Fraud
Under Ukrainian law, there is no such term as "corporate fraud". However, the Criminal Code stipulates liability for crimes similar to the offence of corporate fraud. The most widespread crimes in the corporate sphere are:
-
Fraud. This involves taking possession of somebody else's property or obtaining the property title by deceit or breach of confidence (Paragraph 1, Article 190).
-
Misappropriation, embezzlement or conversion of property by malversation. This involves the misappropriation or embezzlement of somebody else's property by a person to whom it was entrusted to it (Paragraph 1, Article 191).
-
Sham business. In practice, sham businesses are prosecuted under Article 205-1 of the Criminal Code, which establishes criminal liability for any forgery of documents used for registering a legal entity.
-
Evasion of taxes, duties or other compulsory payments. This involves the wilful evasion of taxes, duties (compulsory payments) which are part of the taxation system established by law, where such actions result in actual non-receipt of significant amounts of funds by budgets or special state funds. This can be carried out by:
-
an official of an enterprise, institution or organisation of any ownership status;
-
any unincorporated entrepreneur; or
-
any other person liable to pay such taxes, duties or other compulsory payments.
(Paragraph 1, Article 212.) -
-
Making bankrupt. This is where the wilful actions of a founder (owner) or official of a business entity are taken for selfish motives or for other personal interests (or interests of any third party) which result in a lasting financial insolvency of such business, and subsequently causes significant pecuniary damage to the state or a creditor (Paragraph 1, Article 219).
-
Financial fraud. This involves knowingly filing false information by a private entrepreneur or a founder, owner or official of a business entity to government agencies, authorities of the Autonomous Republic of Crimea or local government authorities, banks or other creditors to obtain subsidies, subventions, grants, loans or tax credits, where no elements of criminal offences against property are involved (Paragraph 1, Article 222).
-
Illegal collection for the purposes of use or using information that constitutes bank or trade secrets. These involves wilful actions taken to obtain information that constitutes bank or trade secrets for the purpose of disclosure of any other use (commercial espionage), as well as illegal use of such information, where it causes significant damage to a business entity (Paragraph, 1 Article 231).
-
Forgery in office. This involves putting any knowingly false information in any official documents, any other fabrication of documents, and also making and issuing knowingly false documents by an official (Paragraph 1, Article 366).
3. Which authorities have the powers of prosecution, investigation and enforcement in cases of corporate or business fraud? What are these powers and what are the consequences of non-compliance? Please identify any differences between criminal and regulatory investigations.
Authorities
The pre-trial investigation within a criminal proceeding commences the moment the information concerned is entered into the Integrated Register of Pre-Trial Investigations (Article 214, Procedure Code). Investigative jurisdiction (competence) depends on the specific crime and is specified in Article 216 of the Procedure Code.
The authorities with the powers of prosecution, investigation and enforcement in cases of fraud in the corporate or business sphere are as follows:
-
National Police of Ukraine (National Police). This is the national and only police service of Ukraine, which must ensure the protection of human rights and freedoms, counteract crime, and maintain public order and public safety. The activities of the National Police are directed and co-ordinated by the Cabinet of Ministers of Ukraine through the Minister of Internal Affairs in accordance with the law. Officials of the National Police conduct pre-trial investigations of criminal offences as established in Ukraine's law on criminal liability (with the exception of offences which fall within the competence of other pre-trial investigation agencies such as offences under Articles 190, 191, 209, 222, 231 of the Criminal Code (see Question 2)).
-
Public Prosecution Service of Ukraine (PPS). The PPS constitutes a unified system that must, in line with its own procedures, perform functions established by the Constitution of Ukraine with the aim of protecting human rights and freedoms and the common interests of the society and the state. PPS officials supervise the observance of laws by the pre-trial investigative bodies (in cases of fraud in the corporate or business sphere, by officials of National Police and the State Fiscal Service).
-
Tax Police (the structural department of the State Fiscal Service). The Tax Police is a specialised police department. It deals with tax offences and conducts pre-trial investigations into cases of tax evasion and other violations within the financial-budgetary sphere. Its key responsibilities are to fight against tax and customs-related crimes.
In addition to the above, officials of the State Fiscal Service can investigate offences under Articles 205, 212 and 219 of the Criminal Code (see Question 2).
It should be noted that in Ukraine, the functions of investigation and prosecution are separated between different state bodies. For example, the Tax Police deals with the investigation, while the PPS deals with prosecutions.
Prosecution powers
PPS. PPS has the following functions:
-
To support the prosecution in court on behalf of the state.
