Another round of attempts to normalize relations between the government and business has once again raised the issue of rebooting the Bureau of Economic Security of Ukraine (BESU) as a key step towards normalizing the business climate. Our song is beautiful and new...
The idea of creating a separate apolitical body that will take care of all economic crimes has been around for ten years. It is difficult to look at the embodiment of this idea – that is, the Bureau of Economic Security of Ukraine (BESU) – without tears. ZN.UA warned at the beginning of February 2021 that the launch of this state body would not automatically mean its effectiveness. And so it happened, the commission for the chairmanship of Tymofii Mylovanov, who is too friendly to the office of the President of Ukraine, from the start of the "reform" elected the former tax official Vadym Melnyk to the post of director of the Bureau of Economic Security of Ukraine (BESU). And then as it happened...
They hoped to create a law enforcement body with enormous analytical capabilities, as provided for in the relevant law, and in practice the reincarnation of the tax police took place.
Under the leadership of Vadym Melnyk, the Bureau of Economic Security of Ukraine (BESU) immediately fell into a "corruption coma" and "procedural agony." We have repeatedly written about the extreme inefficiency of the Bureau. And we also have mentioned about how to turn this state body into an effective one, how they will try to transform it, and why it is almost impossible to do it in the current state of affairs without political will. In general, the key thing is that the Bureau of Economic Security of Ukraine (BESU) ended up under the patronage of the deputy head of the president's office, Oleh Tatarov, who is really famous for the effective use of law enforcement agencies for certain narrow political interests.
In order to at least resuscitate the patient, a separate Temporary Investigative Commission of the Verkhovna Rada of Ukraine (TICVRU) was created, which really made efforts to reform, but so far it has not yielded results. In particular, former director Vadym Melnyk was removed from his post, but before that he was "given" two deputies – "prosecutor" Vitalii Hahach and "state" Eduard Fedorov. The specified pair of experienced and extraordinary personalities dramatically increased the results of the work of the Bureau of Economic Security of Ukraine (BESU). And then they were somehow suspiciously simultaneously dismissed from their positions. Evil tongues say that some had their commercial vision in the work of one of the global tobacco giants. And the latter, in their turn, "had time to turn to the president." Tatarov promised both that he would save them, they only needed to be on vacation for a month, then on sick leave. However, these promises were short-lived, and it is quite difficult to resist against "political retrograde Mercury". Eduard Fedorov left the Bureau of Economic Security of Ukraine (BESU), Hahach maintains "useful communication". But somehow it is not enough to reboot.
However, this is definitely not due to a hopeless situation – the aforementioned Temporary Investigative Commission of the Verkhovna Rada of Ukraine (TICVRU) prepared draft law No. 9080 on the reboot of the Bureau in the spring of 2023. The successful practices of the certification of prosecutors in 2019–2020, as well as some successful ideas from competitions for the National Agency on Corruption Prevention (NACP), National Anti-Corruption Bureau of Ukraine (NABU), the Specialized Anti-Corruption Prosecutor's Office (SAPO), and the State Bureau of Investigation (SBI) were the basis. Then there are a number of draft laws, in particular two of the government's – No. 10439 and 10440. None of them even provides for duplicating the decent norms laid down in No. 9080 from the Temporary Investigative Commission of the Verkhovna Rada of Ukraine (TICVRU). Either the methods of formation of competition commissions are not well-developed enough, or the attestation of employees looks like a mockery of objective reality, and pure profanation can be seen in it. Neither imaginations about being involved in the searches of the Business Ombudsman Council, nor fantasies about other so-called short stories will yield results. People's deputy Yaroslav Zhelezniak has already promised to "enter a new circle" by preparing his draft law. I'm sure he hasn't forgotten exactly what was discussed during our discussions a year ago.
What should be key in future legislative changes? Three things: the method of forming a competitive commission with the predominant voting rights of international representatives, the transparency of the selection of the director, as well as the full certification of all employees (detectives, analysts) with the exception of administrative staff.
Here we can also mention the fantastic idea created in the office of the President of Ukraine. There they were developing a draft law that actually limits the powers of the National Anti-Corruption Bureau of Ukraine (NABU) in investigations if there is a "business element" there. As you can see, the officials have a lot of creative ideas.
