The hunt is on for the billions of dollars that the previous government allegedly stole. Ukraine’s prosecutor’s office on March 13 said that 70 people were involved in laundering and shifting some $70 billion overseas during the four years of Viktor Yanukovych’s truncated presidency. Altogether 33 former officials, including Yanukovych, his sons Oleksandr Yanukovych and Viktor Yanukovych Jr., insider business person Serhiy Kurchenko and others have had their assets frozen in the European Union, Switzerland, Lichtenstein, Canada and the U.S.
Authorities are bandying a dark figure of $70 billion that has been siphoned from state coffers. Aiding them on the ground in Kyiv are experts from the U.S. Federal Bureau of Investigation, Departments of Justice and Treasury, and a UK task force led by its National Crime Agency that includes experts in financial intelligence, money laundering and tracing criminal assets.
“Our professionals know how to find foreign assets that belong to individuals and corporations,” said James Price, the FBI agent in Kyiv who works as the legal attaché.
First Deputy General Prosecutor Mykola Holomsha admitted that it won’t be easy finding and recovering the stolen assets.
“There is a vacuum of information with regard to (former) senior corrupt officials that are wanted,” he said without specifying who. “In many cases the Interior Ministry and Security Service of Ukraine have had to start from scratch.”
Holomsha wasn’t available for comment when reached by telephone on March 14-15. The prosecutor’s office didn’t respond to an emailed Kyiv Post interview request with Holomsha and Deputy General Prosecutor Oleksiy Bahanets, both of whom are leading the asset recovery investigations.
Tracing the vast amounts of money will be a daunting but not impossible task asset recovery lawyers told the Kyiv Post.
Much first depends on what kind of plan and team is assembled to go after the money that is presumably cloaked behind layers of companies, trusts and other entities in multiple jurisdictions and concealed behind proxies to evade scrutiny and disguise cash flows.
At each step of the way facilitators, such as lawyers, accountants, notaries and other corporate professionals have aided the layering with the use of complex legal instruments.
Referring to the asset freeze orders doled out by Europe and North America, British Virgins Islands asset recovery lawyer Martin Kenny said that the likelihood of Yanukovych’s assets being in his name is “fairly remote unless he is a really, dull and slow moving creature.”
A cursory glance at the alleged money schemes used by Viktor Yanukovych, former presidential chief of staff Andriy Klyuyev, his brother and lawmaker Andriy Klyuyev, and by Oleksiy Azarov, the son of former Prime Minister Mykola Azarov, traced by Kyiv-based Anticorruption Action Center, shows that the lawyer’s assumption is correct.
The assets to which they are linked, are layered through various companies and in different European countries and lead to a trust in Lichtenstein and Austrian lawyer Reinhard Proksch whose office in Lichtenstein is the same as the trust.
The anticorruption center says that Proksch, a lawyer registered in New York who provides company formation services in Europe and America was used to help set up a complex web of companies to enrich Yanukovych and other family members, or any members of the Klyuyev family, who are close allies of Yanukovych.
He told Reuters in late February that “I am not a crook…I really think that we have done nothing wrong,” adding that he is ready to cooperate with authorities in Lichtenstein and elsewhere.
Proksch, said he never met Yanukovych but admitted setting up companies for business dealings in Ukraine, including transactions involving the hunting grounds adjoining the lavish Mezhyhirya estate that Yanukovych occupied.
So, unless the architecture that was used to shift and hide assets was faulty, Kenney said, investigators will be confronted with a colossal task “even if the level of intelligence and tradecraft used by the other side is remotely done properly.”
He added though that “sometimes it’s not that silly where the assets are in Yanukovych’s name and there could be an elaborate structure but stupidly puts his name down on the signature card so, you could have an offshore company structure holding the assets as being the owner ostensibly and Yanukovych can be an account signatory expressing control over the account.”
Still, lawyers with whom the Kyiv Post spoke unanimously said that a “dream team” will have to be built consisting of different disciplines like forensic accounting, forensic document examination, criminal investigators, intelligence agents, and then lawyers who have comparative legal training that lies at the intersection of all these sub-disciplines to drive the investigation forward.
“In parallel, you need a private campaign to trace assets to freeze and recover them and this could be done in conjunction with the private sector,” said Christopher Cardona, a dispute resolution partner with Chadbourne & Parke in London.
The key, according to Laurence Winston, partner and head of the litigation team at Squire Sanders in London, is “getting the information as to the stolen assets and any conversion of these assets,” referring to real estate transactions, or the purchase of stocks or bonds.
Generally, authorities, according to Winston, chronologically should “collect intelligence, trace evidence and assets; secure the assets with interim court proceedings; determine final liability and quantum with additional court proceedings; have court orders enforced and return stolen assets.”
At the moment private lawyers aren’t knowingly involved in the Ukrainian government’s asset recovery project.
According to Kenney, they could assist at the “scene of the crime starting with the central bank, (identifying) the counterparties involved, tracking what money laundering techniques were used — then do forward tracing of value along the value chain to the apparent taking of the money itself from a point of consumption to reverse tracing of dominion and control of money.”
In conjunction with the criminal cases that the Ukrainian government is pursuing, lawyers said civil cases should also be pursued to increase chances of success. Since the burden of proof is higher in criminal proceedings, Kenney said that “you can shift the burden to the agent (acting on behalf of the ultimate beneficial owner).”
Although Ukraine probably won’t embark on a public-private partnership, Kenney said “the public sector is built with law enforcement people who do the best job they can but might not have the best resources to reach all the layers. If you take a police officer, he’s trained at a certain level at a university. He’s not sitting at an intersection between complex civil proceedings compared with pre-emptive remedy law. Legal science needs to drive the investigation.”
Ultimately, what asset recovery specialists are up against are what Kenney describes as a tradecraft that is the “best in the world…and extremely exceptionally ingenious.”
They might face between 20 to 50 layers of well-thought out structures that are brilliantly constructed and involve dummy directors and companies, all of which makes it hard to drill down through those layers and get at the value.
The reason why the design of the architecture is complicated in Ukraine and other parts of the former Soviet Union, according to Kenney, is that it was an essential part of the spy infrastructure. Small, legitimate companies would be set up in multiple jurisdictions to conceal the true identity of the owner and source of money. These companies in turn would further intelligence gathering by having a legitimate presence in a given country.
When Communism imploded, a whole cadre of men versed in the tradecraft started selling their services to oligarchs and public officials so, “there’s a whole profession or tradition for hiding money,” said Kenney.
Timing is also key
“Action should be taken whilst political will remains,” said Winston, adding that there’s also an increased risk of “dissipation, conversion and layering of assets if there is a delay in commencing action and the court may refuse to grant injunctive remedies if there has been undue delay.”
However, since Yanukovych and others are under the spotlight, it might be too risky to shift assets to Latin America like Belize or Panama because the counter agents will be afraid to handle the money or charge a high price for their services, said Daryna Kaleniuk, executive director of Anticorruption Center.
“It’s harder for time to be an agent of success for defendants because when the heat is on there are many questions asked where this money came from,” explained Kenney. “Moving money around won’t be so simple right for the other side.”
Also beneficial are the asset recovery tools that are available to lawyers and investigators today. In England alone there is the Proceeds of Crime Act and numerous orders available for obtaining assets: Disclosure Order; Banker’s Trust Order; Norwich Pharmacal Order; and others.
“We have much better techniques, better access to information, better remedies, the judges are learning more and more how important it is to move these cases along,” said Kenney.
Still, it will take a lot of resources and a lot of work to recover the lost money, he concluded.
