Why is it so important for the authorities to push through their draft law on the BEB, which was criticized by business associations and was not supported by Western partners.
In 2020, in order to receive 1.2 billion euros in assistance from the EU, the Ukrainian authorities had to liquidate the tax police and announce a reform of law enforcement agencies involved in the investigation of economic crimes. It was planned to take away the “economic block” from the State Fiscal Service, the Security Service of Ukraine, and the National Police, which were “a nightmare” for business, and give it to a specially created structure - the Bureau of Economic Security (BEB).
On the day the law on the BEB was adopted, in March 2021, a message appeared on the president’s website that the Bureau would analyze “the beneficiaries of financial transactions and determine whether there are violations of the law in the circulation of funds from certain business or government structures.” And the SBU will lose “unusual functions for special services to investigate crimes related to corruption and organized criminal activity in the sphere of management and economics.”
The BEB will deal, in particular, with the investigation of money laundering, conversion centers, and in general will take away from other law enforcement agencies the functions with which they exerted pressure on businesses.
However, the story with the BEB immediately did not go according to plan: after the adoption of the law, a pseudo-competition for the head of the body took place. The former head of the tax police, Vadim Melnik, was elected chairman of the BEB. He was elected under the patronage of Deputy Chairman of the Office of the President Oleg Tatarov. The BEB staff was recruited through opaque manual competitions, or without any competition at all, mainly from other law enforcement agencies.
After a short time of functioning of the Bureau, it became clear that the BEB continues the harmful practices of Ukrainian law enforcement officers.
Last year, the activities of the BEB were investigated by the Temporary Investigative Commission of the Verkhovna Rada, which recognized the work of the body as ineffective. According to economist, coordinator of expert groups of the Economic Expert Platform Oleg Getman, in 2023 the shadow market for tobacco products grew to 23%, alcohol products - to 30%.
Due to gray schemes with excisable goods, the Ukrainian budget loses annually from 40 to 50 billion UAH; in tax twist schemes, losses range from 15 to 20 billion UAH. In total, due to the ineffective functioning of the BEB, the budget does not receive about 100 billion UAH annually.
This is why Ukraine's Western donors, who are now providing critical funding, are pushing for a reset of the Bureau.
The main requirement for the relaunch of BEB is the organization of a transparent competition for the position of director and the immediate recertification of all employees working there.
But government project No. 10439 proposes to conduct personnel certification only a year after the end of the war. And the competition commission, which will select the head of the BEB, will be formed in parity of six members - three from the Cabinet of Ministers and three from international organizations. That is, without the decisive vote of international affairs.
In parliament, the project was presented by the Minister of Justice Denis Malyuska; his ministry is indicated by the Cabinet of Ministers as the structure that developed the document.
Although, according to the People’s Deputy of “Voice” Yaroslav Zheleznyak, in fact the author of the “new concept” for the BEB is the Deputy Head of the Office of the President Oleg Tatarov, who controls the law enforcement sector in Ukraine.
When considering the document in the Verkhovna Rada committees, Denis Malyuska explained the delay in re-certifying BEB workers for a period of time “a year after the war” by the current shortage of personnel in the market due to mobilization.
In general, he asked for the draft to be approved as soon as possible and promised to finalize controversial issues for the second reading.
As a result, the finance and law enforcement committees approved the bill for consideration on the parliamentary floor. However, the Verkhovna Rada failed in the first reading of this draft law, which made it possible to postpone the restart of the Bureau.
BEB reform in exchange for Western money for Ukraine
At the same time, the G7 ambassadors sent a warning letter to the Chairman of the Verkhovna Rada Ruslan Stefanchuk with copies to Prime Minister Denis Shmygal, Minister of Economy Yulia Sviridenko, Justice Denis Malyusko, as well as the chairmen of Verkhovna Rada committees and the head of the Presidential Office Andriy Yermak.
The letter from the Ukrainian authorities contained four points that must necessarily be included in the draft law on the EEB:
- Open and transparent competition for the position of BEB Director
- Audit of BEB activities one year and three years after the appointment of the director
- The possibility of dismissing a director based on audit findings and the impossibility of dismissing him by government decision on the basis of “unsatisfactory results” of work
- Re-certification of all BEB employees and appointment of new ones according to a transparent procedure within a year after the appointment of a new director.
“The adoption of any BEB bill without these elements will negatively affect Ukraine’s fiscal stability, IMF financing conditions and European integration,” the G7 said.
Nevertheless, the next day, a government bill that did not meet these requirements was brought to the Verkhovna Rada for a vote. According to Yaroslav Zheleznyak, before the vote, deputies were put under pressure and threatened not to sign foreign business trips if “people’s deputies do not vote the way the Office of the President needs.”
Despite this, four votes were not enough to pass the draft in the first reading.
“It could have been enough, unfortunately, some colleagues from the opposition factions - European Solidarity and Batkivshchyna - added votes. Some people who told me personally that they would not vote. They came up and said, they were put under pressure: “Either we cancel business trips, or we vote.” Many were threatened,” said Yaroslav Zheleznyak
According to him, now business trips of people's deputies have become a method of political pressure.
“At the beginning of March, when the largest debate on our $60 billion aid would take place, the US Embassy, at its own expense, was going to send a delegation of Ukrainian people’s deputies from different factions so that they would work with congressmen, especially with Republicans, so that they would vote for aid. Now this business trip is blocked for deputies, including me,” says Zheleznyak.
Why is it so important for the authorities to push through their own version of the BEB reform, which puts vital funding for the country at risk?
According to the deputy executive director of the public organization Anti-Corruption Center Elena Shcherban, maintaining control over the BEB is a matter of survival for the authorities.
“For example, the Kolomoisky case, which is now being investigated by the BEB. The Bureau gave Kolomoisky suspicion; he is sitting in a pre-trial detention center, but gave him suspicion solely because NABU and the specialized anti-corruption prosecutor’s office were preparing suspicion for him. BEB was used to get ahead of NABU and SAP, they took him under guardianship and put him in the SBU pre-trial detention center and there they control everything he says. So that he cannot give out any information to independent law enforcement agencies, Kolomoisky is the bearer of colossal information about corruption in Ukraine and many fear him,” notes Shcherban.
According to her, it is important to immediately conduct pre-certification of BEB personnel. Because no matter how wonderful the new director is, he will not be able to work normally with personnel who actually report to Tatarov. And so that the inspection does not turn into the notorious prosecutorial or police certification, it must be carried out according to legally regulated rules, by independent people. The commission must have international members who can examine the applicant's virtue. The government project does not provide for anything like this.
What will happen to the money next?
In mid-February, an IMF team came to Kyiv and discussed the March tranche for Ukraine. It is not yet clear what specific amount we are talking about. Annual funding from the IMF should be approximately $5.4 billion. To receive it, Ukraine has undertaken to fulfill certain conditions - structural beacons. One of the beacons is an immediate reboot of the Bureau of Economic Security.
Funding from other donors in Ukraine is also tied to these conditions. So, if the IMF approves the allocation of funds, Ukraine will also be able to receive a tranche of $1 billion from the World Bank and 4.5 billion euros from the EU.
Therefore, the authorities are forced to pass through parliament as quickly as possible a bill on improving the work of the BEB. Her project was not approved by the business community and Western partners, and did not pass the first reading in parliament.
At the beginning of February, two alternative bills were registered in the Verkhovna Rada, which meet the requirements of donors and have already received positive feedback from business associations. However, the government so far refuses on principle to consider them and put them to a vote.
