Final Jeopardy and July 1, 2011

It’s Final Jeopardy and the category is “Compliance”. As your company’s Compliance Officer you are positively salivating at the prospect. So you go all in and bet everything you have on this last question. You stand abated as Host Alex Trebek poses the following question: “Which two countries had anti-corruption laws go into effect on July 1, 2011?” The Union Jack is firmly planted in your mind (if not a picture of the Bribery Act guys) so you confidently write down “What is the United Kingdom…” but then you realize you cannot think of that second country. You stumble and as the iconic tick, tock of the Final Jeopardy theme runs down…all you can think of is one of the BRIC countries. You know you are close but then the buzzer sounds. You dejectedly show your final answer and and Alex says, “Sorry, but it is the UK and Ukraine.”

So why couldn’t you think of the answer? It might be that corruption is so endemic in Ukraine that is difficult to imagine the government would have the brass to tackle the problem. In 2011, Ukraine ranked number 152 out of 182 countries listed on the Transparency International Corruption Perceptions Index (TI-CPI). You recall that corruption in the Ukraine actually got worse from 2010 when the country ranked 134 out of 178 countries listed on the TI-CPI. Perhaps you recall that corruption has been termed “Problem No. 1” for the country and that even the President of Ukraine has called corruption in his country, “a shameful phenomenon.”

Nevertheless you take your winnings from your second place finish in Jeopardy and go home to find out more this new law. In your Google search you find a law entitled, “On the Prevention and Counteraction against Corrupt Practices”. In your research you find that the Ukraine law has three main components: (1) it defines corruption and corruptive defenses; (2) it sets forth the relevant persons who may be held liable for corruption offenses; and (3) it imposes restriction on these relevant persons, while also setting out the liability factors.

Corruption and Corruptive Offense

Corruption is defined as the use of authority to offer, grant or receive improper benefits as well as requesting such activity. Corruptive offense is defined as an intentional act, not only involving governmental officials, as in the US Foreign Corrupt Practices Act (FCPA), but also between private actors, as is prohibited by the UK Bribery Act. The law includes the offering, granting or receiving of improper benefits, either directly or through a third party.

Parties Covered by Law

The Ukraine law has the same public/private dichotomy set forth in the UK Bribery Act. It defines government officials as those in both the federal, state or local authorities but adds an additional category of person equal to governmental officials. This new category includes officers of public law legal entities who receive wages or a salary from the state, even though they may not be a ‘governmental official’. Both of these categories of persons are covered regarding restrictions imposed as measures aimed at preventing and counteracting corruption.

Restrictions and Liability Factors

Not only can such persons, as noted above, not accept gratuities but their immediate families cannot profit from their positions. Lastly these restrictions hold for up to one year after such persons may have left the government. In addition to these restrictions, the following also apply.

• Gifts and Hospitalities – A person covered may not receive any gift in exchange for any decision, act or non-act. However, the law does allow a one-time gift, restricted to a value of 51% of one month’s salary. It should be noted that there were no restrictions on hospitality, such as travel, accommodation or meals.
• Special Screening – The law requires that all job applicants must declare any criminal history and make an annual declaration of property and income. However, there are notable exclusions to this requirement.
• Financial Control – With the annual declarations, as noted above, the information will be made publicly available. Government officials must also declare any foreign banks accounts they or their immediate family members may hold.
• Reporting Requirements – Government officials just declare all charitable amounts which they receive as gifts allowed under the law.
• Conflict of Interest – A covered official must take action to prevent any conflict of interest from arising but if such conflict does arise, it must be immediately disclosed.
• Code of Conduct – The law requires that a written professional ethics standard exist.
• Duty to Report Corruption – All persons covered by the law have a duty to report any corruption of which they may become aware. The law also has whistleblower protection.

You have now completed your review of this new Ukrainian law. As a Compliance Officer, you are pleased that Ukraine has entered the group of nations fighting corruption. You only wish you would have known about the law when it became effective and you would have not humiliated yourself on Final Jeopardy.

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The blog was based upon the article, “Ukraine’s New Anti-Corruption Law: Will it Really Stop Corruption in Ukraine?” by James T. Hitch, III and Yuliya Kuchma, published in the Fall 2011, Volume 45, Number 3 edition of The International Lawyer.

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© Thomas R. Fox, 2012