Bysaga K. V. REASONS THAT CREATE CONDITIONS FOR MISAPROPRIATION OF PUBLIC FUNDS BY OFFICIALS

Категорія: АКТУАЛЬНІ ПРОБЛЕМИ СУЧАСНОЇ НАУКИ (21-23.10.14), Державне управління

УДК 351:342.5

 

REASONS THAT CREATE CONDITIONS FOR MISAPROPRIATION OF PUBLIC FUNDS BY OFFICIALS

Bysaga K. V.

University of Exeter, Exeter, United Kingdom

 

This article examines conditions which create the platform for top public officials to misappropriate public funds. In order to find these reasons, experience of Ukraine and the UK was used. Nevertheless, the article is more focus on the situation that exists in Ukraine.

Key words: reasons, public officials, corruption, bribery, embezzlement, misappropriation of public funds, The Family.

Бисага К. В. Причини, які створюють умови для незаконного привласнення державних коштів посадовими особами / Університет Екзетер, місто Екзетер, Великобританія

В даній статті розглядаються умови, які створюють платформу для високопосадовців присвоювати державні кошти. Для того щоб знайти ці причини, був використаний досвід України та Великобританії. Проте, стаття більше уваги приділяє ситуації, що склалася в Україні.

Ключові слова: причини, державні посадові особи, корупція, хабарництво, розкрадання, неправомірне привласнення державних коштів, сім’я.

Бисага Е.В. Причины, которые создают условия для незаконного присвоения государственных средств должностными лицами / Университет Экзетер, город Экзетер, Великобритания

В данной статье рассматриваются условия, которые создают платформу для чиновников присваивать государственные средства. Для того чтобы найти эти причины, был использован опыт Украины и Великобритании. Однако, статья больше внимания уделяет ситуации в Украине.

Ключевые слова: причины, государственные должностные лица, коррупция, взяточничество, хищение, неправомерное присвоение государственных средств, семья.

 

Introduction

This article is focused on the problem of misappropriation of public funds in Ukraine and the United Kingdom. This is due to the fact that in recent years, in Ukraine more frequent cases of embezzlement and misappropriation of public funds by officials occurred due to increasing corruption since 2010 when former government came to power.

The relevance of the topic is caused first of all by the fact that after the revolution that had happened in Ukraine during 2013-2014, many ‘dark’ or shadow facts have surfaced, which show how the previous government misappropriated budget funds. The problem of misappropriation of public funds by politicians (members of the government and deputies) was always present in Ukraine because legal norms that regulate issues of corruption, money laundering and misappropriation are very weak.[1] The other situation is in the UK, where the government does not ignore the problem of misappropriation of public funds by officials and try to provide a fitting rebuff to this offence.[2]

The importance of this research is predetermined primarily by the circumstances that occurred in Ukraine in the last ten years: corruption in public authorities; money laundering by politicians; the raiding of enterprises by oligarchs that have a strong bond with officials; norms of the law that were unfavourable for small and medium businesses.

 

The main part

Thorough analysis of the nature, content and determinants of the offence of misappropriation of public funds by officials, it gives grounds to come to the conclusion that a lot of different reasons somehow ‘provoke’ and ‘give possibility’ to commit this offence. Ukrainian professor Evgeniy Nevmerzhitsky identifies the following reasons:

• the lag of legislative process from the realities of life and as a result the lack of proper regulation;

• impunity of senior officials through their influence on the judiciary and law enforcement agencies;

• the use of power, status, position, and authority to satisfy its personal interests or the interests of third parties;

• bribery and corruption;

• existence of the shadow economy;

• participation of oligarchs in the political processes.[3, p.62]

Each of these reasons have negative impact on the state, therefore, they deserve special attention and consideration, however, they are quite extensive and may be subject to a separate consideration. Therefore, this subsection focuses on the main reason that was mentioned above – bribery and corruption.