-
To represent the interests of an individual or the state in court.
-
To supervise the observance of laws by the authorities when carrying out detective operations, inquiries and pre-trial investigations.
-
To supervise the observance of laws in the enforcement of court judgments delivered in criminal cases, as well as in the application of other coercive measures related to the restraint of individual personal liberty.
Powers of interview
Interviewing is an investigative action, which must be conducted in the place of the pre-trial investigation or another place upon agreement with the individual to be interviewed (Article 224, Procedure Code). The following bodies can conduct interviews in cases of fraud in the corporate or business sphere:
-
National Police.
-
PPS.
-
Tax Police.
Powers of search/to compel disclosure
Searches are conducted for the purposes of:
-
Finding and fixing information on the circumstances for the commission of a criminal offence.
-
Finding any tools used for the commission of a criminal offence or property obtained as a result of its commission.
-
Establishing the whereabouts of wanted persons.
(Article 234, Procedure Code.)
Any search must be based on the investigating judge's ruling. If it is necessary to conduct a search, the investigator, with approval of public prosecutor, or a public prosecutor shall submit an appropriate request to investigating judge. The following bodies can submit a search request to the investigative judge in cases of fraud in the corporate or business sphere:
-
National Police.
-
PPS.
-
Tax Police.
Powers to obtain evidence
Evidence must be obtained by parties to criminal proceedings (Article 93, Procedure Code) in accordance with the procedure set out in the Procedure Code.
The prosecution party collects evidence by:
-
Conducting investigative (search) actions and covert investigative (search) actions, by
-
Demanding and obtaining objects, documents, information, expert opinions, audit and inspection reports from state authorities, local government bodies, enterprises, institutions and organisations, officials and natural persons.
-
Conducting other procedural actions as specified and permitted by the Procedure Code.
The following bodies have the right to obtain evidence within the criminal proceeding in cases of fraud in the corporate or business sphere:
-
National Police.
-
PPS.
-
Tax Police.
Power of arrest
According to Article 183 of the Procedure Code, keeping a person in custody (arrest) is an exceptional measure of restraint that can only be enforced exclusively if the public prosecutor proves that none of the less strict measures of restraint would prevent any of the risks specified in Article 177 of Procedure Code from happening, such as the risk of the accused:
-
Hiding from pre-trial investigation agency and/or the court.
-
Special forfeiture.
-
Destroying, concealing or spoiling any of objects or documents that are of essential importance for establishing the circumstances of the criminal offence.
-
Exerting unlawful influence on the victim, witness, another suspect, accused, expert or specialist in the same proceedings.
-
Obstructing the criminal proceedings in other way.
-
Committing a similar or the same criminal offence, or continuing with criminal offence of which he is suspected/charged.
The investigator's or public prosecutor's motion to enforce a measure of restraint must be filed with the local court within the territorial jurisdiction of which the pre-trial investigation is being conducted.
4. Which authority makes the decision to charge and on what basis is that decision made? Are there any alternative methods of disposal and what are the conditions of such disposal?
In a criminal investigation, the criminal charge is presented by an investigator and approved by a prosecutor on the basis of the obtained evidence during the pre-trial investigation stage. If the case is to be heard in court on the merits of a committed offence, the final decisions will be either exculpative or accusational. As an alternative method of disposal, the final decision may be based on a settlement or plea agreement, which contains the agreed penalty.
Under Ukrainian law, there are no other methods of consideration of a criminal proceeding than by the court.
Civil/administrative proceedings or sanctions
The sanctions within civil and administrative proceedings depend on the particular case.
Criminal proceedings
Right to bail. With a view to ensuring the execution of procedural obligations by suspects or accused persons, a bail bond may be paid. The bailor can be any individual or legal entity (except for state or public entities). The amount of bail is determined by the investigating judge at the pre-trial investigation stage, or the court, taking into account:
-
The circumstances of the criminal offence.
-
The property and family status of the suspect/accused.
-
Any other relevant information on their identities and procedural risks (such as any illegal influence in the criminal proceedings).
Other preventive measures include:
-
Personal recognisance (that is, where a person undertakes before a court or magistrate to observe some condition, especially to appear when summoned).
-
Personal security (personal warranty). This is where the investigating judge may impose on the suspect (if regarded worthy of confidence) a written obligation warranting that the suspect will observe the duties imposed on him in accordance with Article 194 of Procedural Code and that the suspect will undertake, should the necessity arise, that he/she will co-operate with the pre-trial investigation or and the court at first request.
-
Home confinement.
