UKRAINIAN INITIATIVE IN FIGHT AGAINST CORRUPTION

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1 America 2030 is a newsletter about fight against corruption, changes in legislation and transformation processes in Ukraine. America 2030 is an international company specializing in M&A, sale of natural resource licenses, debt restructuring, development of new sale channels and complex consulting services. MAJOR ANTI-CORRUPTION CHANGES IN UKRAINE FOR THE LAST THREE YEARS Revolutionary events, hybrid war in the east of Ukraine, economic decline and the restart of Parliament gave impulse to the active fight against corruption in Ukraine After revolutionary events of , Ukraine s new President Petro Poroshenko and the government established many anticorruption authorities, held local election. Hundreds of corrupt officials were detained before the cameras or without them. Many important reforms have been held so that Ukraine may be better integrated into the world community. Electronic governance began its development with new authorities. Also, State Bureau of Investigation and Anti-Corruption Prosecution Office were established. Visa liberalization between Ukraine and European Union is connected with establishment of Anti-Corruption Prosecution Office. Besides, deregulation has also been helpful in the efficient fight against corruption. Active steps towards deregulation have been taken (the plan of deregulation measures has been approved, regulatory base has been simplified, some licenses, certificates and permissions are no longer necessary). Important! We should point out to the adoption of law On Restoration of Confidence to Judicial Authorities in Ukraine. This law was adopted to reform judicial system, and to develop anti-corruption strategy for Another law was adopted to identify final beneficiaries of legal persons and public figures. Besides, some other new authorities have been established such as National Corruption Prevention Agency, National Anticorruption Bureau and Business Ombudsman. POLICE The National Police (since the summer of 2015) is still on the stage of formation in Ukraine, with ongoing elimination of bottlenecks and fight against corruption. According to the latest performance assessment of Ukraine s National Police, about 26% of administrative staff were dismissed. On the whole, 14% of the staff did not pass that performance assessment.. As a result, 5,257 persons failed to pass performance assessment and were dismissed from the police. 4,766 persons were recommended for reduction in position and 4,479 persons were recommended by the commissions for promotion. According to the Ukrainian Minister of Internal Affairs Arsen Avakov: "In Ukraine, according to the staff schedule, there should be 118,000 policemen and 12,000 civil servants. However, in practice, not all the positions are occupied. We lack 18,875 policemen and 1,497 civil servants and, in fact, 109,628 persons are on duty: 99,125 policemen and 10,503 civil servants. 15,670 policemen were taken to the new patrol police taking into account competition procedure and 13,180 persons were taken according to the special assessment procedure for units in antiterrorist operation zone. In general, 68,135 persons were assessed all over the country" Important! Cabinet of Ministers established the structural units of security police in the regions. Also, a new police unit has been established and it is called Department of Economy Protection 5,257 have not passed the assessment

2 JUDICIAL REFORM A judicial reform started in Ukraine the last year aiming at renewing judiciary system. Almost 3,000 judges left their positions before the beginning of the reform. Our goal is to make a real model for functioning of independent judicial authorities that would satisfy public demand on just and efficient courts in Ukraine", managing partner of the lawyers group Yur. KomM Ruslan Chornolutskyi said. We should also note that judicial reform includes the establishment of special anti-corruption courts. European Union has already supported the position of anticorruption activists and agreed that international partners of Ukraine participate in selection of anti-corruption court judges. According to Ukrainian experts, anticorruption courts should begin their full-scale work not later than at the beginning of DECENTRALIZATION OF POWER The Parliament has approved some government initiatives (102) on decentralization of power. The government granted opportunity to the local state administrations to get funds from the local budgets to pay for work of the local officials. President signed the laws on decentralization of powers as regards state registration of the companies. The Parliament has increased the powers of the local authorities as regards providing administrative services and transferred the function for real estate registration. Besides, the Parliament introduced changes into the Budget Code as regards formation and execution of the budgets of local communities. "Decentralization remains our priority and will only gain momentum. This year will already be the third year of full implementation of decentralization reform. So, in the towns and villages new and renovated schools, kindergartens, clinics and hospitals, stadiums and clubs, roads and sidewalks will also appear this year. And those are the things that directly affect the quality of daily lives of our citizens that also attracts