Since its launch about 15 months ago, the Economic Security Bureau of Ukraine (ESBU) has been regularly reporting on its performance. For example, in the last few weeks alone, the ESBU prevented the theft of UAH 62 million of public funds, exposed the misappropriation of UAH 8 million by utilities, seized tobacco products worth UAH 31 million, and so on. However, according to MPs, the agency has opened criminal proceedings in 664 cases, but only 12 indictments have been sent to court. Due to this disproportionate result, MPs have raised questions about the effectiveness and possible corruption component of the Bureau's activities. Thus, at the end of December last year, the Temporary Investigation Commission of the Verkhovna Rada was convened, and in February 2023, the relevant Verkhovna Rada Committee found the ESBU's performance unsatisfactory. Consequently, in March, MPs registered a draft law in the Verkhovna Rada providing for the reboot of the Bureau and its management. Anna Reznikova, Senior Associate at Arzinger, Candidate of Law, and the attorney-at-law has analysed for Mind what should be expected in the field of economic security protection if the draft law is adopted and how lawmakers suggest changing the situation for the better with the disclosure of economic crimes.
Number and date of registration: 9080 dated 03.03.2023
Authors: Danylo Hetmantsev, Olga Vasylevska-Smagliuk, Yaroslav Zhelezniak, Volodymyr Tsabal, Yuriy Kamelchuk, Galyna Vasylchenko, Maksym Khlapuk
Stage: On 7 March 2023, the draft law was submitted to MPs for review.
Alternative legislative initiatives: The draft law has no alternatives.
Cost of the issue. As noted by MPs, the adoption, and implementation of the draft law will not lead to an increase in state budget expenditures, and the launch of the ESBU's effective operation will, on the contrary, attract additional funds to the budget.
Content. The authors of the draft law suggest revising the requirements for the structure and activities of the competition commission for the appointment of the ESBU director. However, the total number of commission members should remain unchanged – 9 people. The National Security and Defence Council and the Cabinet of Ministers of Ukraine (2 persons from each) are proposed to be among the entities that send their candidates to the commission. Another 5 people are appointed on the basis of suggestions from international and foreign organisations. It is proposed to set requirements for the members of the competition commission in terms of work experience, including at least 5 years in the field of law or prevention and counteraction of corruption.
International experts play a special role in the commission's decision-making process. Thus, the decision of the commission is considered adopted if at least 5 commission members, including at least three committee members from among international experts, voted for it. The activities of the competition commission and its members may be financed by attracting international technical assistance. It is proposed that the commission should submit one candidate (the winner of the competition) to the Prime Minister of Ukraine instead of three.
Early termination of powers of the Bureau's leadership. The key aspiration of the draft law is to hold a transparent competition for the position of head of the ESBU. The draft law suggests early termination of the powers of the ESBU Director, his first deputy and deputies, and the CMU to announce a new competition.
Re-certification of current employees of the Bureau. The draft law sets a requirement for the current employees of the Bureau to undergo a re-certification. The procedure itself should be carried out in accordance with the Procedure approved by the Director of the Bureau and conducted by the personnel commission, which should assess the professional competence, level of knowledge and skills, professional ethics, integrity, and conflict of interest of the current employees of the Bureau.
The position of lawyers. The idea of reforming the tax police was mooted as early as 2014. Eventually, in 2021, the relevant law "On the Bureau of Economic Security" was adopted. The purpose of the Bureau was to strengthen the economic security of the state, minimize tax pressure on businesses, and strengthen the fight against criminal offences in the financial sector.
The newly created body was supposed to separate the service and law enforcement functions of the tax service, as well as to resolve the issue of duplication of functions of pre-trial investigation of economic offences among law enforcement bodies.
However, it did not happen as expected. The creation of a qualitatively new pre-trial investigation body did not take place, as changing the name does not imply changing the essence.
The authors of the draft law confirm that in the process of staffing the Bureau, there has been a massive non-competitive transfer of former tax police officers to the newly created body.
Most of the SFS (State Fiscal Service) head office staff, who worked under the newly appointed Bureau director, were also appointed to the ESBU central office. Interestingly, the formation of the Bureau's staff is still in progress. In this respect, we should agree with the authors of the draft law that this state of affairs discredits the main idea and purpose of liquidating the tax police.
In the explanatory note to the draft law, the red line is the need to reboot the Bureau in order to counteract offences that affect the functioning of the state economy, as well as to reduce pressure on business and achieve economic growth.
Along with this, the MPs define the result of such counteraction as the attraction of additional funds to the state budget. In this regard, it is worth noting that it is impossible to achieve the goal of the reform without a qualitative change in approaches to economic offences and the elimination of pressure on businesses that continue operating in the context of war. An independent, professional, competitive selection of the Bureau's employees should play a special role in it.
