Liability for not declaring and concealing the assets: what does the law provide for?

Prosecuting officials for undeclared assets was almost the most scandalous topic of 2020-2021. It is only a matter of time whether Law No. 1531-IX of 29.06.2021 will be the last in a series of reforms, which are systematic and have been going on for many years. We now propose an analysis of the changes in legislation in this area over the past year.

The last wave of changes began with the resonant decision of the Constitutional Court of Ukraine No. 13-p/2020 of 27.10.2020, which declared Article 366-1 of the Criminal Code of Ukraine unconstitutional. In fact, as a result of this decision, criminal and administrative liability for declaring false information has been abolished in Ukraine.

The absence of domestic prosecutions for false declarations and their late submission have aroused resentment, not only within the country but also within the European Union. In particular, the existence of a visa-free regime with the countries of the European Union and cooperation with the International Monetary Fund have become risky issues. The Venice Commission also provided a negative assessment of the decision of the Constitutional Court of Ukraine.

As a result of the decriminalization of Article 366-1 of the Criminal Code of Ukraine, law enforcement agencies, in particular the National Anti-Corruption Bureau of Ukraine, and the courts had to close a significant number of criminal cases.

Within a few months, the Parliament resumed liability for the failure of officials to declare assets in the Criminal Code of Ukraine. Thus, on December 4, 2020, Law of Ukraine No. 1074-ІХ was adopted, which entered into force on December 30, 2020. The latter introduced two separate elements of crime: Article 366-2 “Declaration of false information” and Article 366-3 “Failure to submit a declaration by a person authorized to perform functions of the state or local self-government”.

In contrast to Article 366-1 of the Criminal Code of Ukraine, according to Law No. 1074-ІХ, criminal liability is incurred under:

  • intentional false information in declarations amounting to between 500 and 4000 minimum subsistence levels for able-bodied persons and is punishable by a fine of 2500 to 3000 non-taxable minimum incomes of citizens, or community service for a term of 150 to 240 hours, with deprivation of the right to occupy certain positions or engage in certain activities for a term of up to three years.
  • intentional false information in declarations amounting over 4000 minimum subsistence levels for able-bodied persons and is punishable by a fine of 3000 to 5000 non-taxable minimum incomes of citizens, or community service for a term of 150 to 240 hours, with deprivation of the right to occupy certain positions or engage in certain activities for a term of up to three years.
  • intentional failure to submit declaration which was punishable by a fine of 2500 to 3000 non-taxable minimum incomes of citizens, or community service for a term of 150 to 240 hours, with deprivation of the right to occupy certain positions or engage in certain activities for a term of up to three years.

In this way, the threshold of criminal liability has been lowered and the corresponding crimes have been defined as misdemeanor offense or non-serious crimes.

However, the introduced mechanism had a number of shortcomings, including:

  • crimes under Articles 366-2 and 366-3 of the Criminal Code of Ukraine are subject of investigation by the National Anti-Corruption Bureau of Ukraine. However, the Code does not provide for the possibility of detectives to conduct investigation of misdemeanor offenses.
  • the lack of a proper definition of the subjects of liability, which led to the exoneration of persons that has already been dismissed, but still submit declarations.
  • short statute of limitations for misdemeanor offense and non-serious crimes;
  • the absence of liability for a false declaration in a form of imprisonment, which is commensurate with the commission of such crimes, according to the findings of the Venice Commission.

In order to remedy the above-mentioned shortcomings, on 29 June 2021 the Verkhovna Rada of Ukraine adopted Law No. 1576-IX, which increased the penalties for the above-mentioned offences.

Henceforth, knowingly false declaration in the amount of 500 to 3000 non-taxable minimum incomes of citizens is punishable by a fine of 3000 to 4000 non-taxable minimum incomes of citizens, or imprisonment for a term of up to two years.

Knowingly false declaration in the amount of 2000 non-taxable minimum incomes of citizens is punishable by a fine of 4000 to 5000 non-taxable minimum incomes of citizens, or imprisonment for a term of up to two years, restriction of liberty for the same term.

Intentional failure to submit declaration is punishable also with the restriction of liberty for two years or imprisonment for a term of up to two years.

Thus, criminal offences under Articles 366-2 and 366-3 of the Criminal Code of Ukraine are no longer misdemeanor offenses and may be investigated by the National Anti-Corruption Bureau according to the standard procedure.

A subject of liability was also more precisely defined.

In addition, the law introduces the concept of “criminal offences related to corruption”, to which Article 366-2 and Article 366-3 of the Criminal Code of Ukraine are referred to. The commission of these offences, together with corruption offences, does not provide for the possibility of avoiding liability if the person has genuinely repented, actively contributed to the detection of a criminal offence and fully compensated or repaired the damage caused; or if the person reconciled with the victim. In addition, he may not be sentenced to a lighter penalty than that provided for by law; nor may he be granted parole.

Thus, despite the fact that the authorities have adopted a number of changes to restore criminal liability for false declarations, changing the form of guilt, and taking into account the conclusions of the Constitutional Court of Ukraine, let us hope that they are final and will not cause problems in their application.

Igor Glushko

Igor Glushko

Partner, Head of Criminal Law and White Collar Defence practice, Attorney at law

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