The fact that Ukraine’s IT sector is thriving is a good thing for the country, but not all of the IT companies that are thriving are good.
In fact, Ukraine is a haven for fraudulent companies making massive amounts of money by cheating customers –a problem mainly caused by legislation that is bug-ridden, or entirely lacking.
The issue with incomplete or even missing legislation is a symptom of a lack of consideration for consumers rights by lawmakers – Ukraine simply does not have the same protections for them as there are in neighboring European countries.
Context in 2013
In early 2013, the BBC together with the Kyiv Post investigated a string of allegations made against a network of scam dating websites that were all run by a firm based in Edinburgh, Scotland: Cupid plc.
The dating websites in question – cupid.com, flirt.com and benaughty.com – would hire English-speakers in Ukraine in order to manage several accounts, send flirtatious messages to male customers all over the globe to lure them into paying for a subscription, netting money from thousands of people.
Even though the owner of the firm, Bill Dobie, denied the accusations at the time, a Kyiv Post journalist went undercover in 2013 for an interview in Zaporizhya with one of Cupid plc’s recruiters.
It was clearly explained to our journalist back then that the job involved posing as a female user of the dating site and encouraging male users online to buy memberships – the investigation was a success.
Now, even though Cupid plc is not active anymore thanks to the joint investigation by the BBC and Kyiv Post, these types of scams run from Ukraine have never been cracked down on by authorities here.
How it works
Among the various types of dating websites that operate on the web, nearly all the scamming websites use what they call a “pay-per-letter,” or PPL scheme.
The PPL scheme consists of charging customers for each message they send or receive, as well as per minute of video chat, if that option is available. Payments are usually made using online credits, which users buy in bulk prior to using the website.
The websites prey on users’ loneliness and lack of self-confidence – no matter how unattractive their profiles, customers are bombarded with messages in order to make them feel attractive – and in turn this makes them addicted to using the site.
On one side of the screen is the user who wishes to meet a woman, and on the other, impersonators – generally young females or even males, often students, whose job is to “manage” several profiles at once and who are never required to meet users in person.
Sometimes, users will be lucky enough to chat directly with a woman whose profile is also managed by impersonators from time to time, but this woman communicates only out of pecuniary interest.
Ads for such jobs are easily found on the main Ukrainian job-hunting websites, such as work.ua or rabota.ua.
Such scams survive because of current legislative loopholes in Ukraine, which allow fraudulent services to continue to profit from selling dreams to their clients, while exploiting their employees.
Inadequate laws
While Ukraine aspires one day to join the European Union, the country’s IT legislation is a long way from matching EU Directive 2011/83 on consumer rights, which regulates the provision on online services.
According to Oleksiy Stolyarenko – a Ukrainian lawyer who specializes in IT law – most IT companies in Ukraine are outsourcers –providing services to foreign companies by building a software product that is sold in their clients’ own countries.
The main reason these IT companies are doing so well in Ukraine is the lack of relevant regulation of the sector.
“Regulation limits opportunities for the industry to grow, and makes growth more expensive and complicated,” said Stolyarenko.
All the same, the Ukrainian parliament has passed two important pieces of IT legislation in the past few years. The first “On Electronic Commerce” in 2015, and the second “On Electronic Trust Services” in 2017.
Stolyarenko praises these laws, but so far they have done little to change the situation.
Lacking enforcement
Nataliya Koval – the owner of a legitimate and successful Ukrainian matchmaking website – agreed to speak to the Kyiv Post to give the perspective of a professional in the matchmaking business.
According to her, websites are pretty much free to do whatever they want, which is why she decided to create an alliance of matchmaking companies and dating websites in order to push for proper regulation in a unified manner.
Koval deplores the absurdity of the current legislation, explaining how her type of activity is legally registered under code 96.09, which includes shoe repair and other personal services.
And even if Ukraine were to strengthen these regulations, legislation without enforcement is not sufficient to protect consumers.
Election year
The laws passed in 2015 and 2017 marked the start of e-commerce regulation in the country. But even though both laws are supposed to protect consumer rights, Stolyarenko says that authorities are not enforcing them.
There is “almost no online enforcement against fraud – such as credit card fraud – as the capacities of Ukrainian cyber police are quite limited and stretched over different areas,”Stolyarenko said.
He also noted that 2019 is a crucial election year – with presidential and parliamentary elections – which means that there is very little chance for the parliament to work on consumer rights issues.
The near absence of policing of the web, combined with the lack of regulation, means Ukraine is far behind its western neighbors.
Gamechanger
An official of the General Directorate of Competition, Consumption and Fraud Prevention in France agreed to speak to the Kyiv Post anonymously as they are not authorized to do so by management.
According to the official, everything that concerns consumer rights in Europe is “very strictly regulated,” all in order to protect the consumer.
The internet having been such “a gamechanger” regarding consumption as we see it, it forced France and other Europeans nations “to totally re-think consumption regulations,” the official said.
When it comes to matchmaking websites – be it dating or marriage websites – “each website is forced to determine the true identity of every single one of its users,” the official said.
And “paying girls to either meet or speak to clients is considered pandering, which is a criminal offense.”
