Recent income declarations in Ukraine – heightened risk for companies

So what is all the fuss about?

Last month, all senior public officials in Ukraine submitted electronic declarations of their assets.

Approximately 50,000 declarations were filed, revealing that a large number of declarers and their family members keep millions of dollars in cash and other valuable property. On 1 November 2016, Ukraine’s General Prosecutor announced that they will investigate all politicians and governmental officials who declared monetary assets of more than $100,000 or gifts of over $10,000, and will impose prison sentences of up to 15 years on any officials guilty of wrongdoing. It is expected that other Ukrainian anticorruption authorities (NAPC, NABU and SAPO) will assist in terms of investigating and prosecuting such officials.

How can this affect companies doing business in Ukraine?

As a result of their investigations of the origin of wealth of Ukrainian officials, Ukrainian authorities may discover corrupt payments made to Ukrainian officials by companies doing business in Ukraine. If that happens, such companies may be subject to significant liability under Ukrainian and international anticorruption laws (including, where relevant, the UK Bribery Act and the U.S. Foreign Corrupt Practices Act).

What can be done now?

While it is too early to know how fully and aggressively these issues will be pursued by the Ukrainian authorities, it is advisable for companies to:

  • review their past relations with Ukrainian officials to identify any significant interactions (e.g. money transfers or gifts); and
  • make an internal assessment as to whether any of these interactions may potentially involve any questionable payments (either directly or indirectly through third-party firms).

What if any improper interactions cannot be excluded?

Any potential concerns should be properly investigated. Such an investigation may allow companies to, amongst other things:

  • stop inappropriate practices;
  • enable the development of a strategy for dealing with the problem;
  • identify information that may be relevant for timely notification to professional indemnity insurers; and/or
  • cooperate with authorities at an early stage in order to limit potential exposure.

Going forward

It is expected that companies doing business in Ukraine will face enhanced requirements and investigations regarding possible corrupt practices in the coming years.

An effective way of managing possible risks connected to this new approach is the implementation of a robust compliance system and the appropriate investigation of possible issues arising from past dealings.

If you would like to know more about the subject covered in this publication, or our services, please contact Rob Shantz or Ario Dehghani.