foreign investors Prime Minister said. Changes in terms of decentralization provide a three-level system of local government. It is suggested that the system of administrative and territorial structure will consist of the regions, districts and communities. By the way, it is the communities that are proposed to be given the greatest powers and financial resources. Locally there will be representative of the state at the local level (prefect) to be appointed and dismissed by the President upon the recommendation of the Cabinet of Ministers. Also, some regions of Donetsk and Luhansk regions may receive special status. CUSTOMS REFORM The Ukrainian government organized 20 mobile groups to fight corruption in the customs. The government is organizing interregional customs to fight smuggling. The Ministry of Finance has also developed a draft law about the institute of authorized economic operators that was unanimously approved by the Government. Besides, the mechanism for automatic distribution of customs declarations was approved and some agreements between the governments were concluded on mutual assistance in customs affairs. One more step in this direction is connected with introducing automated system of customs services called Single window. "So, introduction of "Single window" at the customs allows to simplify and decrease the number of customs formalities, cut the time for customs procedures, minimize human factor in the process of decision making by the customs officers and regulatory authorities, to eliminate opportunities for corruption acts. The introduction of Single window will also help the development of international trade, - press-service of the Ministry of Finance of Ukraine stressed. 20 mobile groups to fight corruption

3 BANKING REFORM Several important decisions were made to restore banking system in Ukraine. In particular, the responsibility of bank owners has been strengthened as the banks should now provide the lists of connected persons every month and there are more strict rules to identify them. Besides, the number of banks was reduced from 180 in the beginning of 2014 to 98 in the end of 2016 and it is expected that about banks will remain by the end of The audit examinations of the largest banks were conducted and recapitalizations are under way. We have undergone the cleanup of the banking system. It was a painful but necessary measure on the way of reforming and improving the quality of Ukraine s banking system. So called zombie-banks were withdrawn from the market, as well as the banks that were characterized by the high share of loans to the connected persons, and the banks that failed to fulfil the NBU s recapitalization norms, Valeriia Hontareva, the National Bank Governor, said. Important! The reform of banking sector, macroeconomic stabilization and monetary policy of the National Bank of Ukraine were highly estimated by international financial institutions that provide loans to the Ukrainian government, including IMF. ENERGY REFORM Energy sector also faced many changes that should have some impact on further development of Ukraine s economy. Natural gas prices were raised to the so-called market level, and natural gas prices were equated for population and for industrial consumers. Important! The reform of National Joint-Stock Company NaftoGaz of Ukraine includes change in its management, corporatization, establishment of independent supervisory board. This state-owned company had losses before 2014 but in 2016 it was one of the largest taxpayers in the Ukrainian budget of The adoption of new legislation about natural gas market opens this sector for competition and leads to its regulation in accordance with the EU third energy package. Also in Ukraine: gas imports were diversified and became less dependent on Russian Federation; as a result of reforms, the level of corruption in oil and gas sector has decreased; as a result of reforms, there is less load on the budget from NJSC NaftoGaz of Ukraine; some stimuli were introduced to implement energy-saving technology by households and industry; energy prices were raised to the so-called market level. TAX REFORM Ukrainian agricultural producers now pay taxes according to general taxation system, as a result of implementation of new law, introducing changes to the Budget Code as regards balancing budget revenues in In January 2016, unified social tax was reduced to 22%. The positive effects of that law include less load on the payroll fund for the companies (that makes them more competitive), increased salaries to the workers, higher speed of business activities and volumes of export supplies, investment flows. The implementation of that law means there will be less shadow economy in the country. I have little interest in offshore legislation, - Ukraine s Prime-Minister Volodymyr Groysman notes, - but I believe that Ukrainian system should be understandable and transparent as much as possible. My task in terms of tax reform has two positions to simplify administering of taxes and to introduce responsibility of tax authorities so that they could not just walk along and impose fines. There is no doubt that under new authorities many more reforms and key changes happened that helped to stabilize economic situation inside the country in 2016 and attracted interest of domestic and foreign partners who are now ready to build long-term mutually beneficial relations with Ukraine.