So, what is the Bureau of Economic Security of Ukraine (BESU) is clear. It is also known who controls this state body and what the results of such control are. Now about the changes to be introduced through the newly created "Entrepreneurs' Council", and, in fact, about the new regulation of the work of the Bureau of Economic Security of Ukraine (BESU).
First of all, if they are going to change the functionality of the Bureau of Economic Security of Ukraine (BESU), then it may be about increasing or decreasing this functionality. It is not entirely clear what can be increased there. This state body differs from other law enforcement bodies in that, in addition to the crime investigation function, it has created an additional analytical prevention function. We have to admit that the analysis is being prepared by the Bureau of Economic Security of Ukraine (BESU), but over the years it has had no effect on the increase in revenues from fuel, "excise" (tobacco and alcohol) fees, value-added tax (VAT), fraud, etc. The only thing that succeeded was that in 2022-2023, slightly stricter rules were established for the gambling business. Revenues have increased, but considering that before the representatives of this business did not pay anything at all, and now they pay very low amounts, the pressure turned out to be minimal.
If the functionality is not increased, but on the contrary, it will be reduced more, it turns out that either a part of the investigative process, or the entire investigative process, or analytics will be taken away. In case of elimination of analytics, everything will remain as it is. No one will fight systemic manifestations of abuse through prevention. In the event that a part of the investigation is withdrawn, this investigation must be transferred somewhere within the framework of Article 216 of the Criminal Procedure Code of Ukraine. But where and how to transfer? We are already trained by previous experience with other government agencies. In particular, the National Police of Ukraine continues to "break some rules" within its "economic" powers. It is worth noting that they will not lose this functionality, no matter what anyone says. There, former "economic policemen" were simply transferred to a new department. This is not about qualitative changes. Or let's recall the State Bureau of Investigation (SBU), where the well-known "economic" divisions within the departments were "restructured". Moreover, a dualism of power arose, when the head of one of the key departments and one of his deputies actually have different subordinates.
Similarly, the situation can be described when the investigation function in the Bureau of Economic Security of Ukraine (BESU) is eliminated. They will definitely find somewhere to hide something, but essentially everything will remain unchanged.
We repeat once again: the state body must be guided by the law and be independent and apolitical. This is currently not available. And here is a new example for you.
The detective unit of the Bureau of Economic Security of Ukraine (BESU) for the protection of finances in the budgetary sphere and international technical assistance is investigating official forgery, non-payment of taxes and forgery of documents for state registration of funds of one agricultural group of companies. The investigation was preceded by tax audits in the area of group income taxation. Inspections established that the companies of the specified group illegally used the reduced rate of income tax on the income of foreign legal entities in the amount of 5% instead of 15%, thus evading the payment of taxes in the amount of almost UAH 61.5 million. Accordingly, the company was sent tax notices-decisions on additional payments for the specified amount, as well as fines. However, according to the provisions of the Tax Code of Ukraine, in the event of a court appeal, the tax liability is considered unsettled until the day the court decision enters into force. And the owners of the business group filed a lawsuit, which recognized their rightness, since it was about dividends for non-residents. The appeal upheld the result. On January 9, 2024, the conclusions presented by tax officials regarding the transfer of tax liabilities from 5 to 15% were officially recognized as illegal. However, this did not become an obstacle for the detectives of the Bureau of Economic Security of Ukraine (BESU), they informed the co-owners of the mentioned business group of their suspicions on the same dates, leading them to a new round of "showdowns". We intentionally do not disclose the names of the persons involved, nor the name of the group of companies. It doesn't matter, because we are talking about an institution. More precisely, about the applied "use" of the Bureau in narrowly corporate, not in any way state, interests. Will this next round of pretend reboot of the Bureau of Economic Security of Ukraine (BESU) make a difference?
We're just moving in circles again. We are reinventing the wheel. And it would be possible to simply carry out a comprehensive reform of the criminal justice bodies of Ukraine, complete the re-certification of prosecutors, including the independent assessment of all those whom ex-prosecutor general Venediktova helped enter this state body of justice through administrative commissions. Finally, restart the Bureau of Economic Security of Ukraine (BESU), fully and fundamentally, and not by inventing more and more new constructions of the reform, which fundamentally do not provide for new approaches to work.
All the more so, if the necessary changes in the work of the Bureau of Economic Security of Ukraine (BESU) were mentioned even in the European Commission's report in November.