There are many different definitions of corruption and among them it is possible to distinguish the following definition. Corruption is an unlawful activity that is in use by officials of their rights and opportunities for personal enrichment.[4] Corruption in its nature includes bribery, which describes the process of corruption. A bribe is an illegal remuneration of material nature. Both, accepting a bribe and giving it is forbidden and punishable by the law. Receiving a bribe by the official constitutes an acceptance of illegal remuneration for the performance or non-performance in the interests of the person giving the bribe or the benefit of a third party of any action available to it by using power or services position.[5] Corruption in public authorities is present in both countries, in Ukraine and the UK.

At the international level issue against corruption and bribery is regulated by the United Nations Convention against Corruption.[6] This Convention was ratified by both the UK and Ukraine. Another act that covers this issue is The Council of Europe’s Criminal Law Convention on Corruption.[7] Moreover, in each country the issue of corruption is governed by internal regulations. In Ukraine it is an Act of Ukraine on Prevention and Combating of Corruption.[8] In the UK it is the Bribery Act 2010.[9] All these legal frameworks are intended to reduce the existence of corruption or completely eliminate it in government authorities.[10]

Moreover, corruption can be defined as a complex social phenomenon occurring in the implementation of power relations, authorised powers by person that using power given to them to meet their personal interests (interests of third parties), and to create conditions for the implementation of corruption, conceal these activities and promote them. Corruption in Ukraine has become one of threats to national security. The UK also has a problem with corruption in public authorities, however, it is not so extensive problem as it is in Ukraine. The impact of corruption on Ukrainian state and society is complex and systemic in nature, particularly it refers to the social, economic, government, politics and international aspects.[11, p.208]

Social influence lies in the fact that corruption has two social subsystems: official (adhered to legal and ethical standards) and unofficial (using illegal methods). Economic impacts consist in the fact that corruption affects all sectors of the economy of Ukraine. Imperious impacts shows that corruption in Ukraine affects the formation of bodies of state power of all branches of government in the formulation and implementation of public policy. Thus, during the formation of representative bodies, it is difficult to avoid the influence of corruption.

The political aspect of influence lays in the fact that corruption and fight against it is widely used in the practice of political activity in Ukraine. It is clear that the situation is particularly acute during the elections. Thus, during the elections to the Verkhovna Rada of Ukraine (Parliament), the police initiated a review of criminal cases against Yulia Tymoshenko (opposition leader), that were considered as political and as a means of pressure on the opposition. In its turn, representatives of opposition parties issued a series of parliamentary inquiries, which require investigation of criminal cases of bribery of top officials. However, criminal cases against those officials were not opened. Moreover, the international dimension of corruption has a negative impact on the international image of Ukraine and impedes, and sometimes blocks the flow of foreign investment.[11, p.209]

According to statistics from the General Prosecution Service of Ukraine, during 2013 there were registered 2273 criminal offences that were related to bribery and corruption including 1683 charges of accepting a bribe. Criminally liable for bribery most attracted were government officials, officials of the interior ministry, officials and officers of local authorities and customs officials. The largest amount of bribe in 2012, which was documented by the police officers, in Ukraine amounted to $ 11 million.[12]

Besides, Transparency International (international NGO against corruption) in their Corruption Perceptions Index 2013[13] analysed all countries in the issue of the existence of corruption. According to this Index, which processed data of 177 countries, 70% of countries have problems with corruption and embezzlement of public funds. Appropriately with assessment of corruption the UK is described as a ‘clean’ country with the score of 76 and 14th place. In contrast, Ukraine is characterised as a corrupt country with the score of 25 and 144th place. Two countries located in Europe, but have opposite indicators.[13]

Ukrainian professor, Mykola Havronyuk mentioned, that in Ukraine there is widespread corruption due to imperfect political institutions and the judiciary, ambiguous laws, ignorance or misunderstanding of the laws by population, nepotism and political patronage, and the weak influence of civil society. The main reason for the flourishing of corruption in Ukraine is that officials are not afraid to take bribes.[14]