4 GENERAL PROSECUTOR S OFFICE RETURNED UAH 10 BILLION DURING THE YEAR In the previous year, about UAH 9 billion were returned at the lawsuits of General Prosecutor s Office. According to Yurii Lutsenko, Ukraine s General Prosecutor: At the lawsuits of General Prosecutor s Office, UAH 15.5 billion were awarded by the courts to the citizens and the state in 2016 Mr Lutsenko also mentioned that due to the actions by General Prosecutor s Office, they managed to cancel more than a thousand of illegitimate court rulings that allowed to prevent the loss of UAH 2.3 billion by the state. MILITARY PROSECUTOR S OFFICE HANDED 285 INDICTMENTS IN CORRUPTION CASES TO COURT The investigators from Ukraine s Military Prosecutor s Office handed to court 285 indictments against 329 persons that is a part of anti-corruption proceeding, chief Military Prosecutor Anatolii Matios informed. THREE IMPORTANT OFFICIALS CAUGHT RED-HANDED ON BRIBES Three important officials were arrested. Two of them were deputy mayor of Kherson and a member of Kherson city council and the third one was from General Prosecutor s Office. According to Yurii Lutsenko, deputy mayor and his associate demanded 15% kickback from the local entrepreneurs for the services provided. "80 thousand hryvnias of bribe should be the last for them", Yurii Lutsenko summarized. He pointed out that these suspects were detained by the officers from Central Investigation Department of General Prosecutor s Office. The corresponding decision was made in early January at the government session. According to Ostap Semerak, the Minister of Ecology and Natural Resources, several complaints were received at the end of 2016 against the management of State Ecological Inspectorate. PM Volodymyr Groysman also addressed National Anticorruption Bureau with a request to verify the legality of the decision of Kyiv Appeal Court judge V.Melnyk about the return to the Italian citizen of $1,000,000 which she tried to smuggle out of Ukraine through Boryspil airport. "Today I will address all the control authorities that are authorized to inspect this court decision, Prime Minister said. He also informed that he intended to address National Anticorruption Bureau and Ministry of Justice to participate in investigation of this issue. NOT ONLY CIVIL SERVANTS WILL SUBMIT DECLARATIONS THIS YEAR Not only civil servants will be obliged to submit their e-declarations. From this year on, such declarations will also be submitted by the administrators of education departments and of educational institutions of the state and municipal property forms.. Beginning from January 1, the principals of educational institutions of the state and municipal property forms, as well as their deputies, should submit their declarations, anti-corruption agency warned. The officer of General Prosecutor s Office who was also detained demanded $200,000 through the intermediary attorney. CABINET OF MINISTERS INITIATED INVESTIGATION AS REGARDS THE CHAIRMAN OF STATE ECOLOGICAL INSPECTORATE The Cabinet of Ministers has initiated an internal investigation against the chairman of the State Ecological Inspectorate Andrii Zaika. About UAH 9 billion were returned

5 THE INSTITUTE OF DENOUNCERS WAS CREATED IN UKRAINE Ukrainian legislation is introducing so-called institute of denouncers that will monitor the lifestyles of Ukrainian civil servants, then compare them with the information from e-declarations and find discrepancies. Among the denouncers there may be mass media, legal and physical persons who would inform National Agency on Corruption Prevention about discrepancies they find. In case of discrepancy between the true and declared value of the properties indicated in the declarations (or not indicated at all), the declarant will face administrative or criminal liability. CONSTRUCTION SCANDAL IN CHERNIVTSI REGION Prosecution Office of Chernivtsi region is investigating the loss of UAH 1,000,000. The major suspect in the course of investigation is a director of a construction firm who is suspected in fraud and laundering of money obtained in illegal way. Pretrial investigation has found that the accused director of the construction company, the head of the housing co-operative, has signed an agreement with Chernivtsi City Council on the execution of the works concerning the design and construction of engineering networks for one of the residential districts in Chernivtsi. It should be noted that the company did not have the necessary funds for construction and therefore was