practices
outside Ukraine is the possibility of using court
cases for trials of civil and criminal fraud which is
different to the Ukrainian system where fraud can
be only criminal.
5. What judicial or legislative developments have
impacted the prosecution of business crimes in
your jurisdiction in the last 12 months? Are there
any significant proposals for reform of the legal
framework that governs business crimes in your
jurisdiction?
Among the reforms, the introduction of the institute of special confiscation and conviction in
absentia should be noted. The introduction of
such measures requires a special regime of judicial investigation in cases where such confiscation
is provided for third parties, which are not the
subject of crime. Therefore, we believe this violates
the basic principles of the European Convention
on Human Rights.
Unfortunately, reforms held during the last
five to seven years have not been able to contribute
to objective investigation of cases and to determine before prosecution and investigation the
real problem, such as the feasibility of the investigation, satisfaction to compensate for the damage
and return the lost funds or assets, as well as
crime prevention.
The judicial system still bears signs of a repressive nature. In most cases of crime, the prosecution
asks to keep the suspect in custody for the duration

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The main difference with

practices outside Ukraine
is the possibility of using
court cases for trials of civil
and criminal fraud which is
different to the Ukrainian
system where fraud can
be only criminal

of the investigation, and the release bail, especially

in political affairs, is often motivated to be incommensurable compared to the position of the person
and the criminal investigation on the assumption
that he has committed the crime. It should be
noted that the law enforcement authorities often
make public statements accusing those or other
persons without waiting for a judicial investigation. Such practice, in our opinion, contradicts the
European practice that respects the presumption
of innocence.
According to the Corruption Perceptions Index
of 2015, Ukraine is placed at the 130th position with
a score of 27. Furthermore, the data collected by
the World Justice Project Research in 2014, which
places Ukraine just before China with an index
0.45 regarding the protection of fundamental
rights, speaks for itself. Additional surveys
suggest that corruption practices are still widespread in Ukraine. This sad statistic evidences
the difficult conditions in which Ukrainian advocates have to work in defending clients rights and
upholding the rule of law.
Recently, when Arseniy Yatsenyuk was Prime
Minister, he shared his opinion on who should
investigate business crimes in Ukraine, he noted
the need for allocation of jurisdiction between law
enforcement agencies, in particular the transfer of
the investigation of economic crime to a separate
single body by creating economic police, which
would take over functions from the national
police.

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Since the beginning of the conflict, Ukraine and

Russia virtually stopped cooperation and the
exchange of information. It is very important to
note in connection with the fact that the economic,
family and partnership relations between the
citizens of both countries never ceased and unfortunately, the criminals frequently use this.
It should also be noted that the European law
enforcement offices find it hard to request information directly from Ukrainian law enforcers due to
their reluctance to cooperate and, as I have often
had to hear from the heads of law enforcement
agencies from different European countries and
international organisations, there is a need to verify
the information coming from the Ukrainian side.
Mainly the requests coming from Ukraine
lack objectivity and Ukrainian law enforcement
agencies do not always comply with the formalities for the execution of requests for mutual legal
assistance. The circumstances of the request are
generally not clearly set out and do not match the
information sought.
Sometimes the requested information has
no relevant connections with the case materials.
This is further complicated by the lack of foreign
language speaking law enforcers and their knowledge of such processes.
Ukraine withdrew from the CIS agreement
on the exchange of information in the fight
against crime in 2015 for political reasons. The
Commonwealth of Independent countries consists

of nine full members and two associate states and

all of them have significant ties with each other.
As mentioned previously, often there are cases
that criminals operate on the territory of multiple
CIS states and such decision of the government
created an obstruction for cooperation between
law enforcement agencies.
On the other hand, in 2015, in the process of
implementation of the visa liberalisation action
plan with the European Union, Ukraine received
access to INTERPOL databases. Such connection
to INTERPOL databases means that Ukraine has
now become part of a single Criminal Information
System. The benefit of this includes the ability
to take part in fighting cross-border crimes and
fighting terrorism, money laundering, corruption, arms trade, and human trafficking. There is
hope that our law enforcement officers will use the
opportunity to exchange information with other
police forces around the world with regard to
international criminal networks in addition to the
ability to extradite wanted Ukrainians from any
other country in the world.
7. What unique challenges do entities or individuals
face when enforcement agencies in your jurisdiction
initiate an investigation?
At the moment, the main challenge is the lack of
investigation. It is hard to say more on this matter.
Of course, the professional level of the staff is much
lower than in previous years, as fictional reform in
police and prosecutors offices had cut out many
professionals from law enforcement agencies. At
present, the current staff of the above-mentioned
offices consists of university graduates who underwent intensive training courses during the reform.
Such courses were carried out in haste and this has

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UKRAINE

6. How common is it for enforcement agencies in

your jurisdiction to exchange information and cooperate internationally with other agencies? What
are the consequences of cross-border cooperation
on prosecutions of entities and individuals in your
jurisdiction?

