Financial Transparency Coalition

Last week Ukrainians cast their ballots for a new president. It was the first election for the position since the nation ousted its allegedly-corrupt former President, Viktor Yanukovych.

Before he fled to Russia, Yanukovych lived on 340 acres of land on the banks of the river Dnieper in Ukraine. His former 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, 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. Really, words can’t do it justice. You should just take a look at the pictures.

According to Ukraine’s acting prosecutor general, Oleh Makhnitskyi, initial intelligence suggests Yanukovyh stole “tens of billions of dollars” in public funds from his nation. Ukrainian prosecutors also believe that Yanukovych was able to fuel his personal assets with the alleged proceeds of corruption because he could hide assets in an opaque international financial system and network of phantom companies.

Late last month, the United Kingdom hosted a two-day meeting for government officials from thirty-five countries to discuss how the international community might coordinate to recover these allegedly stolen assets. In the official statement from this meeting, the Ukraine Forum on Asset Recovery, participants recognized that the “recovery of the proceeds of corruption through international cooperation is essential in helping restore integrity and public trust in government, and in sending a strong message that there can be no impunity for those who abuse their official positions.”

While the sentiment is admirable, and the cooperation amongst these nations for the people of Ukraine is commendable, we shouldn’t hold on breath that much will come of it.

Asset recovery is maddeningly, frighteningly difficult (particularly in a world largely without public registries—more on that later). As Tom Cardamone, Managing Director of Global Financial Integrity, has said: “The opportunity costs of trying to locate, let alone recover, corrupt proceeds are just too frustratingly, maddeningly, horribly high. Given their complexity and difficulty, efforts to recoup stolen funds are Sisyphean in the extreme.” Past repatriation efforts, for example, have resulted in the return of only about 1 percent of stolen government money.

Asset recovery, whether done with or without the cooperation of some of the international community, may be a piece of the puzzle. It will not, however, solve the problem. The only strategy that really works is to prevent the money from going out in the first place.

Prevention is, of course, a long-term solution. It would involve, for example, worldwide adoption of public registries for beneficial ownership, which would require companies, trusts, and foundations, to not only gather information about their beneficial owners, but also to publish it in the public domain. With public registries, governments would provide this information free, on a widely-available basis, and in an open data format. Citizens, journalists, and members of civil society would be able to access this information and hold companies accountable for their actions.

While it might be too late to recover the funds already allegedly stolen by Yanukovych, there is significant evidence that if these registries were accepted globally, they would boost asset recovery and, through deterrence, may reduce the flow of illicit money from many nations like Ukraine. These registries would make it much harder for corrupt politicians to hide their dirty cash abroad, stemming the tide of illicit money. Such a change would have an enormous impact on the everyday people of Ukraine and many more beyond.

Image used under Creative Commons license / Flickr User DeepStereo