forced to sign an agreement with the bank to open a credit line with a free lending regime. So, the director of the company has developed a criminal plan, which was aimed at taking possession of the funds of individual investors, in particular, he placed advertisements in the media for the sale of apartments, and worked with a real estate agency to look for investors. Further, possible fraudster managed to persuade investors to become associate members of the housing co-operative ", the press service of the prosecutor's office reported. THE UNITED STATES WILL HELP GENERAL PROSECUTOR S OFFICE TO SECRETLY CONTROL THE PROSECUTORS FOR CORRUPTION With the US assistance, Ukraine s General Prosecutor s Office is organizing a new service to control its employees on corruption matters. "The second direction is connected with the establishment of IG - inspectorate general -together with American colleagues. The competition is ongoing and 99 applications have been submitted on the position of its chief. This service will be authorized to secretly inspect all the signals on corruption and abuse concerning any employee of prosecution office and it will report to General Prosecutor only, General Prosecutor Yurii Lutsenko said. A JUDGE WAS CAUGHT ON BRIBE IN KYIV The judge of the Economic Court of Kyiv has been detained on suspicion of extorting bribe, as informed by Yurii Lutsenko, General Prosecutor. According to him, the judge was caught red-handed. The detention was done with the participation of General Prosecutor s Office as well Specialized Anticorruption Prosecution and Security Service of Ukraine The Department of Economic Crimes of General Prosecutor s Office in cooperation with Anticorruption Prosecution and Security Service of Ukraine caught red-handed the judge of economic court of Kyiv who tried to get $16,000 from the entrepreneur by fraud for decision in favour of briber in the higher institutions of the Arbitration Court, Lutsenko wrote. 99 application have been submitted on the position of its chief

6 US INVESTORS TO INVEST $140,000,000 INTO CONSTRUCTION OF AIRPORT IN UMAN The US investors plan to invest about $140,000,000 in the construction of airport in Uman owing to which more tourists may be attracted to the town. The Ministry of Economy made an agreement with the investors who believe that the construction of the airport will simplify the transportation of Hasidim who come to visit the grave of Reb Nachman of Bratslav in Uman every year. The existing military aerodrome will become the base for the new airport. After construction, it will be used both for military and civil aircraft. AN OFFICER OF POLICE CHIEF DIRECTORATE IN KYIV WAS DETAINED BY INTERNAL SECURITY DIVISION Internal Security Division in Kyiv has detained an officer from Kyiv Chief Directorate of Police. The detective of the department of crimes against property tried to extort $3,500 from the accused in the robbery for assistance in imposing lighter punishment on him. FIGHTING CORRUPTION THROUGH PROZORRO SYSTEM The introduction of electronic system of government procurements ProZorro has helped Ukraine to save about UAH 8 billion from the national budget. Beginning from April 1, 2016, ProZorro system became compulsory for all the ministries, departments and other government institutions. All the issues concerning procurements, construction and other important expenses are now solved exclusively through ProZorro that means that every company or entrepreneur may offer its goods or services regardless of its location or experience.. THE DETECTIVES OF NATIONAL ANTICORRUPTION BUREAU HAVE DETAINED ACTING CHAIRMAN OF BOARD IN SUSPICION OF MORE THAN UAH 300,000,000 BRIBE On January 25, 2017, the detectives of National Anticorruption Bureau have detained acting chairman of board of the State United Mining and Chemical Company, National Anticorruption Bureau Informed. According to the bureau, the official is suspected in making harm to the company on the sum of more than UAH 300,000,000. Important! According to the bureau, the official is suspected in making harm to the company on the sum of more than UAH 300,000,000. CORRUPTION ON TENDERS OF UKRAINIAN RAILWAY It appears that some members of Ukrainian Parliament are earning on the tenders of Ukrainian railways (PJSC Ukrzaliznytsia). In particular, there are some questions to the chairman of transportation committee of Ukrainian Parliament Yaroslav Dubnevych (Petro Poroshenko Block) and to his brother Bohdan Dubnevych (from the same party). Another