It has been a year since the G7 Ambassadors expressed civil society's concerns about the procedures followed during the process of appointing the Head of the National Agency of Ukraine for Finding, Tracing and Management of Assets Derived from Corruption and Other Crimes. In order to build trust in ARMA, we would like to report on the numerous challenges, achievements and issues we have faced over the past year. This time was extremely important for the Agency's work, which was marked by a significant improvement in all areas of its activities.
One of the biggest achievements of this year is that for the first time since the establishment of ARMA, the economic effect of its activities exceeded the amount of state expenditures on its maintenance (UAH 189 million in 2024). At the same time, the application of new approaches to the strategy of managing seized assets has resulted in a significant positive trend in the amount of income paid by managers to the state budget of Ukraine.
This period was characterized by a high level of productivity in terms of the number of asset tracing requests - more than 7,000 requests from Ukrainian law enforcement agencies and foreign jurisdictions. In this context, it is important to achieve public access to the Unified State Register of Assets Seized in Criminal Proceedings, a comprehensive database of all assets seized by Ukrainian law enforcement and courts in criminal cases. As of today, the register contains over 290,000 records of seized assets (of which over 69,000 have been transferred to ARMA) and allows tracking (including online) all actions that take place with a particular asset. The opening of the registry is a long-awaited and much-needed step towards European integration, which is in line with open data policy and international best practices.
It is also significant that the state budget of Ukraine received UAH 101.3 million from asset management in 2023, and UAH 288.2 million for 6 months of 2024 (UAH 41.84 million in 2021, UAH 34.79 million in 2022).
In addition, the state budget of Ukraine received UAH 103 million from the sale of seized assets in 5 months of 2024, including UAH 15.4 million from customs payments (2021 - UAH 110.1 million, 2022 - UAH 980.8 million, 2023 - UAH 570.6 million).
The Agency also actively worked on amending the current legislation, which improved the mechanisms for tracing and effective management of seized assets. One of the main achievements was the approval of the Asset Recovery Strategy for 2023-2025, which was developed in response to international recommendations, in particular those contained in the European Commission's Fourth Report on the Visa Suspension Mechanism; operational conclusions prepared following the seventh meeting of the Subcommittee on Justice, Freedom and Security of the EU-Ukraine Association Committee; and the European Commission's Opinion on granting Ukraine the status of an EU candidate. The Strategy defines the course of state policy on the introduction of a comprehensive model for the return of illicit assets to Ukraine and will serve as a basis for the development of mechanisms for compensation for losses caused by the aggression of the russian federation.
It should also be noted that ARMA is the only central executive body in Ukraine authorized to purchase military bonds, and therefore the only state body that strengthens the country's defense capability at the expense of seized assets (funds), including those of russian origin. Thus, over the past year, military bonds worth more than UAH 4.162 billion were purchased (using 80% of the seized assets transferred to ARMA's management), which is many times higher than the amount of funds spent by the Agency on the purchase of such government bonds in previous periods of its activity. In addition, ARMA initiated amendments to the legislation, which made it possible to purchase government bonds in foreign currency.
It is worth noting that the difference between the interest rate of domestic government bonds and the deposit in state-owned banks over the past six months amounted to more than UAH 500 million of guaranteed revenues to the state budget.
An equally important component of ARMA's activities is the establishment of cooperation with specialized international institutions and foreign partners responsible for organizing and implementing effective cooperation in the field of asset tracing, finding and management. It is worth noting that over the past year, ARMA has reached a qualitatively new level of international communication and has made significant progress in this area.
In particular, for the first time in the eight years of the Agency's existence, an international interagency agreement was signed - a Memorandum of Partnership and Cooperation with the Asset Recovery Office of the Republic of Malta. In addition, in 2024, ARMA joined the European Partners Against Corruption (EPAC), the European Anti-Corruption Contact Points (EACN), the Steering Committee of the Balkan Asset Management Interagency Network (BAMIN), and established cooperation with the European Union Advisory Mission (EUAM). To date, EUAM is the only partner of ARMA that contributes to the Agency's institutional capacity. In addition, it provides logistical assistance, including the supply of software and office equipment for the needs of investigations, as well as educational activities to ensure the professional development of the Agency's staff. Joint projects and exchange of experience with international organizations allow for the implementation of best practices in the management of seized assets, which helps ARMA achieve significant results in the fight against corruption.