The key points of the draft law. First. The approach to the formation of a competition commission for the appointment and dismissal of the Bureau's director is changing. The lawmakers took as a basis the experience of electing heads of anti-corruption agencies (National Anti-Corruption Bureau of Ukraine, Specialized Anti-Corruption Prosecutor's Office, National Agency for Prevention of Corruption) and selecting personnel for the latter. The Verkhovna Rada of Ukraine is not among the entities entitled to determine the members of the selection panel.
A special role is given to international observers, who can be appointed by the CMU on the proposal of international organisations, the list of which is established by the MFA. The list of candidates is agreed upon jointly by such international organisations. The requirements for commission members are also changing. While previously only citizens of Ukraine could be members of the commission, this restriction is now suggested to be removed. Instead, the requirements for at least 5 years of experience in the field of law or corruption prevention are introduced.
It should be acknowledged that the experience of preventing economic offences, which has not been proposed in the draft law, is also relevant for the commission members. The MPs suggest ensuring transparency and independence of the competition by distributing the votes of the commission members, as mentioned above.
Second. The requirements for a candidate for the position of the Bureau's director are changing. Thus, the requirement of at least 5 years of experience in senior positions in public authorities, enterprises, institutions or organisations, regardless of ownership, is no longer required. Accordingly, a citizen of Ukraine who is at least 35 years old, has a higher legal and/or economic education (specialist or master's degree), as well as at least 10 years of work experience in the speciality, may apply for the position of the Bureau's director.
Third. The procedure for terminating the powers of the Bureau director is simplified. Previously, the dismissal of the Bureau director required the Cabinet of Ministers to recognize the Bureau's work as unsatisfactory, which was based on the results of the director's report. Now, it is proposed to dismiss the director based on the conclusion of the Commission for External Independent Assessment (Audit) of the Bureau's performance, which establishes such inefficiency and improper performance of duties by its director. The Commission consists of 3 members appointed by the CMU on the basis of proposals from international and foreign organisations.
The Commission members shall be entitled to:
Fourth. The law requires re-certification of the existing staff of the Bureau and prohibits transfers to the positions of the Bureau without competition. It is proposed to prohibit the employment of citizens in the Bureau without a competition (including transfer from the category of positions of public and non-public staff members, civil service positions and positions of persons who have entered into an employment contract with the Bureau to another category).
A separate prohibition is established on the employment of a person to the position of the Bureau if the candidate has held any investigative and/or operational position in the tax police, Prosecutor's Office, the Security Service of Ukraine, the State Bureau of Investigations, the National Police and the militia for a total of at least 1 year before 1 January 2023. Of course, such a provision is surprising in terms of its one-sidedness, since the professional experience of a person who has previously effectively carried out a pre-trial investigation and operational support of economic crimes would be useful to the Bureau's employees without such experience. It, in turn, would ensure the effective launch of the Bureau.
It would be wise to guarantee a high-quality and independent selection of personnel with the aforementioned experience by confirming their professional qualities and competences by the relevant commission, as well as mandatory confirmation of zero tolerance to corruption and their impeccable reputation.
The lawmakers propose to conduct an assessment of all current employees of the Bureau within a year from the date of the first new director's election. It is suggested that the certification should include the following stages:
To conduct the interview, the Commission has the right to receive from the Bureau, NABU, SBI, NAPC and other public authorities any information about the employee necessary for the purposes of the assessment. For example, the number of disciplinary proceedings and complaints against the employee, compliance with the rules of professional ethics and integrity, including compliance of the employee's and his/her family members' expenses and property with the declared income.
It is planned to take into account information about the employee's non-compliance received from individuals and legal entities, state authorities and local self-government bodies.
The appraisal may include other stages. Based on the results of the appraisal, the Commission shall decide whether the employee has successfully passed the appraisal or failed the appraisal. Repeated performance appraisal is prohibited. Employees of the Bureau who refuse to undergo appraisal or who fail the appraisal are dismissed.
Thus, numerous violations in the selection process and the lack of effective results of the Bureau's work in the first 15 months have a negative impact on the level of trust in the newly created body, which requires appropriate measures from the country's leadership.
One of them is draft law No. 9080, which is not without certain drawbacks that should be eliminated in the future. The main purpose of these changes should not be another distribution of positions but to accelerate the launch of the Bureau, and its proper staffing, which will ensure effective pre-trial investigation of economic offences, as well as to eliminate existing drawbacks in the organisational work of the Bureau, and to eliminate any pressure on a business.