How the closure of registries affects business, media and NGOs

What data we are missing

article by SERHIY MILMAN,

founder and CEO of YouControl

Losing access to open data leads to non-transparency and wrong decisions. First of all, for business, because it loses the opportunity to check the reliability of its partners. The Unified State Register of Legal Entities, Individual Entrepreneurs and Public Formations (USR) was closed – it is the basic register for verifying, analyzing and monitoring the legal status of companies, without which the work of banks and other financial institutions became much more complicated. The lack of a real opportunity to conduct due diligence of clients creates a number of problems: it increases the risks for the financial system of Ukraine, slows down the already weak economy, and creates conditions for violating the requirements of the regulatory legislation. Including in terms of the discovery of the "Russian trace" and other similar "traces" (of Belarus, Iran, etc.) in the Ukrainian business environment.

Due to the non-disclosure of information on the financial statements of enterprises, which is managed by the State Tax Service and the State Statistics Service, thousands of companies (including state-owned) and private entrepreneurs, law enforcement officers, public figures, and journalists do not receive the information they need about the financial capabilities of a business now. How to search and find the best potential partners if access to up-to-date financial data is limited? Or take, for example, logistics. How to search for new suppliers and carriers in unconventional and already difficult conditions without access to supporting information?

In addition, due to tax debt data closure, companies face situations where they are denied loans or grants due to outdated tax history information. An interesting point: the Ministry of Economy of Ukraine issued an order that involves the evaluation of micro-grant recipients in the YouControl system. Since YouControl information is based on primary official information, including about the tax debt, which is currently missing, now users are contacting us with claims that they cannot participate in grants, because “Oshchadbank” JSC uses outdated data and refuses to satisfy grant applications. Namely, in the state, the left hand does not know what the right hand is doing, while business and the economy suffer.

Lack of license data can lead to widespread abuse by unscrupulous manufacturers and service providers. There have already been precedents of market monopolization by manipulating the process of licensing, which could be identified through open registries.

How the closure of data influences corruption, the media and the public

However, not only the real sector suffers from data closure. In short, in the absence of open registries, corruption grows exponentially. Without the data of the Unified State Register of declarations of persons authorized to perform the functions of the state or local self-government, the level of public control over the actions of the authorities has significantly worsened. In fact, the process of identifying corruption risks of officials based on an analysis of the dynamics of the property status of declarants has stopped.

According to the NACP, only about a third of those who were obliged to declare their incomes have voluntarily filed their declarations for 2021. From the latest information: according to the data of the Anti-Corruption Headquarters, the people's deputy from the “Servant of the People” Anna Kolesnyk was officially notified of suspicion – she provided false records in her declaration. This is clear evidence of why all top officials must submit declarations for the previous year, despite the martial law. If this is not done now, it will be extremely difficult to prove the facts of violation of the legislation on the prevention of corruption.

To date, the information of the State Land Cadastre of Ukraine and the Public Cadastral Map has been closed. Meanwhile, they are important for effective implementation of the land reform. This information is critical for the banking and agricultural sectors of the economy. Due to the closure of these data, corruption risks at the local level increase significantly, since the possibility of public control over changes in land rights and their public monitoring disappears. It becomes more difficult to quickly check the rights to land plots, and the risks of forcible takeover increase.

Since the beginning of the full-scale invasion, requests from public anti-corruption organizations and journalists to Your Control to disclose certain data have become much more frequent. This indicates that the search for information for activists and media professionals has become more complicated due to the closure of data. In fact, access to some registries is closed to the general public, but remained for commercial customers, on a paid basis, in the form of a special service. Now such access is open to the USR and the State Register of Real Rights to Immovable Property. However, the subscription fee for such a service starts from UAH 5,000. Furthermore, obtaining such data is complicated by the lack of a conventional web interface and the need to have and set up your accounting system (which costs tens of thousands hryvnias).

You can also contact the stewards with requests for public information. It's free, but the application processing time (up to ten days) makes it much more difficult to obtain information. Firstly, because of the time, which is always short during the war, and secondly, because of the actual circumstances (lack of electricity, access to the Internet and email), and thirdly, it is extremely inconvenient.

How the anti-corruption component of the issue affects Ukraine's cooperation with donators

Donators love accountability. Openness, transparency, trust - this is exactly what our country needs now to effectively confront the enemy, as well as to quickly recover thanks to the help of allies and investors. Corruption is Putin's ally. And the stronger public control and the more transparent the actions of the authorities are, the lower level of corruption we will observe, the confidence in the state will grow inside and outside. The public and international partners should know how the funds are distributed, whether they are stolen, whether they are used for their intended purpose to help the army and the victims of the war. Therefore, again, it is open data that can provide this.

Is the closure of such a data array justified in wartime conditions?

It is clear that on February 24, at a moment of uncertainty, such a decision was made in a hurry. But nine months have passed since the beginning of the full-scale invasion: the country lives on, important processes are taking place, business is operating, and the closure of open data complicates all this. During this time, the state did not give a reasonable answer to the question about the reasons for this closure, and not a single manager bothered to establish conditions for restricting access to information, as required by Article 6 of the Law of Ukraine “On Access to Public Information”. It is worth noting that this procedure (the so-called triple test) had never been carried out even before the beginning of the war. Now, at best, we have the explanation "closed due to risks to national security." One could agree with this, since publication, for example, of data on defense enterprises, military units, critical infrastructure facilities, and so on can really do harm in a military sense. At the same time, it is obvious that information about companies that sell sausages, arrange corporate parties, provide insurance services, etc., does not pose any risks to the security of the state, on the contrary, it is useful for partners.

Which registries can and should be opened now without any risks

Taking into account the results of a survey among the YouControl service users and our own observations, it is obvious that the following should be open immediately:

• the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Formations;
• financial reporting of the State Tax Service and the State Statistics Service;
• the Unified State Register of declarations of persons authorized to perform the functions of the state and local self-government, and the Unified State Register of persons who have committed corruption or corruption-related offenses;
• environmental data (information about the state of the environment).

Read this article by SERHIY MILMAN in russian and Ukrainian.