-
Detention in custody.
Penalties. Under the Criminal Code, the crimes similar to "corporate fraud" (see Question 2) are punishable with the following sanctions (with the most severe types of punishment listed):
-
Fraud: imprisonment for up to 12 years with confiscation.
-
Misappropriation, embezzlement or conversion or property by malversation: imprisonment for up to 12 years with confiscation.
-
Sham business: fine in the amount equivalent to about EUR1,230 or imprisonment for up to five years.
-
Evasion of taxes, duties or other compulsory payments: fine in the amount equivalent to EUR13,709 with confiscation.
-
Making bankrupt: fine in the amount equivalent to about EUR1,650.
-
Financial fraud: fine in the amount equivalent to about EUR5,500.
-
Illegal collection for the purpose of use or use of information that constitutes bank or trade secrets: fine in the amount equivalent to about EUR4,400.
-
Forgery in office: imprisonment for up to three years.
6. Are there any measures in place to safeguard the conduct of investigations? Is there a process of appeal? Is there a process of judicial review?
Information relating to the pre-trial investigation can only be disclosed with the prior permission of the investigator or public prosecutor and any information must be within the scope they deem possible (Article 222, Procedure Code).
If necessary, the investigator or public prosecutor must advise persons who learned information relating to the pre-trial investigation due to having participated therein, of their duty not to disclose such information without its permission. Unlawful disclosure of information of the pre-trial investigation will entail criminal liability.
In criminal proceedings, the following rights are guaranteed:
-
The presumption of innocence as enshrined by law.
-
The right of the suspect to know what criminal offence he/she is suspected or accused of, the right to refuse to provide any testimony or explanation.
-
The right of the suspect to have an attorney upon the first request.
-
The right to inviolability of home, ownership, non-interference in private communication unless through a decision of the court.
-
The right to avoid self-incrimination, family and close relatives' privilege.
-
The right of participants in the proceedings to file evidence, to provide explanations.
-
The right of participants in the proceedings to demand recusation (that is, the act of disqualifying the judge on the grounds of possible partiality or prejudice).
-
The right of participants in the process to familiarise themselves with procedural documents, receive copies of them and appeal to the court or the court of higher instance.
(Articles 271 to 275, Criminal Code.)
In relation to the process of appeal, the Procedure Code establishes the right to appeal:
-
Decisions, acts or omissions of investigators or public prosecutor can be challenged during pre-trial proceedings (separate decisions, acts or omissions are established in the Article 303).
-
Rulings of the investigative judge, which were granted within the pre-trial investigation (list of ruling, specified in Article 309).
-
The final decision of the court within the criminal proceeding (verdict).
Bribery and corruption
The following international anti-corruption conventions apply in Ukraine:
-
UN Convention against Corruption 2003 (Corruption Convention).
-
Council of Europe Civil Law Convention on Corruption 1999 (Civil Law Convention on Corruption).
-
Additional Protocol to the Criminal Law Convention on Corruption 2003.
Foreign public officials
The Criminal Code does not establish separate defences and criminal liability for corruption offences of the foreign public officials. However, in practice it is possible to qualify the illegal actions of a foreign public official as complicity with a Ukrainian public official or officer of a private law legal entity in the commission of the offences (see below, Private commercial bribery).
Domestic public officials
Offences relating to bribery/corruption of domestic public officials under the Criminal Code are as follows:
-
Abuse of power/abuse of official status. This involves deliberate actions, motivated by lucrative self-interest, or other personal interest, or interests of third parties, or use by an official of power or of official status contrary to the interests of service, where such abuse causes substantial damage to the rights, freedoms, and interests of individual citizens, or state or public interests, or interests of legal entities protected by law (Paragraph 1, Article 364).
-
Forgery in office. This involves putting any knowingly-false information in any official documents, or any other fabrication of documents, and making and issuing knowingly false documents by an official (Paragraph 1, Article 366).
-
Neglect of official duty. The is the failure to perform or the improper performance, from an official, of his/her official duties due to negligence, where it caused significant damage to the legally-protected rights and interest of individual citizens, or state and public interests, or interests of legal entities (Paragraph 1, Article 367).
-
Acceptance of offer, promise or receipt of unlawful benefit or bribe by an official. This involves the acceptance of an offer, promise or receipt by the official of an illegal benefit, as well as a request to provide such benefits for themselves or a third person for the commission or such officer in the interests of the person who offers, promises or provides illegal benefit, or in the interests of a third person of any action with the use of her power or official position (Paragraph 1, Article 368).
