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Asset recovery laws adopted by parliament are worsening seizure and confiscation regime in Ukraine

Today Ukraine’s parliament adopted a set of laws aimed at improving asset recovery procedures in the country.

Specifically, draft laws #3040 (on asset recovery and management office), #2540a (on asset seizure) and #2541a (on special – third party – confiscation).

However, the parliamentarians significantly changed the initial drafts developed and introduced by the government, to the extent that some of them undermine the goals declared by the government.

In particular, draft law #2540a worsens the already soft regime of assets seizure, jeopardizing the possibility to seize assets at early stages of criminal investigations and assets of third parties. The MPs are suggesting to set up very high standards of proof needed to be presented by prosecutors in court to seize assets, which could be compared with the standard needed to prove a crime and guilt of a particular person.

In order to seize assets prosecutors will have, in addition to proving their criminal origin, to calculate whether the value of the asset to be seized corresponds to the crime damages or illicit income. However, damages could be present in not every crime and illicit income might not be detected. It would give discretion for courts to refuse seizure warrants in almost any criminal investigation. This would mean that not only third-party confiscation will not work in Ukraine, but the possibility to confiscate assets directly owned by criminals will be also under serious threat.

Another draft law #3040, passed by parliament, is supposed to set up an independent asset recovery and management agency. However, MPs have changed the initial draft law introduced by the government to the extent that the law deprives the agency from the power to manage seized property, as well as to sell and/or transfer it if needed. This directly contradicts article 10 of EU Directive #2014/42/EU on the freezing and confiscation of instrumentalities and proceeds of crime.

It means that the agency, which parliament voted to set up, will in fact have no power to manage seized assets, leaving this function to investigators and prosecutors. Currently, prosecutors and investigators execute authority with no clear procedures, as well as tools of oversight and control, resulting in a high risk of corruption, ineffectiveness and violation of property rights.  We stress on the Minister of Justice statement that asset recovery laws changed by parliament contradict the initial drafts suggested by the Government and might worsen already existing tools of seizure and confiscation. Moreover, Vitaliy Kasko, head of the Interagency Group of Asset Recovery, confirmed that these draft laws  – after changes in parliament -will harm the work of law enforcement agencies, including the newly established National Anti-corruption Bureau.

It should be noted that only 320 EURO of confiscated assets pursuant to sentences for corruption offence were recovered to the state budget during six months of 2015.