Each corruption act has its own intention, its embodiment, and its logical conclusion. As a rule, the logical conclusion of any illegal act is laundering and extraction of unfairly accumulated funds somewhere afar from the jurisdiction where the money was stolen.
Close relationship existing between corruption and money laundering requires focusing on the stage when the proceeds of crime are gained, in order to prevent the legalization of such costs, which will make it almost impossible to return stolen money to taxpayers.
Among international organizations that focus on corruption as a source of accumulation of funds that can participate in the legalization (laundering) of criminal incomes, a special place takes the Financial Action Task Force - FATF an intergovernmental body, which purpose is to develop and implement measures and standards against money laundering on the international level.
FATF recognizes that corruption has sufficient potential to affect negatively the economic development of any country, it impedes the fight against organized crime and effective public administration, and it undermines the principles of trust in the society. That is why FATF prepares the Annual Report consolidating practical recommendations for combating corruption, money laundering, and terrorist financing.
FATF recommendations are recognized by all countries-members of this organization and became a standard for improvement of international and European legislation on anti-money laundering.
Since 1st January 2017, Ukraine has joined BEPS (Base Erosion and Profit Shifting) Plan. This indicates the intention to become a member of FATF regime for the automatic exchange of tax information within the framework of FATF.
Therefore, FATF rules are not yet applicable to Ukrainian citizens. However, it should be noted that participation in FATF requires introduction of the standard CRS (the standard for automatic exchange of financial information), which obliges banks, insurance companies, and brokers to provide information about their clients.
This is about earnings from sale of property, income received from funds in accounts, payments made to such accounts, income from interest, dividends and insurance payments. This information is collected from all individuals and entities. This does not hide the owners (beneficiaries) of legal entities, as the CRS standard uses a very broad concept of controlling persons, meaning founders, trusted founders, beneficiaries, individuals who exercise full control over the trusts.
It also includes a number of indirect owners, in particular individuals responsible for making managerial decisions, general directors and even those with broad powers (representatives according to general power of attorney or instructions for managing accounts). In other words, in case of adoption of FATF standards, many residents of Ukraine will appear in foreign legal entities as a shareholders or owners of a bank accounts. Information about the owners will become accessible to the controlling bodies.
Therefore, a question is arising: if the methods are well-known and the anti-money laundering standards are described up to the last comma, why a country that desperately needs to fight corruption does not implement them? For some reason, our "fighters with corruption" do not understand the simple truth: if the corruption offender will keep corrupt money under the mattress, fearing to be tracked because of tightened control over cross-border transactions, it will be much easier to return such assets to the state.
Money laundering is hand in glow with corruption. It's time to realize that we will feel results of the fight against legalization of the stolen money only if transparent and understandable FATF algorithms will start to work, the effectiveness of which is proved by international practice.
It does not matter how many new anti-corruption bodies or anti-corruption courts will be established in Ukraine, as the result of their activities will be diminished without a clear procedure for blocking of money laundering. Closing suspicious financial transactions within Ukraine would greatly facilitate arrest and return of corrupted money to the state budget of Ukraine.
In fact, FATF rules and practices are well-known and available. Ukraine only needs to implement them and use them for effective actions to return the dirty money to Ukrainian citizens.
Yevhen Kalinin is a lawyer leading legal department of a Member of Ukrainian Parliament.
Yevhen is responsible for investor-government relations, communications with authorities of Ukraine and Estonia, drafting and anti-corruption expertise of bills in Corruption Prevention and Counteraction committee of Verkhovna Rada of Ukraine.
Yevhen is also a counsel at the local law firm, responsible for the digital and media law practice and GR practice.