Handle with Care
The outgoing year was marked by several legislative anti-corruption initiatives in our country. At the same time, business crime/white collar crime practices became vivid for many legal advisors. While the significance of legal compliance in the West a must have standard, in Ukraine implementation of substantial norms has received some attention only recently.
In this light we have asked legal practitioners to provide us with an insight into this increasingly important issue.
White collar crime is usually defined as a crime committed by a person of respectability and high social status in the course of his or her occupation. White-collar crime, therefore, overlaps with corporate crime because the opportunity for fraud, bribery, insider trading, embezzlement, computer crime, copyright infringement, money laundering, identity theft, and forgery are more available to white collar employees.
In our opinion, the scope of the recent bribery legislation can have a positive impact on the situation with corruption in the country.
On 7 April 2011 the Ukrainian Parliament adopted the On Main Principles of Preventing and Combating Corruption Act of Ukraine (hereinafter — the Act), which entered into force on 1 July 2011 except for Articles 11 and 12.
That Act, which was developed in according with proposals suggested by the Group of States against Corruption of the Council of Europe (GRECO), Decisions of the Constitutional Court of Ukraine, opinions of experts and the public.
The Act is aimed at adapting certain provisions of the UN Convention against Corruption, Council of Europe Criminal Law Convention against Corruption with Additional Protocol. With the adaptations of the Act greatly expanded the range of subjects liable for corruption, and were clarified and specified the terms for inclusion of an individual among those who are responsible for corruption offences.
Today, it is difficult to assess the effectiveness of adopted legislation.
the scope of the recent bribery legislation can have a positive impact on the situation with corruption in the country
We have not experienced any of its impact on the needs of our clients so far. However, it is understandable that liability for corruption should be clearly strengthened, due to the reasonable customers needs to be protected from the corruption of officials. In our practice there are precedents when corruption in the police force covered up raider attacks on enterprises. It is not acceptable when corrupt officials, through a nominee, posses a part of a business not at the expense of their labor and talent but due to corrupt patronage of this business.
We find it reasonable to amend current legislation by the provisions of the OECD Convention on Bribery of Foreign Public Officials in International Business Transactions, which along with the UN Convention against Corruption is arguably the most important international anti-corruption agreement. The Convention requires parties to make bribery of foreign public officials a criminal offence, as well as related offences of incitement, aiding and abetting, authorization, attempt and conspiracy. Parties must also establish the liability of legal entities for the bribery of foreign public officials, and must put in place effective penalties, including seizure and confiscation or comparable monetary sanctions.
Legally speaking, a key element of the Convention is the requirement that parties establish jurisdiction where the offence is committed in whole or in part in their territory. They are also required to take measures to establish jurisdiction to prosecute their nationals for offences committed abroad where such jurisdiction exists for other offences, according to the same principles. The adoption of these principles can enhance the reputation of Ukraine in the world and improve the business climate for international investors.
The globalization of the world economy has made the issue of protection of interests of officials of legal entities in conflict situations with the state, including law-enforcement bodies, an extremely topical question. These conflicts, first of all, are connected with economic crimes. Complaints by law-enforcement bodies about the activity of enterprises often led to attempts to institute criminal proceedings against the senior management of enterprises.
Offenses in the economic sphere are, first of all, tax crimes; swindling in the economic sphere; illegal business; legalization (laundering) of money; deliberate bankruptcy; fictitious bankruptcy; evasion from payment of customs payments, stealing from an organization or individuals; dealing in contraband, etc.
Legislative regulation in this sphere is developing actively and the adoption of legislation about decriminalization of economic crimes is possible in the near future
Economic crimes are the most difficult since the carrying out of various examinations in most cases demand research and studying documents connected with the economic activities of enterprises. In most cases the analysis of documents doesn’t enable a categorical conclusion to be drawn on the presence or signs of an offence in the actions of a suspect. Many infringements are supposed unintentional, and grow out of an enterprise taking risks or are not criminal acts at all. For attorneys firms which include business crime/white collar crime practice priority is refusal in the opening of a criminal case or the termination of a criminal case at a preliminary stage of the investigation.
Legislative regulation in this sphere is developing actively and the adoption of legislation about decriminalization of economic crimes is possible in the near future. Such practice is inherent in economically developed countries. The state has no benefit from the criminal liability of persons who have committed economic crimes, and here financial responsibility for damage caused is a step in the future.
Over the past year many local law firms have started to actively develop their white collar crime/compliance practices. The coming into force of the new Ukrainian anti-corruption laws (the new laws) and the UK Bribery Act 2010, as well as the increased enforcement of the US Foreign Corrupt Practices Act (FCPA) may be viewed as the most influential factors in this regard.
Clients have been looking lately for comprehensive analysis of the new laws, developing/amending local compliance programs, bringing global compliance policies into conformity with Ukrainian law, and consultations on various specific issues regulated by the new laws. One of the most popular requests has been analysis of particular cases of giving gifts/providing hospitality.
Businesses are now trying to observe a value threshold for gifts established by the new laws. Companies have also become more careful regarding the circumstances of giving gifts/providing hospitality and selective in choosing their business partners.
The new laws are generally less strict than the FCPA and the UK Bribery Act 2010 (the foreign acts)
The new laws are generally less strict than the FCPA and the UK Bribery Act 2010 (the foreign acts). For instance, they do not (i) have extra-territorial application, (ii) impose liability for third party payments, (iii) provide for company liability, and (iv) do not establish a “facilitating payment” exception or an “adequate procedures” defence, or any other exceptions and defences available under the foreign acts (the latter would be much appreciated by local business community).
Due to the extra-territorial application of the foreign acts many transnational companies operating in Ukraine are trying to bind senior officers and other personnel of their Ukrainian subsidiaries by global compliance programs developed under foreign acts. The outside counsel’s role in this process is to ensure that the global policies, which per se are not enforceable in Ukraine, operate under Ukrainian law.
We would agree that interest in the area of white collar crime practice has been reinforced recently both worldwide and in Ukraine. On the global scale it is due to the entering into force of the UK Bribery Act, which is much tougher than the US Foreign Corrupt Practices Act.
In Ukraine, in addition to the latter, it is also due to the fact of adoption of Ukrainian anti-bribery legislation. With respect to compliance with the UK Bribery Act our clients are asking us to clarify whether the operations of their Ukrainian subsidiaries and representative offices are compliant with the UK Bribery Act and FCPA. Also after adoption of Ukrainian anti-bribery laws there has been an increase in the number of enquiries from our clients regarding whether their established business practices are in line with the new anti-bribery legislation.
The UK Bribery Act introduced, among other things, a new type of crime — Failing to Prevent Bribery
The UK Bribery Act introduced, among other things, a new type of crime — Failing to Prevent Bribery. For example, the management of a company in the UK may be criminally liable for corrupted the conduct of its employees in Ukraine based on the fact that the company failed to take all reasonable action to prevent bribery by failing to implement a compliance program. This type of crime should be also introduced into Ukrainian anti-bribery legislation.
In addition to the types of legal work described above, any outside counsels may assist clients with implementing compliance programs within business structures of their clients, which requires drafting various internal rules and regulations, dealing with labor law issues.
