How can Ukraine return tens of billions of dollars siphoned abroad by corrupt officials and fraudsters?

The return of funds that were withdrawn from Ukraine through corruption and fraudulent schemes is one of the most important tasks in the current realities, because it will provide financial support for the Ukrainian Armed Forces and the Ukrainian economy. Unfortunately, in previous years this work was completely failed by the authorities.

Journalists from Mind managed to obtain information about foreign jurisdictions that the state of Ukraine has identified as priorities in the process of returning funds illegally withdrawn from its borders over the past decades. The editors of the publication found out how work is going on with these jurisdictions and recalled the most famous cases of criminal withdrawal of money.

Who is working on returning money to Ukraine today?

Mind sent a request to the National Bank, one of whose main tasks is to control the country’s banking system and prevent cases of money being withdrawn through non-transparent transactions with bank accounts. The request, among other things, included the following questions: “What amount of money, according to your data, has been withdrawn from Ukraine since 2010 by illegal methods or schemes? Today, when Ukraine desperately needs money, do you consider the return of previously withdrawn capital as a source of economic support in wartime? Whose support does Ukraine need for this?”

The regulator responded that “these issues are not within the competence of the National Bank.” And they advised me to contact law enforcement agencies.

The Ministry of Justice should also be an active participant in the recovery processes: its role in these matters is determined by the Cabinet of Ministers and is regulated by the state Strategy for the search and recovery of assets. The editors sent the department the same questions as they did to the NBU. “These issues do not fall within the competence of the Ministry of Justice of Ukraine. Contact law enforcement agencies,” the Information Policy Department of the Ministry of Justice told Mind.

The SBU and the Bureau of Economic Security advised Mind to contact the National Agency of Ukraine for Identification, Tracing and Management of Assets (ARMA) in response to relevant requests.

“Recovery of funds is a priority and mission of the Agency, especially during times of war. An analysis of activities for previous periods indicates that there were no initiatives and, as a result, no mechanisms adopted to resolve the issue raised,” ARMA Deputy Chairman Stanislav Petrov answered Mind.

Let us remember that ARMA was created in 2016. Prior to this, combating the laundering of corrupt funds fell within the competence of the National Bureau of Interpol, the Security Service of Ukraine and other government bodies.

Now ARMA faces another task - obtaining compensation from frozen Russian assets. “In 2024, ARMA joined Operation OSCAR, launched by Europol together with EU Member States, Eurojust and Frontex to support EU Member States’ financial investigations into criminal assets belonging to individuals and entities sanctioned in connection with the Russian invasion of Ukraine “, - Stanislav Petrov clarified.

In addition to ARMA, there is at least one other government agency that deals with asset recovery. This is the Deposit Guarantee Fund. Most of the banks that participated in the withdrawal of large sums went bankrupt in 2014-2017. “The Fund’s work to return funds withdrawn abroad from banks continues at the pre-trial and judicial stages in the relevant jurisdictions,” the Fund told Mind.

According to representatives of the Fund, the mechanism for returning funds provides, among other things, for sending relevant appeals, claims and statements to government agencies, judicial and other law enforcement agencies of foreign countries. Funds in such cases, as a rule, must be returned on the basis of a corresponding decision of a foreign court. “To do this, the Foundation attracts foreign specialists in the field of law of the relevant country to represent its interests. The support of relevant foreign law enforcement agencies (judicial authorities, courts, prosecutors’ offices) would contribute to a faster return of illegally withdrawn funds,” the department added.

Who took Ukrainian money abroad?

One of the oldest cases is the notorious story of the former Prime Minister of Ukraine Pavel Lazarenko. Let us recall that the “Lazarenko case” thundered in the late 1990s, that is, more than 25 years ago. Almost $200 million was transferred to the United States through various extortion schemes, including racketeering. In 1999, Lazarenko was detained by US authorities on charges of extortion and fraud and arrested. He was not returned to Ukraine due to the lack of extradition treaties.

In 2011, the former head of the National Bureau of Interpol, Kirill Kulikov, stated that Ukraine would never be able to return Pavel Lazarenko’s money, because funds seized in the United States become the property of the American budget. In 2016, the New York Times reported that Pavel Lazarenko not only seeks political asylum in the States, but also hopes to get “his” fortune back. And in the summer of 2024, the US Department of Justice announced that it was trying to confiscate Lazarenko’s $200 million in favor of Ukraine.

Another “exemplary case” is the so-called “Boiko towers”. The corruption scheme, implemented in 2011 with the active participation of Yuriy Boyko, the Minister of Energy of Ukraine from the team of President Viktor Yanukovych, consisted of seizing $460 million of public funds through shell British companies under the guise of purchasing rigs for oil and gas production.