-
Illegal enrichment. This applies when a person authorised to perform the functions of the state or local government receives assets of an amount which exceeds 6,500 non-taxable minimum incomes of citizens (EUR253,000) without legal grounds.
Private commercial bribery
Offences relating to private commercial bribery under the Criminal Code are as follows:
-
Abuse of official authority by officer of a private law legal entity, irrespective of organisational legal form. This involves deliberate (with the purpose of gaining illegal benefits for him/herself or for other persons) use contrary to the interests of the private law legal entity concerned, irrespective of the organisational legal form, by an officer of such legal entity of his/her authority, where such use causes substantial damage to the rights or interests of individual citizens, or to state or community interests, or interests of legal entities protected by law (Paragraph 1, Article 364-1).
-
Bribery of an official of a private law legal entity. Accepting an unlawful benefit by an officer of a private law legal entity in exchange for the performance or non-performance of certain actions in the interest of a perpetrator or a third party while exercising his/her authority (Paragraph 1, Article 368-3).
Previously (until November 2015), a person who had committed a criminal offence under Article 369 (that is, offering or giving an improper advantage to officials) could be exempt from criminal liability if:
-
An improper advantage was extorted from him.
-
After making or receiving an offer of the improper advantage, he reported the offence voluntarily to the responsible investigative authorities.
However, the current legislation does not specify any such exemptions.
11. Can associated persons (such as spouses) and agents be liable for these offences and in what circumstances?
Associated persons (such as spouses) and agents can be liable for offences referred to in Question 9 if the investigative bodies qualify their actions as complicity with the Ukrainian public official or officer of a private law legal entity in the commission of the offences referred to above (Article 27, Criminal Code).
12. Which authorities have the powers of prosecution, investigation and enforcement in cases of bribery and corruption? What are these powers and what are the consequences of non-compliance? Please identify any differences between criminal and regulatory investigations.
Authorities
Under Article 216 of the Procedure Code, criminal proceedings related to bribery and corruption are investigated by:
-
State Bureau for investigations. This investigates offences committed by top officials, low enforcement officials, military officers and judges (the list is established is Paragraph 4, Article 216 of the Procedure Code).
-
Detectives of the National Anti-corruption Bureau of Ukraine (Anti-corruption Bureau). These investigate offences specified in Articles 364 to 368 to see if they were committed under circumstances set out in Paragraph 5, Article 216 of the Procedure Code.
-
National Police. This conducts the pre-trial investigation of criminal offences as established in Ukraine's law on criminal liability (except for offences that fall within the competence of the detectives of the Anti-corruption Bureau (see above)).
Prosecution powers
The following bodies have powers of prosecution in cases of bribery and corruption:
-
PPS (General Prosecutor's Office and local prosecutor's offices). The PPS (and in particular, General Prosecutor's Office and local prosecutor's offices) exercises the prosecution powers within the criminal proceeding instituted by the National Police. For further details on their functions, see Question 3.
-
Specialised Anti-Corruption Prosecutor's Office. This is an independent unit of the General Prosecutor's Office and is primarily responsible for supporting and overseeing criminal investigations launched by the Anti-corruption Bureau. This state body is entrusted with the following responsibilities:
-
supervision over the observance of laws during the conducting of operational search activity of a pre-trial investigation by the Anti-corruption Bureau.
-
the maintenance of state prosecution in relevant proceedings; and
-
the representation of the interests of a citizen or state in court in cases provided for by law and related to corruption or corruption-related offences.
-
Powers of interview
For details on the powers of interview, see Question 3.
The following bodies have the right to conduct interviews in cases of bribery and corruption:
-
Officials of the National Police.
-
Officials of the State Bureau for Investigations.
-
Detectives of the Anti-corruption Bureau.
-
Officials of the PPS (General Prosecutor's Office and local prosecutor's offices).
-
Officials of the Specialised Anti-corruption Prosecutor's Office.
Powers of search/to compel disclosure
For details regarding the powers of search/to compel disclosure, see Question 3.
The following bodies have the right to conduct searches in cases of bribery and corruption:
-
Officials of the National Police.
-
Officials of the State Bureau for Investigations.
-
Detectives of the National Anti-corruption Bureau.
-
Officials of the PPS (General Prosecutor's Office and local prosecutor's offices).
-
Officials of the Specialised Anti-corruption Prosecutor's Office.
Powers to obtain evidence
For details regarding powers to obtain evidence, see Question 3.
The following bodies have the right to obtain evidence in cases of bribery and corruption:
-
Officials of the National Police.