Today embezzlement and misappropriation of public funds by top officials are the most common offences in relation to the budget. Crimes in public administration represent a considerable social danger. This is due not only to the fact that public officials misappropriate budget funds, but also that such crime is committed by the officials of various ranks.[15]

Therefore, the State Service of Financial Monitoring in Ukraine has developed so-called guidance typologies and mechanisms that describe the standard circuit of an appropriation of public funds. This government organization has noted as common schemes, which include: false retail of goods or providing of service; falsification of accounts for obtaining goods and services; speculative transactions in securities sector; sale of goods or providing services over the false company; concluding direct agreements with residents or non-residents who then disappear; false contract with the transfer abroad; speculative export trade transactions; fictitious transactions.[16] However it is possible to argue that this list is not full, because each time corrupt officials try to build schemes which would be difficult to identify. Each of these schemes is unique. However, a further object of this section will be the consideration of schemes which are organized and operating under Yanukovych and his entourage for the misappropriation of public funds.

Mr. Yanukovych, throughout his political career had salaries no more than $ 2.000, but when he became a President of Ukraine in 2010, he could afford a luxurious estate outside the city in nature reserve. Now the price of his estate in the area has reached more than one billion UAH.[17] The answer to the question ‘how is it possible’ is simple. He multiplied his own assets through corruption in the country and misappropriation of public funds. Almost all of his assets, he concealed a network of phantom companies both in Ukraine and abroad.

In recent years, Ukrainian press has developed the term ‘The Family’, which described Mr. Yanukovych and his close relatives and friends that held positions in the government and who were engaged in misappropriation of public funds. The term ‘The Family’ includes next people: Victor Yanukovych (ex-President); Oleksandr and Victor (his sons); Serhiy Arbuzov (ex-Governor of the National Bank of Ukraine); Vitalii Zakharchenko (ex-Minister of Internal Affairs of Ukraine); Oleksandr Klymenko (ex-Minister of fees and income of Ukraine); Eduard Stavytskyi (ex-Minister of Energy and Coal Industry of Ukraine); Yuriy Kolobov (ex-Finance Minister); Mykola Prysiazhnyuk (ex-Minister of Agriculture and Food) and Sergiy Kurchenko (banker and businessman).[18]

Besides, ‘The Family’ controlled all ministries and it was not allowed to be present at public administration entities, for those who were not close to the President. Such schedule of persons in authorities each month allowed Yanukovych ‘without noise and dust’ to ravage the state budget for ‘The Family’ needs.[18]

Conclusion:

One of the main reasons of existence of misappropriation of public funds by top officials is corruption that exists in public authorities. Corruption in the system of government can be defined as the abuse of public authority by officials, as well as, obtaining any illicit benefit for himself/herself or third parties. As a result, corruption undermines the credibility of the country, causing damage to the functioning of the state apparatus, limiting the constitutional rights and freedoms, discrediting the country at the international level.[19]

Now corruption is more than a private matter of two or more people, it is rather a ‘disease’ of a whole country. Corruption is a crime which limits human rights to fair treatment, because when a person gives a bribe he/she has become a privileged person. As the result breach of equality occurs. Ignoring of this problem does not resolve it, but rather gives the freedom of action to corrupt officials, who feel their impunity. Corruption destroys public trust and destroys social capital. It undermines the laws and regulations that aim to serve productive social objectives.[20, p.21]

Foremost in the fight against corruption, in addition to the relevant legislation, there should be present a political will and readiness of society to change. Public authorities must stand at the head of the fight against corruption, because the main thing is a political will to progressive and systematic actions. The society should press the authorities and they need to elect government that would actually fight against corruption in all its forms.

 

References:

1. Corruption Assessment: Ukraine. Final report, / [Spector B. I., Winbourne S., O’Brien J., Rudenshiold E.]. – W.: USAID, 2006, - 84p.