name mentioned in the investigation is that of Oleksandr Ponomarov ex-member of the Party of Regions and now the member of the group Will of the People. Besides, the materials of investigators speak about the commissions from Ukrainian Railway that went to oligarchs - Rinat Akhmetov and Viktor Pinchuk. Law enforcers had much to learn about corruption schemes in Ukrainian Railway during the presidency of Viktor Yanukovych. According to Ukraine s Prime Minister Volodymyr Groysman, ProZorro has not only helped to save money but has also influenced the development of small and mid-sized businesses in Ukraine. The investors want to invest $140,000,000 in construction of airport in Uman

7 AN ASSISTANT JUDGE IN THE COURT OF APPEAL IN KYIV REGION WAS CAUGHT ON BRIBE The detectives of National Anticorruption Bureau of Ukraine have detained the assistant judge of the Court of Appeal when she was receiving bride for providing assistance to a citizen of Ukraine in the court proceedings On January 23, 2017, the detectives of National Anticorruption Bureau of Ukraine have detained the assistant judge of the Court of Appeal of Kyiv Region on $23,000 bribe. "According to the investigation, that person deceived a citizen about the possibility of positive decision in his interests by the Board of Judges of Higher Specialized Court for Civil and Criminal Cases, on condition that he pays $23,000, press service of National Anticorruption Bureau informed. BEGINNING FROM 2017, THE EU WILL LAUNCH A PROGRAM TO FIGHT CORRUPTION IN UKRAINE, - EUOBSERVER On YES Summit in Kyiv, the European Neighborhood Policy and Enlargement Commissioner Johannes Hahn intends to present new EU program to fight corruption in Ukraine. Press secretary of that European official has recently informed that Mr Hahn plans to visit Kyiv but has not provided any additional details. That program started on January 1, 2017 and it will last for three years. Its budget was EUR 16 million. The program covers four major directions: establishment and development of anti-corruption institutes, strengthening of parliamentary supervision, working with regional authorities and support of civil society organizations and journalists on the frontline of fight with corruption. The program will be administered from the EU representation office in Kyiv. Due to implementation of that program, the Ukrainian government hopes for substantial increase of the investments to the country. BRITAIN WILL INSPECT ANTI-CORRUPTION SYSTEM OF THE MINISTRY OF DEFENCE Ukraine and Britain has agreed to extend and further develop their cooperation in the area of defense in On Ukraine s initiative, British experts conduct external audit of anti-corruption system of the Ministry of Defence, the Minister Stepan Poltorak informed. Ukraine s Parliament ratified agreement on military cooperation with Britain on November 2, Ukraine s Minister expressed his gratitude to a group of foreign strategic advisors and British general Nick Parker visiting Ukraine, for their assistance in reforming Ukraine s Armed Forces. According to the Minister, the signing by Ukraine and Britain of joint statement on the issues of joint cooperation in the area of defence confirms the intentions of the ministries of defence to continue their cooperation, in particular, political dialogue, to assist in the development of conceptual and doctrinal documents in the area of cyber protection, in military intelligence etc. Besides, Minister Poltorak emphasized on the fact that it is now necessary to focus our particular attention to continue cooperation in the area of training exercises as well as language and professional training. British Secretary of State for Defence Michael Fallon has announced earlier that the training program for Ukrainian military will be extended for one more year. PRESIDENT POROSHENKO HAS POINTED OUT MAJOR LANDMARKS FOR THIS YEAR Ukrainian President mentioned the following issues, such as fight against corruption, economic growth, strengthening defence potential and other issues of no less importance. When meeting with the foreign ambassadors the Ukrainian President emphasized: "Our landmarks for 2017 fight against corruption, honest courts, economic revival, investments, energy security, and strengthening defence potential. President also added: I hope for cooperation between Ukraine and Donald Trump, President-elect of the United States Budget of Anticorruption Program will be EUR 16 million

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