-
Officials of the State Bureau for Investigations.
-
Detectives of the Anti-corruption Bureau.
-
Officials of the PPS (General Prosecutor's Office and local prosecutor's offices).
-
Officials of the Specialised Anti-Corruption Prosecutor's Office.
Power of arrest
For details regarding powers of arrest, see Question 3.
The following bodies have the right to obtain evidence in cases of bribery and corruption:
-
Officials of the National Police.
-
Officials of the State Bureau for Investigations.
-
Detectives of the Anti-corruption Bureau.
-
Officials of the PPS (General Prosecutor's Office and local prosecutor's offices).
-
Officials of the Specialised Anti-Corruption Prosecutor's Office.
Court orders or injunctions
For details regarding orders, see Question 3.
The following bodies which have the right to obtain evidence in cases of bribery and corruption:
-
Officials of the National Police.
-
Officials of the State Bureau for Investigations.
-
Detectives of the Anti-corruption Bureau.
-
Officials of the PPS (General Prosecutor's Office and local prosecutor's offices).
-
Officials of the Specialised Anti-Corruption Prosecutor's Office.
13. Which authority makes the decision to charge and on what basis is that decision made? Are there any alternative methods of disposal and what are the conditions of such disposal?
See Question 4.
Civil/administrative proceedings or penalties
Ukrainian law establishes administrative liability for the following actions, connected with corruption:
-
Violation of restrictions on secondary employment and combining with other activities.
-
Violation of restrictions on the receipt of gifts.
-
Violation of financial control requirements.
-
Violation of requirements to prevent and resolve conflicts of interest.
-
No-use of action against corruption.
(Section 13-A, Code of Ukraine on Administrative Offences.)
Criminal proceedings or penalties
Right to bail. See Question 5.
Penalties. According to the Criminal Code, corruption crimes are punishable with the following sanctions (with the most severe types of punishment listed):
-
Abuse of power/abuse of official status: imprisonment for up to six years.
-
Forgery in office: imprisonment for up to five years.
-
Neglect of official duty: imprisonment for up to five years.
-
Acceptance of an offer, promise or receipt of unlawful benefit or a bribe by an official: imprisonment for up to 12 years.
-
Abuse of official authority by an officer of a private law legal entity irrespective of organisational legal form: a fine equivalent to about EUR5,000.
-
Bribery of an official of a private law legal entity: imprisonment for up to seven years.
-
Illegal enrichment: imprisonment for up to three years.
15. Are there any measures in place to safeguard the conduct of investigations? Is there a process of appeal? Is there a process of judicial review?
See Question 6.
Insider dealing and market abuse
17. What are the main regulatory provisions and legislation relevant to insider dealing and market abuse?
The general prohibition on using insider information and market abuse can be found in the Law of Ukraine on State Regulation of the Securities Market in Ukraine. The National Securities and Stock Market Commission can impose financial sanctions on legal entities involved in such activities.
Individuals may be subject to liability for the same actions pursuant to both the provisions of the Criminal Code (criminal liability) and the Code of Administrative Offences (civil liability), depending on the level of socially dangerous consequences.
Disclosure of commercial or bank secrets
Disclosure of commercial or bank secrets involves the wilful disclosure of commercial or bank secrets without consent of its owner, by a person who was aware of these secrets in connection with his/her professional or official activity, where it was committed for selfish motives and caused a significant damage to a business entity (Paragraph 1, Article 232, Criminal Code)
According to the Law of Ukraine on State Regulation of the Securities Market in Ukraine, the following actions will not be regarded as market abuse:
-
Maintaining prices for securities in connection with their public placement or circulation, provided such actions are committed by market traders under the relevant agreement with issuers.
-
Maintaining prices for securities issued by open or interval mutual investment institutions in connection with their redemption when it is established by law.
-
Maintaining prices, levels of demand and supply and volume of bidding of financial instruments, provided that such actions are committed by market traders under the relevant agreement with the stock exchange.
-
Intervention by state authorities in connection with the implementation of monetary or debt policies.
20. Which authorities have the powers of prosecution, investigation and enforcement in cases of insider dealing and market abuse? What are these powers and what are the consequences of non-compliance? Please identify any differences between criminal and regulatory investigations.
Authorities
Overall supervision and monitoring of the market traders' activities is conducted by the National Securities and Stock Market Commission, which also co-operates in the exchange of information with other public authorities.
Prosecution powers
Prosecution and investigation powers in criminal proceedings are exercised by the National Police and the prosecution offices.
Powers of interview
See above, Prosecution powers.