In general, the damage caused to the Ukrainian budget directly by Viktor Yanukovych and his entourage is estimated at almost $70 billion. In particular, the case of the former Minister of Revenue and Duties of the Yanukovych era, Alexander Klimenko, involves an amount of $12 billion transferred abroad through Austrian and Cypriot banks .

The owners of PrivatBank, on the eve of the nationalization of the institution in 2016, according to official information, caused damage to the state budget of Ukraine amounting to $5.5 billion - this amount was announced in its report by the auditing agency Kroll. The money was transferred to Switzerland and the USA. And the owners and top managers of another large bank, Rodovid, withdrew almost $3.2 billion from Ukraine to Latvia, Cyprus and other countries.

Also, relatively recently, a scheme to inflate the cost of electricity, known as “Rotterdam+”, received great publicity - losses from it are estimated at $1.7 billion. The money passed through Cypriot and Dutch accounts.

Among other high-profile cases of money transfer outside Ukraine, it is worth mentioning the activities of Sergei Kurchenko, whose entourage siphoned off about $2 billion through schemes in the energy sector, theft at state-owned enterprises Ukrspirt (almost $200 million), non-transparent procurement and other transactions in Ukravtodor ($500 million), Naftogaz ($1 billion), Kiev Metro ($30 million), schemes with illegal land acquisition in Kyiv ($200 million).

In the cases mentioned, Ukraine lost about $97 billion. And this is only part of the Ukrainian money withdrawn since independence. Among the countries they ended up in are the USA, Great Britain and other states that are now active partners of Ukraine in countering Russian aggression. Therefore, it seems quite logical to hope for help from the authorities of these countries, including in the return of funds lost by the Ukrainian economy at one time.

What is needed to return money stolen from Ukraine?

To return assets, it is necessary to obtain a court decision from the country in which these assets are located. “This is a common task of the authorities to help ARMA comply with the court decision and return funds to Ukraine to support the economy during martial law. The problem is that we are not members of the European Union and our justice is not implemented with the justice of the EU and other countries,” explains Stanislav Petrov.

As Mind has learned, over the past five months, ARMA has entered into interdepartmental agreements on the search and management of assets with Malta (Bureau for Tracing and Recovery of Assets), Kazakhstan (State Agency for the Management of Recovered Assets), Moldova (National Anti-Corruption Center), Romania (National Agency for the management of seized assets), the Federation of Bosnia and Herzegovina (Federal Agency for the Management of Seized Assets).

According to Stanislav Petrov, the same draft interdepartmental agreements with France, Denmark, Estonia, Albania, Italy, Croatia, North Macedonia, Belgium and Finland are currently being processed. Additionally, draft cooperation agreements have been sent to 12 countries, including: Great Britain, Canada, Germany, the USA and Japan.

“Cooperation continues with 88 countries and international organizations in the field of identifying and tracing assets. Based on the results of the analysis and comparison of quantitative indicators for identifying and searching for assets abroad, priority jurisdictions were identified to improve access to information and develop asset recovery mechanisms,” ARMA told Mind. Such jurisdictions include the UK, Spain, France, Switzerland, USA, Latvia, Czech Republic and Poland.

The Deposit Guarantee Fund, which heads the process of returning money withdrawn from bankrupt banks to Ukraine, is also working on the return of funds. “The Fund supports relevant out-of-court, pre-trial and judicial proceedings in many jurisdictions, in particular in the USA, Great Britain, Switzerland, Liechtenstein, and Cyprus,” the FGV told Mind.

Note that no one mentions such a jurisdiction as Austria, although Austrian banks were participants in many financial schemes to withdraw money from Ukraine.

How often in the world is “corrupt” money returned?

This depends on the jurisdiction and political will of the authorities of the country that seeks to return them. Obviously, large financial centers such as the US or UK, which have a lot of leverage, find this easier than other countries.

“Corruption funds are returned only after an international investigation and a court decision. Before that, you still need to find where exactly these funds are “hanging” and freeze them, and this in itself is a huge set of problems. For example, in Nigeria and Mexico there were cases of the return of assets that were stolen by one of the presidents. But even according to court decisions, the criminality of the way to obtain funds that are subject to return is recognized in no more than 50% of cases,” says Yaroslav Lomakin, managing partner of the British company Honest&Bright, which has been specializing in international financial consulting for more than 20 years.

In 2014, the UK promised to help return money stolen by Viktor Yanukovych’s entourage to Ukraine. The United States promised the same assistance, and some of the money was indeed returned.

Therefore, we can conclude that the political will of Ukraine’s allies - the USA and Great Britain - is the decisive argument in matters of returning funds to Ukraine. However, for this, the Ukrainian side must also work - collectively and consistently, and not “throw” the problem from department to department.