One of ARMA's most successful cases is the asset management of PJSC VinnytsiaPobutkhim, one of the largest national producers of household chemicals. Thanks to operational control measures, ARMA managed to establish effective management of the company's assets, maintain production facilities and increase stable revenues to the state budget of Ukraine from UAH 237 thousand per month to almost UAH 8 million. The total revenues for the last 8 months amount to UAH 63.7 million, including UAH 87 million in taxes to the state budget.
Another significant achievement of ARMA was the management of the assets of the Glusco gas station chain. Previously, these assets did not generate any revenues to the state budget due to inefficient management and lack of proper control. As a result, ARMA's control measures and decisive steps have optimized the operation of the stations, significantly increased their profitability and ensured transparency of financial flows. In particular, in the first five months of 2024, PJSC Ukrnafta transferred UAH 35 million to the state budget of Ukraine under the management agreement concluded with ARMA from the management of the seized Glusco gas stations.
It is also worth mentioning the management of corporate rights of gas distribution companies known as Firtash's oblgases. Over the previous two years, these assets did not bring the state a single penny.According to ARMA Order No. 227 of 04.10.2023, an interagency working group was established jointly with the Security Service of Ukraine, which, through operational and control measures, provided guarantees to the manager. Such guarantees, in accordance with the distribution of dividends, will ensure revenues to the state budget of Ukraine of more than UAH 800 million, of which:
UAH 226 million in 2022;
UAH 564 million in 2023.
As of today, the state budget of Ukraine has already received UAH 172.4 million thanks to the work of ARMA team.
Viktor Medvedchuk's yacht Royal Romance has become another vivid example of ARMA's effective work over the past year. Despite strong opposition from lawyers of Steptoe International LLP (USA), representing Medvedchuk's interests, ARMA managed to carry out a number of operational measures and carry out the necessary procedures to start the process of selling the yacht, which had been seized since 2022, but until November 2023, due to a number of circumstances, the case did not develop properly.
In November 2023, at the initiative of ARMA, the Cabinet of Ministers of Ukraine improved the procedure for the sale of seized assets and regulated their sale abroad. Since that moment, ARMA, not being an authorized body that sends requests to foreign competent authorities for international legal assistance, in accordance with Article 545 of the Criminal Procedure Code of Ukraine, Article 18 of the Special Law of Ukraine on ARMA, has sent a number of requests regarding the yacht to the Croatian state authorities - the Ministry of Maritime Affairs, Transport and Infrastructure, the Ministry of Justice, the Ministry of Foreign Affairs, the Embassy of Croatia in Ukraine and all competent state authorities of Ukraine involved in this process. Thanks to fruitful bilateral cooperation, we received assistance from the Croatian government authorities in further realization of the asset.
Significant achievements included obtaining a Certificate of the right to sail under the State Flag of Ukraine, which was accompanied by appropriate changes to the International Maritime Organization (IMO), as well as the inspection of the yacht by ARMA delegation and the receipt of extremely important documents seized from the vessel by the Croatian police during its arrest. This allowed us to hold a competition to select the vessel's seller and select two winners of the competition, which for the first time launched the process of selling an asset located in a foreign jurisdiction.
Having gained practical experience in the first case of asset recovery, understanding the gaps in national legislation, in order to reduce the time for preparing and sending relevant requests for international legal assistance, as well as to ensure proper interaction between the competent authorities of Ukraine and foreign countries, proper coordination and execution of requests, taking into account the legislation of foreign countries and international agreements, the Agency initiated amendments to Article 545 of the Criminal Procedure Code of Ukraine to allow ARMA to apply to authorities in foreign jurisdictions for international legal assistance in the field of asset tracing, finding and management within its competence.
Having gained practical experience in the first case of asset recovery, understanding the gaps in national legislation, in order to reduce the time for preparing and sending relevant requests for international legal assistance, as well as to ensure proper interaction between the competent authorities of Ukraine and foreign countries, proper coordination and execution of requests, taking into account the legislation of foreign countries and international agreements, the Agency initiated amendments to Article 545 of the Criminal Procedure Code of Ukraine to allow ARMA to apply to authorities in foreign jurisdictions for international legal assistance in the field of asset tracing, finding and management within its competence.