2. Transparency International UK, Corruption in the UK. Overview and policy recomendations / TI UK/ June 2011, ISBN 978-0-9566194-4-0

3. Nevmerzhitsky E.V., Legal Issues of Economic Crime and Corruption / E.V. Nevmerzhitsky. – Kiev: APSV, 2005. – 415p.

4. Online Legal Dictionary, Corruption / 2nd edn. [Electronic resource]. – Mode of access: http://thelawdictionary.org/corruption/

5. Criminal Code Of Ukraine [2001], Bulletin of the Verkhovna Rada of Ukraine 29.06.2001, №2341-II

6. United Nations Convention against Corruption [2003], 58/4. – Vienna. [Electronic resource]. – Mode of access: http://www.unodc.org/documents/treaties/UNCAC/Publications/Convention/08-50026_E.pdf

7. The Council of Europe’s Criminal Law Convention on Corruption [1999], CETS N 173. – Strasbourgh. [Electronic resource]. – Mode of access: http://conventions.coe.int/Treaty/en/Treaties/html/173.htm

8. Act of Ukraine on the Prevention and Combating of Corruption [2011], Bulletin of the Verkhovna Rada of Ukraine 07.10.2011 №3206-VI

9. Bribery Act [2010], (c.23). [Electronic resource]. – Mode of access: http://www.legislation.gov.uk/ukpga/2010/23/contents

10. Georgetown University Law Library website, International Anti-Corruption Law Research Guide. [Electronic resource]. – Mode of access: http://www.law.georgetown.edu/library/research/guides/intlcorruption.cfm

11. Nyzhnyk V.M., Economic diplomacy and economic security of Ukraine / V.M. Nyzhnyk. – Khmelnytsky: KNU, 2007. – 299p.

12. Hmelovska O., Last year, to the court came only 907 in 1927 criminal proceedings on the facts of bribery / O. Hmelovska // The Ukrainian Week. – 2014. [Electronic resource]. – Mode of access: http://tyzhden.ua/News/106051

13. Transparency International, Corruption Perceptions Index 2013 / EYGM 2014. [Electronic resource]. – Mode of access: http://www.ey.com/Publication/vwLUAssets/EY-Transparency-International-Corruption-Perceptions-Index-2013/$FILE/EY-Transparency-International-Corruption-Perceptions-Index-2013.pdf

14. Centre of Political and Legal Reforms website, 5 reasons why in Ukraine there is widespread corruption, and what to do with it?. [Electronic resource]. – Mode of access: http://pravo.org.ua/protydiia-koruptsii/1506-5-prychyn-chomu-v-ukraini-poshyrena-koruptsiia-i-shcho-z-tsym-robyty.html

15. Department of Financial Investigations, the State Service for Financial Monitoring of Ukraine, Current methods and techniques of legalization (laundering) proceeds from crime and financing of terrorism / 2012. [Electronic resource]. – Mode of access: http://webcache.googleusercontent.com/search?q=cache:vy2t7BXrrv8J:www.minfin.gov.ua/file/link/396801/file/2012.pdf+&cd=1&hl=ru&ct=clnk&gl=ua&client=firefox-a

16. The State Financial Monitoring Service in Ukraine, Money Laundering Typologies and their Detection Mechanisms / 2008 / Order of SFMS from 25 December 2009 № 182

17. Fakty.ictv.ua website, Realtors rated Mezhyhirya 1 billion UAH / 2014. [Electronic resource]. – Mode of access: http://fakty.ictv.ua/ua/index/read-news/id/1509265

18. Leshchenko S., Government of Yanukovych's Family. Version 1.0 / S. Leshchenko// Ukrainska Pravda. – 2012. [Electronic resource]. – Mode of access: http://www.pravda.com.ua/articles/2012/12/25/6980434/

19. Mills A., Causes of corruption in public sector institutions and its impact on development / A.Mills // 2012. [Electronic resource]. – Mode of access: http://unpan1.un.org/intradoc/groups/public/documents/un-dpadm/unpan049589.pdf

20. Bryan R Evans, The cost of corruption / Evans B.R. – Teddington: TearFund, 1999. – 33p.

 

 

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