Three years past after the Revolution of Dignity (winter 2013—2014), Ukraine is still in turmoil with ongoing turbulence of political clashes, rampant economic crisis and armed conflict in the East, which tore the country apart. EU prospects for Ukraine remain vague, mainly due to lavish corruption endemic to the Ukrainian politics. The launch of a new system that requires government officials to declare their wealth and property online (e-declarations) had an explosive effect, with the Ukrainians and European community stunned by vast wealth accumulated by those in power in Ukraine.
Stanislav Berezkin is serving his third term as a member of the Ukrainian Parliament. He is well known in the Ukrainian business community as the former owner of agriholding Creative Group. He is also notorious for obtaining some $500 million in loans from three Ukrainian state-owned banks (Oschadbank, Ukreximbank and Ukrgazbank), that were allegedly syphoned out of the Creative group to Berezkin’s personal offshore accounts. Berezkin did not repay the debts, but chose to sell heavily indebted business, which eventually went bankrupt under its unbearable debt burden.
What is done by night appears by day. It appears that days before the Revolution of Dignity Stanislav Berezkin made huge payments to the entourage of the ousted president of Ukraine Viktor Yanukovych. In 2013 the Berezkin’s Swiss company Creativ Trading S.A. transferred USD 20 million to Yorkfield United LLP, a company believed to be controlled by the former Governor of the National Bank of Ukraine Sergey Arbuzov.
Sergey Arbuzov is known as a banker of the so-called “Family”, a term to denote the entourage of the ousted president of Ukraine Viktor Yanukovych. Mr. Arbuzov is believed to have informally supervised the entire financial and banking sector of Ukraine when in office. Presently, he is facing criminal charges for embezzlement of public funds in Ukraine. Yorkfield United LLP (to which Berezkin paid USD 20 million) is among the companies investigated in relation to crimes committed by Mr. Arbuzov.
Ukrainian law enforcement authorities are hunting down bank accounts and assets controlled by Mr Arbuzov and other allies of Yanukovych. In September 2016 the Latvian court ordered a number of Latvian banks to seize EUR 50 million allegedly belonging to the ousted Ukrainian leadership. Yorkfield United LLP was among the companies holding the seized funds.
It is not quite clear what the real purpose for the payment of USD 20 million was. However, there might be reasonable grounds to suspect that this was a political corruption payment – a payment by MP Stanislav Berezkin to the former top banking official for the assistance in obtaining multi-million loans from the state-owned banks, such loans eventually never repaid.
The payment of $20 million appears to have been made under fake trade contracts to circumnavigate the European banking compliance. Berezkin’s Swiss trading company Creativ Trading S.A., allegedly involved in a number of similar suspicious banking payments, had recently filed for bankruptcy.
An international audit firm Baker Tilly is known for auditing Creative Group for a number of years. But the auditors appear to have turned blind eye on what is commonly known as high-risk transactions and suspicious wire transfers. Three offices of Baker Tilly from Ukraine, Cyprus and Switzerland were auditing Creative Group’s cross-border financial activities. It is not quite clear whether any of these offices of Baker Tilly might be legally liable in connection with the political corruption payments or in connection with the attempt to disguise such political corruption under the normal course of business.
The case at hand is the reminder that it is yet to been seen whether the Ukrainian political establishment and law enforcement make progress in their efforts to combat political corruption and recover corruption assets.