Organized crime groups are in rapid decline, yet corporate raiding and trafficking remain at high levels, while public corruption and conflict of interests are a significant problem, as is counterfeiting and cyber security.
These are
the main findings of Swiss non-profit group Organized
Crime Observatory, just two months into its assessment of corruption and
organized crime in Ukraine that is expected to conclude by September 2014.
Done in
conjunction with two corruption research pillars, the Terrorism and
Transnational Crime and Corruption Center in Washington, D.C., and the Basel
Institute of Governance in Switzerland, the
interim report has taken a structured and scientific approach to ascertain
the extent to which corruption and crime is entrenched in Ukrainian society.
Combining
raw figures from various agencies with qualitative analysis, OCO found that the
prevalence of organized crime groups has declined by 34 percent over the
decade. Data from last year show that 193 groups out of 258 have existed for
less than a year. However, the same statistics revealed that the “internationalization”
of Ukrainian criminal groups is growing.
“It is not the
mafia that choose illegal markets,” reads the report, “but the illegal markets
that choose the mafia.”
Illegal activities
Drugs are
the most frequently smuggled item through Ukraine – 70 percent of all smuggling
in 2012. Situated at the heart of the “Black Sea route,” increasing volumes of
Latin American cocaine, and synthetic drugs from China and India have been
detected in the Odesa port, including heroin from Afghanistan.
The report
indicated that Ukrainian law enforcement bodies often “provide protection for
the brokerage companies involved in smuggling.”
Some 20
percent of pharmaceutical products in Ukraine are counterfeit. And 50 percent
of cement and 30 percent of petrol sold in-country are counterfeit.
Tobacco
smuggling remains a problem and involves Ukrainian, Polish and Lithuanian
groups. One Interpol operation seized 250,000 packs of counterfeit cigarettes at
an illegal tobacco factory hidden underground in Ukraine. In another operation,
EU authorities seized more than 13,000 cartons of tobacco and tobacco products worth
€350,744 in tax and duty evasion in a 700-meter long tunnel under the
Slovak-Ukrainian border in 2012.
Citing the
International Organization
for Migration, the report noted that Ukrainian victims of human trafficking
seek the most help. The number of assisted victims in 2012 was at the same
level of 2006: 945 individuals.
“Ukraine is
a source, transit, and increasingly, a destination country for men, women, and
children subjected to forced labor and sex trafficking,” the report stated.
It
continued: “High level of corruption in law enforcement structures and general institutional
ineffectiveness are the contributing factors that at least partially explain
the shortcomings in fighting human trafficking.”
Corporate
raiding has become the preferred choice of redistributing property, but contract
killings are still a major concern that the report says are motivated by “failure
to pay debts, property distribution/division of spoils and elimination of
business competitors.”
The number
of contract killings is on a downward trend with 147 reported in 2007-2012.
Still, there were a number of high profile assassinations this year in Crimea,
Odesa and Kharkiv, meaning “the demand for criminal actors specializing in
violence is still high,” the report says.
Cybercrime
is a major cause for concern for Ukrainian law enforcement agencies in the
coming years. There were more than 2,000 cases of internet fraud registered in 2012
by the cybercrime unit of the police. The most prevalent schemes include
identity theft, fraudulent sale of non-existent goods, online Ponzi schemes, and
online banking theft.
“Every
fifth Ukrainian company and every second internet user have been the targets of
cyber criminals,” said the report.
Corporate raiding
The report
took a historical approach in assessing the rising phenomenon of illegal
company takeovers. Its origins date to the late Soviet period when owners of
kiosks, small cooperatives and private businesses needed to pay off local
organized crime groups for protection. But as state property and enterprises
were privatized, “raiders used a combination of violence, fraud and
intimidation to gain ‘legal’ ownership over privatized and privatizing
enterprises, many of which they already de-facto controlled.”
The report
cited corporate raiding as a “major disincentive to foreign and domestic
investment and a serious contributing factor for capital flight.”
It added
that no government activity or agency has a made a dent in popular perceptions
that “high-level officials not only protect the raiders, but are often
themselves the ultimate beneficiaries of the raids.”
Corporate
raiding sharply rose after President Viktor Yanukovych was elected in 2010.
Between 2010 and 2011, the number of complaints increased more than tend fold
from 75 to nearly a 1,000. There are now between 2,000 and 3,000 raids a year,
with an annual cost to the economy of $3 billion. Some 30 to 50 “raiding groups”
have been identified.
The
phenomenon is found in every sector of the economy, but is concentrated in
sectors with expensive physical assets, such as land, machinery and buildings,
and with a large and steady cash flow. These include, in particular, extractive
industries, the food industry, large factories and successful retail outlets
such as shopping malls, restaurants and hotels, reads the report.
Arms trading
Arms
trading in Ukraine are inextricably linked to its shipping and transport
industries with Odesa, the river port of Mykolayiv, and as of lately, the new
dry port Euroterminal being at the heart of shipment routes.
All weapons
transfers, licit or illict, are directed by the Ukrainian government, says the
report.
Public corruption
The report
observes that “Ukraine is the only country to have two recent prime ministers
imprisoned for corruption, fraud and money laundering…”
A breakdown
of statistics show that 26 percent of corruption cases were for
misappropriation, embezzlement or property fraud by abuse of power. The vague
transgression of abuse of authority resulted in 57 percent of cases, and
bribery in 32 percent of cases.
“Ukraine
has historically been characterized by widespread conflicts of interest in high
level and in the management of public finances due to a high impact of
oligarchic groups on state decision-making,” reads the report.
It then describes
in detail how former Prime Ministers Pavlo Lazarenko and Yulia Tymoshenko became
wealthy.
Kyiv Post editor Mark Rachkevych can be reached
at [email protected].
