Financial Transparency Coalition

Victor Yanukovych lives on 340 acres of land on the banks of the river Dnieper in Ukraine. His home, a five story mansion named Mezhyhiriya, is decorated with marble, crystal, and precious woods. It is difficult to overstate the luxury of this palatial building. Its cedar doors are worth $64,000 each, the wall paneling in the staircases is valued at $200,000, each individual chandelier cost about $100,000. The entire value of the property is estimated at around $200 million.

From this description, you might believe that Yanukovych is a dignitary or an exceptionally successful businessman. In some ways, he is those things, but not for legitimate reasons. In fact, Yanukovych is a politician. Since 1997, Yanukovych has served alternately as Governor of Donetsk, twice as Prime Minister of Ukraine, and now President of Ukraine. For most of his career, his official salary was about $2,000 per month.

Yanukovych was elected President of Ukraine in 2010. Since then, Yanukovych has watched over an increasingly struggling national economy. Amidst the global recession, demand for Ukraine’s exports—namely steel and industrial capital—has fallen. The nation’s currency is now being held artificially high to help pay for imports and debt servicing, but this has only furthered weakened demand for its exports.

Yet Ukraine’s real problem is not exports, or currency, or debt. It is—as its President’s mansion has shown—corruption.

Ukraine is not alone in this problem or its solution. In part, Yanukovych is able to fuel his personal assets with the proceeds of corruption because he can hide assets in an opaque international financial system and network of phantom companies.

The European Parliament (EP) and EU member state governments are currently discussing revising EU anti-money laundering rules under the EU Anti-Money Laundering Directive. Next week, the EP will have an opportunity to stem the tide of abuse of the EU financial system by politicians like Yanukovych and the hundreds of others like him. Specifically, on January 22^nd, the EP’s Economic and Monetary Affairs (ECON) and Civil Liberties, Justice and Home Affairs (LIBE) committees will vote on several amendments, including one which would create public registries for beneficial ownership.

Public registries in the European Union would be a big deal. With this requirement, the EU would require companies, trusts, and foundations, to not only gather information about their beneficial owners, but also to publish it in the public domain. The information would be free, widely available (perhaps using existing corporate registries), and in open data format. Citizens, journalists, and members of civil society would be able to access this information and hold companies accountable for their actions.

There is significant evidence that if these registries are accepted globally, they would boost asset recovery and, through deterrence, may reduce the flow of illicit money. If the EU adopts these registries, it will mean it would be much harder for individuals like Victor Yanukovych to hide their dirty cash in Europe and it will provide momentum for other nations to create their own registries, stemming the tide of illicit money. Such a change would have an enormous impact on the everyday people of Ukraine and many more beyond. It is time for the EU to take this bold step forward.

Update: The vote on the EU Anti-Money Laundering Directive has been postponed until February 13, 2014