More than two state budgets. How money is withdrawn from Ukraine

Over more than 30 years of independence, at least $100 billion has been withdrawn from Ukraine abroad, said the head of the National Agency for Tracing and Asset Management (ARMA) Elena Duma. At the current exchange rate, this is more than 4 trillion UAH, or more than two state budgets of Ukraine for 2024 in revenue terms.

To return such assets, ARMA, back in July 2023, developed and approved a procedure for the sale of seized assets abroad.

In November last year, the government amended Order No. 719, which defines the procedure for the sale of seized assets at electronic auctions. Only then was it possible to attract foreign trading platforms outside of Ukraine, although ARMA has been operating since 2016.

At the same time, the agency cannot select a buyer on its own, but is obliged to create a competition commission with the participation of representatives of the Ministry of Economy and the Ministry of Justice. They must select an auction organizer based on eight criteria. They can be found in the Procedure for selecting on a competitive basis legal entities involved in the sale of seized assets.

In short, they are mainly about whether a participant in the competition has:

• adequate material and technical base for organizing and conducting the sale of assets at electronic auctions based on the auction principle;
• at least three years of practical experience in the sale of such assets;
• relevant personnel, such as valuers, with at least three years of experience in the auction field;
• corresponding price offer and the like.

That is, according to Elena Duma, the sale of assets is based on experience: for yachts it can be a global auction house, for real estate - a real estate agency, for works of art - specialized sites.

In addition, the updated Unified State Register of Assets Seized in Criminal Proceedings (USRAA) should be operational as early as January 2025.

Currently, USRAA has more than 324 thousand records, of which 72 thousand are assets managed by ARMA.

“As of 2024, ARMA’s total portfolio is already 12 billion UAH, of which cash management is 10 billion UAH, 8 billion UAH of which are in military bonds, that is, they are already working for the Defense Forces,” says Elena Duma.

According to her, in January-October 2024, ARMA received UAH 2 billion from the management of seized assets and their sale.

“Income from government bonds alone already amounts to UAH 700 million to the state budget. In August, we purchased war bonds for $31 million, which in one month brought in an income of $700 thousand. In September, we purchased war bonds for 6.5 million euros,” added the head of the agency.

By the way, ARMA began to show such effectiveness in 2023, when Elena Duma became the head of the agency. Before that, more money was spent on maintaining the institution than it brought in to the budget.

Lazarenko case

Speaking about the withdrawal of money from Ukraine, one cannot help but recall the fifth Prime Minister - Pavel Lazarenko.

While still in the position of First Deputy Prime Minister, he organized the supply of gas and oil products to the Dnepropetrovsk region, and since 1996 - to Ukraine as a whole through the commercial company Unified Energy Systems of Ukraine (UESU) of Yulia Tymoshenko. Superprofits were generated due to inflated gas prices for Ukrainian consumers. The money was withdrawn in particular through the Turkish company United Energy International Limited, a subsidiary of UESU.

In September 1998, the General Prosecutor's Office of Ukraine opened a criminal case against Lazarenko. He was accused of stealing state property on an especially large scale. But at the beginning of 1999, Pavel Lazarenko left Ukraine. He was detained in New York while trying to cross the border using a fake passport.

In 2004, Ukrainian businessman Pyotr Kirichenko, one of Lazarenko’s partners, testified that he transferred $30 million to the official and helped launder the money through Antigua, Switzerland and Poland.

In August 2006, a California court sentenced Pavel Lazarenko to nine years in prison and a fine of $10 million. The former prime minister was released in November 2012.

In total, Lazarenko managed to withdraw about $200 million from Ukraine. The state is still trying to return this money.

In August 2024, it became known that the US Department of Justice, through a civil forfeiture procedure, wanted to seize more than $200 million in favor of Ukraine. These funds were seized in different countries. Litigation on them has been going on for about 20 years.

In April 2017, the then Deputy Prosecutor General of Ukraine Yevgeny Enin said that the US government plans to return the money stolen by Lazarenko under certain conditions, and not just transfer it to the state budget.

According to Yenin, Pyotr Lazarenko’s defense team proposed that the American government conclude a “50-50” agreement, but the proposal was rejected.

Perhaps things will move forward after the leaders of the G7 countries agreed to provide Ukraine with $50 billion in loans, which will be repaid using proceeds from frozen Russian assets.

Russians are withdrawing money from Ukraine

Since the beginning of the full-scale invasion of Ukraine, the law has prohibited the removal of Russian owners or beneficiaries from companies. However, despite the restrictions, 621 companies have gotten rid of the Russian trace and not only continue to operate in our country, but they also win million-dollar government tenders.