Despite significant achievements, we continue to face many challenges, including the need to overcome resistance from those who seek to avoid responsibility for their illegal actions. It should be noted that some state institutions and international partners did not adequately support the Agency's initiatives. In particular, despite our numerous appeals (including within the framework of security agreements) to the embassies of key partner countries and existing international technical assistance projects, mechanisms have not yet been used to establish ARMA Office of Reforms and implement other ARMA initiatives that would allow the involvement of foreign experts and strengthen the institutional capacity of the Agency.
The lack of support from international technical assistance projects remains a significant problem.Despite the fact that ARMA actively cooperates with foreign partners, many of the Agency's initiatives are currently not receiving adequate attention. An additional challenge is budgetary constraints and insufficient funding for ARMA's activities, which significantly complicates the implementation of strategic tasks and important projects.
Legislative restrictions create additional difficulties. In particular, it should be emphasized that legislative initiatives are still being considered by the Verkhovna Rada of Ukraine. For example, draft law No. 10069 of 18.09.2023, which provides for amendments to the legislation, in particular, to the Law of Ukraine "On the Basic Principles of Forcible Seizure in Ukraine of Property of the russian federation and its residents", which eliminates the need to obtain the permission of the owner - the russian federation and its residents - to manage and sell their seized assets (is currently under consideration by the Verkhovna Rada of Ukraine).
No less important is the draft law No. 11009 of 12.02.2024, which aims to regulate the management of assets during martial law and in peacetime by improving the sanctions policy and increasing the efficiency of management of state, municipal property and seized assets in order to meet vital humanitarian, military or other needs that arose during martial law in Ukraine (under consideration by the Verkhovna Rada of Ukraine).
Another example is the draft Law of Ukraine on Amendments to the Law of Ukraine "On the National Agency of Ukraine for Finding, Tracing and Management of Assets Derived from Corruption and Other Crimes" initiated by ARMA, which provides for improvement of the procedure for competitive selection of the Head of the Agency, determination of an exhaustive list of grounds for early dismissal or termination of the powers of the Head of ARMA, introduction of guarantees of ARMA's independence from improper interference or influence on its activities, as well as improvement of the procedure for conducting an independent external assessment of ARMA's activities (sent to the interested executive authorities for amendments and proposals).
conducting an independent external assessment of ARMA's activities (sent to the concerned executive authorities for amendments and suggestions).
It is also worth noting that civil society has requested an audit of ARMA's work for an independent external assessment of the Agency's activities. At ARMA's initiative, the State Audit Service of Ukaine has already conducted a financial audit and received a draft report for the period from January 01, 2022 to December 31, 2023. In addition, ARMA initiated an audit by the Accounting Chamber of Ukraine.
The external audit in accordance with Article 12 of ARMA Law remains a problematic issue, as due to gaps in national legislation, such an audit of the Agency's activities is not properly regulated.
Despite numerous obstacles from persons deprived of their illegally acquired property and limited support from international technical assistance projects, the Camden Asset Recovery Interagency Network (CARIN) mentioned Ukraine as one of the most active participants in international cooperation in its annual report for 2023.
Out of 436 requests for asset tracing sent by Ukraine to CARIN, 215 were sent to ARMA. At the same time, Switzerland, the United States, Ukraine and the United Kingdom received the largest number of requests from CARIN members for asset identification and tracing. Out of 138 requests to Ukraine, 106 were forwarded to ARMA, which demonstrates the high level of trust of international partners in the Agency.
Thus, every step taken by ARMA and every initiative implemented is aimed at creating a fair and transparent mechanism that provides not only immediate results in the form of asset recovery and increased revenues to the state budget of Ukraine, but also has far-reaching consequences for strengthening the economic and social stability of the state. Measures aimed at improving the asset management system, introducing legislative changes to optimize the procedures for selecting asset managers, expanding the possibilities for selling seized assets, in particular abroad, reflect a deep understanding of the needs of modern Ukraine and the Agency's effective work for the benefit of our country and its citizens.
Despite all the challenges, realizing the high potential of the Agency, which can be qualitatively strengthened with the help of our strategic partners, ARMA remains open to cooperation in bilateral and multilateral formats to resolve problematic issues and improve the efficiency of its activities.
Head of ARMA Olena DUMA
