Timofey Saytarly,
Vladimir Golubev
Crime-research.org
Typical schemes of outflow of capital and money laundering in Ukraine
Ukraine's economic processes concerned with forming the market economy increase the probability of legalizing illegal incomes. In its turn, it resulted from the imperfectness of laws regulating the activity of economic structures, inexperience of law enforcement bodies in resolving this problem, penetration of shady moneymakers and other representatives of the criminal environment into a legal economy.
The problem of money laundering has gained in an international scale and transformed into a global threat for the integrity, reliability and stability of Ukraine's financial and governmental structures. It requires taking urgent steps to fight this phenomenon and deprive criminals of their illegal revenue sources.
To our mind, three most typical schemes of illegal capital leakage and money laundering should be emphasized when considering this issue.
Export and import operations
The scheme of money laundering through import operations is as follows. Illegally acquired funds are remitted to accounts of dummy firms and then foreign currency is transferred abroad to pay import contracts. The further bankroll manipulations take place there. Money is transferred from one account to another until it become legal.
Among well-known ways of illegal enrichment are to embezzle credits (especially state ones), deceive partners, make "pyramids", attract public funds and cause a bank failure, privatize industry and trade, etc. Those banks developing in a rapid way during a primary accumulation of capital and then failing, in reality, transferred some money to foreign bank accounts. Then these funds were put in a legal business abroad or in Ukraine.
As a rule, criminals officially register "fictitious" or "transit" firms for dummies, military men, prisoners, as well as needy and mentally ill persons. Real machination organizers transfer money to their accounts on legal grounds. Further, these firms vanish and organizers make no claims (or at least formal ones) on breaking contracts. These firms are of a short-term nature. Tax bodies start showing interest in their activity only in three months when it is time to check the accounts. Tax officers can suspend the movement of funds to the account that is practically not required by that time and carry out the revision. Fictitious firms are taken under the currency control after ninety days. All computations should be accomplished within this time. Information on breakers is obtained too late because of an imperfect mechanism of the interaction between Ukraine's National Bank and commercial banks. By this, the firm had ceased to exist for a long time, its managers disappeared and documents are lacking. In such cases, it is impossible to audit an enterprise, impose a fine and search out its managers.
As a result, criminals often use this scheme and avoid the punishment. It should be emphasized that the import piracy is realized through authorized banks that are currency control agents. Their security service can establish the authenticity of firm founder documents, identify their managers, reveal illegal transactions in a proper time and take necessary steps or inform law enforcement bodies. However, banks are still reluctant to inform law enforcement agencies about shady financial operations or do it to their discretion.
According to the export operation scheme, goods are delivered to bought or established firms abroad. As a rule, foreign firms are supplied with raw materials but Ukrainian ones obtain no money. Funds do not return to Ukraine and they are legalized abroad. False firms can be also used in these cases. They are easy to replace in three months, guilty persons being difficult to find then. This channel is widely used because it results in decreasing export prices.
Fictitious services and transfer
It is quite risky to establish dummy firms. Therefore, swindlers often use a fictitious service payment scheme. The currency control cannot be taken of this sphere because the criminal can be arrested if the whole scheme of obtaining illegal revenues is exposed before their legalization.
As a rule, cash money is illegally transferred when locally exchanging UHR for foreign currency to obtain it abroad. Foreigners who are engaged in a "shuttle" business derive considerable incomes from import. However, they cannot bring back their receipts in UHR or foreign currency unless they were declared. Therefore, firms or banks with partial or full foreign capital are set up. Further, the scheme is very simple. Trade earnings are exchanged and then firms transfer them to their native bank accounts abroad through import contracts. When the audit starts, documents are destroyed or vanish, foreigners leave Ukraine and it is impossible to find managers. This problem will remain while there is a shuttle business.
Cash Circulation
Taking into account a severe control of cash currency and the legalization of an economic life (first of all, shady circulation), breakers often use the following scheme of encashing foreign exchange. Ukrainian businesspersons buy or establish firms abroad, open their representative offices or branches in Ukraine and transfer large sums of foreign exchange to these accounts through foreign contracts. Although representative offices must not realize an economic activity, they do it in a very active way. Some cash money is given to foreigners to pay traveling or other expenses because they can get cash exchange on legal grounds. After encashing, a part of funds is put into a shady use or exported abroad.
Very large money is put into a shady circulation through external economic activities of enterprises (price and import volume manipulations, illegal customs registration). In such cases, customs duty discharge is considerably reduced. It appears that many goods are illegally imported. In Ukraine, they are for overpriced sale and delta plus receipts resulted from selling unregistered goods are partially or fully put into a shady circulation and cannot be taken under control. Funds remain to be in a shady use to evade taxes and avoid a penalty.
Finally, some cash funds are legalized, for example, by contributing them as individual deposits to the enterprise capital stock. As a rule, they are partly deposited in large sums. In the same way, money is transferred to local or foreign deposit bank accounts^; shares or other securities are purchased. Other ways of legalizing illegal incomes are connected to definite losses. When a firm fixes ill-gotten money as commercial receipts, it will have to pay many taxes. We suppose that at present this way of legalizing money is not so widely used in Ukraine as in foreign countries because of many other more simple ones.
In conclusion, it should be emphasized that the above schemes of laundering dirty money are realized through financial institutions. Bank employees know about illegal operations and sometimes they participate in them. State organizations cannot take their control of all suspicious transactions because of a large number of commercial banks in Ukraine. Combining efforts of all governmental bodies, authorized banks and financial institutions can prevent using and money laundering in Ukraine.
Passing Ukraine's law "On preventing and struggling against the legalization of illegal incomes" and establishing the National Agency on Financial Security will favor solving the problem of money laundering.
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