“The Ministry of Justice proved in 8 out of 10 inspections that registration actions were illegal. However, the changes were not canceled, and companies with a whitewashed reputation continue to operate in the Ukrainian market,” Opendatabot says in its material.

The Ministry of Justice stated that registration changes can be canceled either by a court decision, or if a complaint is filed by a person whose rights have been violated, within two months from the day the person learned or could have learned about the violation of his rights, but no later one year from the date of adoption of the relevant decision, commission of action or inaction.

But in the vast majority of cases, more than one year has already passed since re-registration, that is, the deadlines have been missed. At the same time, there is no specific person affected by the withdrawal of Russian capital and the whitening of business.

“Now a rather strange situation has developed: Ukraine is demanding that foreign partners block Russian assets and transfer this money to us, while at the same time the Russians are calmly and with impunity withdrawing their capital from Ukraine. This finding is simply not controlled by government agencies whose responsibilities include monitoring registration activities.

Even if a private company brings a ready list of potential violators, and government agencies confirm them, nothing happens. The Ministry of Justice cannot eliminate these violations due to the long-standing nature of the actions and the absence of the person who suffered.

Which government body in Ukraine will take control of the re-registration of Russian assets and cancel the statute of limitations for such transactions? Who, in the end, should initiate further consideration of cases where the state of Ukraine is actually the victim? While these questions remain open, Russians continue to withdraw their funds, and their businesses continue to make money on Ukrainians and government tenders,” notes Opendatabot founder Alexey Ivankin.

Billions are siphoned off in grain

As BusinessCensor previously wrote, from 20% to 50% of Ukrainian grain exports can be used to transfer currency abroad and money laundering.

The “black grain” scheme is used to evade taxes and move currency out of the country. Unaccounted grain is bought from farmers for cash and registered with fictitious shell companies that export it abroad.

Along the way, the cargo may change hands several times and is eventually sold to the final buyer. But the funds received remain with one of the intermediary companies and are not returned to Ukraine.

Former Deputy Head of the Office of the President Rostislav Shurma, in an interview with Economic Pravda last year, argued that exporters who exported grain under shadow schemes did not return up to $20 billion in revenue to Ukraine.

“Everyone thinks it was some kind of big centralized scheme. No. The question is that it was an absolutely decentralized story, into which hundreds of entrepreneurs of various kinds, if you can call them that, ran. These are not large grain traders. Firstly, it is very difficult to administer, and secondly, there are risks associated with the fact that you may lose your credit history and may face criminal prosecution. This was mainly done by non-systemic medium-sized companies,” Shurma said.

In general, the export of “black grain” allows for the laundering and transfer abroad of proceeds from other shadow schemes that involve the sale of goods or services for cash. In particular, according to the SBU, this is how the organizers of illegal gambling schemes withdrew funds from Ukraine.

Kolomoisky's experience

In 2021, the American publication Pittsburgh Post-Gazette published a large-scale investigation into how Igor Kolomoisky laundered illegally obtained proceeds through PrivatBank and Deutsche Bank, buying steel mills and real estate in the United States.

The authors of the investigation claim that between 2008 and 2015, Igor Kolomoisky and his partners likely stole at least $750 million and then transferred the money through numerous bank accounts of companies opened in Cyprus and the Virgin Islands. Ultimately, the funds ended up in the United States through Deutsche Bank USA - employees of the institution issued fictitious loans to companies controlled by the oligarch.

About $526.6 million was transferred to companies controlled by Kolomoisky and his partners in Delaware, where most of the money was used to buy 18 real estate properties, including nine metallurgical plants, five skyscrapers, two office parks and a closed Motorola plant northwest of Chicago. .

The US Department of Justice has repeatedly appealed to the court regarding the possible withdrawal of money from PrivatBank by Igor Kolomoisky and his partners. The claims in the lawsuits are in the millions of dollars.

Now Igor Kolomoisky has been in a pre-trial detention center in Ukraine for more than a year. He is suspected of fraud and embezzlement of PrivatBank funds, as well as organizing a contract murder in 2003. He was charged with several suspicions based on different episodes.

According to Kolomoisky himself, he was given the suspicion after a call from America.

Earlier it was reported that the oligarch was deprived of Ukrainian citizenship in order to simplify his extradition to the United States. However, there was no request from the Americans.

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$100 billion withdrawn from Ukraine over the years of independence is a substantial amount that would be useful to Ukraine in conditions of a full-scale war and an urgent need for external financing of the state budget.

However, for now they are nothing more than the legendary gold of Hetman Polubotok - everyone knows about the money, but they cannot get it. The return of assets, as the story of the same Lazarenko shows, is a difficult process extended over time without any guarantees. Therefore, there is no need to count on these funds yet.