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BUSINESS CRIME 2016

directly affected the level of professionalism of the

new staff. It should also be added that the lack of
professional experience of the staff plays a huge
role in the process of investigation.
In our experience, we can say that senior
management tend to conduct business crimes more
often than regular employees, and in most cases
this is ignored by the law enforcement officers,
even when it is well known to the public. However,
this is only apparent in those cases where political
interest is absent. One of the challenges of modern
investigation is that the current government stimulates an investigation if there is any political benefit
such as the elimination of political opponents or
of their financial supporters or creating a positive image of the current government, by creating
fictional trials and investigations that create an
image of successful reform activity for the population. Ukraine still has more than half of its economy
in the black market, which makes individuals and
companies operating in such a way unable to report
business crimes or try to satisfy their claims by the
rule of law as it would lead to their schemes being
uncovered. Also, although the trust of the public to
law enforcement offices such as the national police
has generally increased since the reform, this trend
is not supported regarding courts, especially the
supreme economic court of Ukraine, where most
of the judges were not affected by the reform.
Although recently judges were subject to investigations and some were indicted, no real proceedings
were held against them.
Comparing government statistics from
previous years, the rate of business crime has been
decreasing; however, it is hard to agree on this
matter. The number of clients seeking advocates
services on business crime matters is increasing.
We increasingly have to advise not only Ukrainian
clients, but international clients as well, due to
the specific character of Ukrainian law and law
enforcement officers, as well as the judicial system.
I also want to stress attention on the low level
of the judicial system in Ukraine. It should be
noted that Ukraine still suffers from a corrupted
judicial system, where decisions are based on kickbacks and the protection of interests of oligarchs
and individuals close to leading politicians.
8. Do enforcement agencies in your jurisdiction
provide incentives for individuals or entities to
self-report a business crime or otherwise provide
assistance to the government? If so, what factors
should individuals or entities consider when
assessing whether to self-report a business crime or
cooperate with a government investigation?
We provide clients with the procedure of compliance according to the FCPA and Bribery Act in
cases connected to the UK and the US. It should
also be noted that our clients ask us to provide

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Comparing government
statistics from previous
years, the rate of business
crime has been decreasing;
however [...] the number of
clients seeking advocates
services on business crime
matters is increasing

investigation of possible criminal risks in the

case of acquisition of a companys assets or entry
into any transaction. We also conduct an internal
investigation, which allows us to identify potential
crime risks inside the company. We have experience in representing companies in the case of
crimes as victims of actions from both top management and individual employees.
Law enforcement officers in Ukraine do not
stimulate such activity due to their conservatism
but, in our opinion, it would be beneficial for crime
prevention.
However, we should mention that the practice
of denunciations is increasing, although currently
there is no official point of view from the government on such practice. There are, however, signs
of such practice between rival companies, individuals and interested parties and activists.
9. Do enforcement agencies in your jurisdiction use
non-prosecution agreements (NPA) or deferred
prosecution agreements (DPA)? If so, how do such
agreements work in practice and what can entities
or individuals do to reach an NPA or a DPA with
enforcement agencies? If not, do you believe it is
likely that such agreements will become part of the
legal framework in the next five years?
NPAs are not used in our legal system. However,
there is an agreement on the recognition of guilt
and an agreement of settlement with victims of

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101

SEPTEMBER 2016

expands the tools to achieve such agreements

by the prosecutors office and will contribute to
the investigation being reasonable and finding
ways to return the assets and the payment of the
damage.
In these difficult conditions, we try to work and
claim, in practice, the establishment of the rule of
law and justice.

Volodymyr Bogatyr volodymyr@bogatyr.kiev.ua

Dr. Bogatyr has served as a Deputy Minister of Justice of Ukraine from 2007 to 2011, and was
recognised as The Honoured Lawyer of Ukraine by the President of Ukraine in 2010. He is
admitted as an advocate in Ukraine, a foreign advocate in Russia (2014) and in Poland (2015),
which gives him an extra competitive advantage and ensures that clients data can be kept safe
by storing it in a separate jurisdictions. In 2014, Dr. Bogatyr successfully acquired a Ph.D. in
Jurisprudence at the Institute of Legislation of the Supreme Council of Ukraine.

BOGATYR & PARTNERS is a full-service boutique law firm based in

Kyiv, Ukraine. The team has a particular focus and experience in
business crime, fraud, asset tracing & recovery, commercial litigation
in Ukraine and provide international legal assistance in challenging
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w w w.b o gat y r.com

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UKRAINE

crime on penalties and sentences. In our legal

system, there is a practice of deferral of punishment with a trial period without concluding the
convicted person in custody, which is very similar
to the methods of mediation in the UK and the US.
In my opinion, mediation and similar tools
must become instruments that will allow an
agreement to be reached with the accused and

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