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Ukraine

Beneficial Ownership Registry (UA0076)

Overview

At-a-Glance

Action Plan: Ukraine Action Plan 2018-2020

Action Plan Cycle: 2018

Status: Active

Institutions

Lead Institution: MoJ MoF State Fiscal Service State Service of Financial Monitoring National Agency of Ukraine for Finding, Tracing and Management of Assets Derived from Corruption and Other Crimes State e-Government Agency

Support Institution(s): Transparency International Ukraine, Government-Civic Initiative “Together against Corruption,” International Renaissance Foundation, Anti-Corruption Action Centre, other CSOs and international organizations (upon their consent)

Policy Areas

Anti-Corruption, Beneficial Ownership, E-Government, Private Sector

IRM Review

IRM Report: Ukraine Transitional Results Report 2018-2020, Ukraine Design Report 2018-2020

Starred: Pending IRM Review

Early Results: No IRM Data

Design i

Verifiable: Yes

Relevant to OGP Values: Access to Information , Technology

Potential Impact:

Implementation i

Completion:

Description

Launching a mechanism to verify information on final beneficiaries Nowadays, the effective law requests the legal entities to identify its final beneficiary, regularly update and store information about him/her and provide it to the state registrar in cases and scope stipulated by law. Information on final beneficiaries is accessible in the Unified State Register of Legal Entities, Private Entrepreneurs and 13 NGOs (hereinafter – the Register), but it is incomplete and displayed in a non-structured way there. Moreover, Ukraine lacks a mechanism to verify information from the Register. Namely, it does not specify an authority that is authorized to conduct such verifications as well as reasons therefor. On 22 May 2017, the MoJ, State e-Government Agency, Transparency International Ukraine and OрenOwnershiр Consortium signed the Memorandum of Understanding that identifies joint action on transferring information on beneficiary ownership from the Register to the Global Beneficial Ownership Register. Actions Responsible Timeframe Partners Indicator 1. Updating software of the Register so that it separately displays information on a founder and a final beneficiary owner (controller) of a legal entity MoJ MoF State Fiscal Service State Service of Financial Monitoring National Agency of Ukraine for Finding, Tracing and Management of Assets Derived from Corruption and Other Crimes State e-Government Agency December 2018 – March 2019 Transparency International Ukraine, Government-Civic Initiative “Together against Corruption,” International Renaissance Foundation, Anti-Corruption Action Centre, other CSOs and international organizations (upon their consent) Data on beneficiary owners of legal entities in the Unified State Register are adapted for integration to the Global Beneficial Ownership Register 2. Drafting proposals on a mechanism to verify information on beneficiary owners from the Register -//- December 2018 – December 2019 -//- A concept of a mechanism to verify information on beneficiary owners from the Register is developed Expected results of this activity are transferring information from the Register to the Global Beneficial Ownership Register; introducing verification of information on final beneficiary owners; preventing and countering laundering of the proceeds of crime, financing terrorism and proliferation of weapons of mass destruction

IRM Midterm Status Summary

7. Launch the mechanism of verifying final beneficiaries

Language of the commitment as it appears in the action plan: Launching a mechanism to verify information on final beneficiaries [58]

Nowadays, the effective law requests the legal entities to identify its final beneficiary, regularly update and store information about him/her and provide it to the state registrar in cases and scope stipulated by law. Information on final beneficiaries is accessible in the Unified State Register of Legal Entities, Private Entrepreneurs and NGOs (hereinafter – the Register), but it is incomplete and displayed in a non-structured way there. Moreover, Ukraine lacks a mechanism to verify information from the Register. Namely, it does not specify an authority that is authorized to conduct such verifications as well as reasons therefor.

On 22 May 2017, the MoJ, State e-Government Agency, Transparency International Ukraine and OрenOwnershiр Consortium signed the Memorandum of Understanding that identifies joint action on transferring information on beneficiary ownership from the Register to the Global Beneficial Ownership Register.

Milestones:

  1. Updating software of the Register so that it separately displays information on a founder and a final beneficiary owner (controller) of a legal entity
  2. Drafting proposals on a mechanism to verify information on beneficiary owners from the Register

Start Date: December 2018

End Date: December 2019

Context and objectives

Information on the ultimate beneficial owners of companies in Ukraine is disclosed in the Unified State Register of Legal Entities, Private Entrepreneurs and NGOs (Register). [59] However, this Register has several flaws, including incomplete information displayed in non-structured ways, [60] irregular updating, [61] insufficient and questionable information, [62] and no mechanism to verify insufficient and questionable information. [63] The law imposes fines for not submitting information to the Register, but few fines have been applied in practice. Also, there are no sanctions for submitting incorrect information to the Register.

Some civil society representatives believe that the existing flaws allow the concealment of ultimate beneficial owners. According to an interviewed representative from the Anticorruption Action Centre (ANTAC), [64] some Ukrainian companies have intentionally disguised their real owners. [65] Many companies often submit incorrect information about their beneficial owners or do not submit any information at all. [66]

This commitment aims to launch a mechanism to verify the accuracy of the Register’s beneficial ownership information by updating its software. The linked performance indicators are specific enough to verify, and because this initiative implies a more precise disclosure of data on registered entities online, it is relevant to OGP values of access to information and technology and innovation.

The verification of information on the Register continues from Commitment 5 from the previous action plan (2016−2018). While some progress was made, including the passage of a regulation to comply with global open data standards, the software to search and display relations between ultimate beneficial owners was not developed. [67] The Ministry of Justice (MoJ) expects this current commitment will result in accurate and up-to-date information on ultimate beneficial owners in the updated Register, [68] which could help prevent and counter laundering of criminal proceeds. [69] If fully implemented, this commitment could have a transformative impact in allowing accuracy verification of companies’ ultimate beneficial owners included in the register.

Next steps

Experts from civil society advise the MoJ to introduce unique identifiers for individuals and to establish annual mandatory updates of the Register data. [70]

For effective verification, multiple mechanisms could be used to verify information on beneficial owners from the Register. These include automatic checks against risk-indicators, feedback from banks, and cross-checks with other registries. The Cabinet of Ministers could prepare a draft regulation specifying agencies and their roles for verification.

[59] “The United States Register of Legal Entities, Private Entrepreneurs and NGOs” (Open Data Portal, 12 Dec. 2019), https://data.gov.ua/dataset/1c7f3815-3259-45e0-bdf1-64dca07ddc10.
[60] “The Cabinet of Ministers of Ukraine. Decree on 18 December 2018 #1088-p” on The Government Portal, The Unified Web-portal of Executive Authorities of Ukraine (Cabinet of Ministers of Ukraine Secretariat, 18 Dec. 2018), https://www.kmu.gov.ua/storage/app/media/17-civik-2018/partnerstvo/plan_2018%20-%202020.pdf.
[61] Oleksiy Orlovsky, International Renaissance Foundation (IRF), interview by IRM researcher, 6 Mar. 2019.
[62] “Beneficial Owner: What is Inside Ukrainian Business Register?” Open Society Foundations (Liga.net, accessed: Dec. 2019) https://project.liga.net/projects/beneficiar/index_en.html.
[63] “Beneficial Owner: What is Inside Ukrainian Business Register?” Open Society Foundations (Liga.net, accessed: Dec. 2019) https://project.liga.net/projects/beneficiar/index_en.html
[64] Tetiana Shevchuk (ANTAC), interview by IRM researcher, 12 Mar. 2019.
[65] Ibid.
[66] Darya Kaleniuk and Tetiana Shevchuk, “Why it is profitable in Ukraine to lie to the state about the beneficial owner” (Zn,ua, 8 Dec. 2018), https://dt.ua/internal/ivan-ivanov-chi-vse-zh-taki-realni-kontroleri-kompaniy-296445_.html.
[67] “The Regulation of the Cabinet of Ministers of Ukraine on 18 May 2017 #339,” Legislation of Ukraine, the Verkhovna Rada of Ukraine: The Official Web-Portal, (Cabinet of Ministers of Ukraine Secretariat, 18 May 2017), http://zakon2.rada.gov.ua/laws/show/339-2017-%D0%BF/paran2#n2.
[68] Oleksandr Kozlov (MoJ), email exchange with IRM researcher, 22 Mar. 2019.
[69] “The Cabinet of Ministers of Ukraine. Decree on 18 December 2018 #1088-p.”
[70] Kaleniuk and Shevchuk.

IRM End of Term Status Summary

7. Launch the mechanism of verifying final beneficiaries

Completion: Limited

The register now displays separate fields for founders and ultimate beneficial owners, [90] following a software update. [91] This information is free to access, [92] but it displays the data fields separately only if those fields have been updated by the registered entity since the software update. [93] It remains unclear whether, or to what extent, new and accurate information is available.

The working group holding responsibility has not yet published the concept paper on this, [94] and no further steps have been taken. [95] Database registrars and government entities responsible for ensuring the veracity of the data submitted, therefore, do not have updated guidelines for verifying data. [96]

[90] In particular, name, residence address, the type of beneficial ownership, and the percentage share of the share capital in a legal entity or the percentage of voting rights in a legal entity of an ultimate beneficial owner.
[91] Valeria Kolomiyets (Ministry of Justice), email exchange with IRM researcher, 2 November 2020. On 11 August 2020, after the implementation period ended, the updated software of the Unified State Register was introduced into full operation allowing for the introduction of verification of personal information, using information from the State Register of Civil Status, the Unified State Demographic Register, the State Register of Individuals - Taxpayers, the Unified information system of the Ministry of Internal Affairs of Ukraine.
[92] “Free Request. The Unified State Register of Legal Entities, Private Entrepreneurs and NGOs,” The Ministry of Justice of Ukraine, accessed November 2020, https://usr.minjust.gov.ua/content/free-search.
[93] “The Law of Ukraine on Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Financing of Terrorism and Financing of Proliferation of Weapons of Mass Destruction #361-IX,” Verkhovna Rada of Ukraine, 16 August 2020, https://zakon.rada.gov.ua/laws/show/361-20#Text.
[94] Public agencies: The Ministry of Justice, the Ministry of Finance, the State Financial Monitoring Service, the National Bank, the State Tax Service. Civil society organizations: Together Against Corruption, OGP Evaluation project, YouControl, International Renaissance Foundation. International project: The Consultancy Fund for Supporting the Ukraine-EU Association. These organizations signed a memorandum for cooperation and formed the Up to 100% Correct working group. Also, inputs were submitted by the Federal Ministry of Finance of Austria, Open Government Partnership, OpenOwnership, Innovating Governance Association, OpenOwnership Pilot Program, and the Council of Europe.
[95] Valeria Kolomiyets (Ministry of Justice), email exchange with IRM researcher, 2 November 2020.
[96] Valeria Kolomiyets (Ministry of Justice).

Commitments

Open Government Partnership