National Agency of Ukraine for finding, tracing and management of assets derived from corruption and other crimes (abbr. – Asset Recovery and Management Agency or ARMA) began to operate since October 2017.

ARMA is a special body, which helps the law enforcement officers to find the property and also manage it after its arrest.

Detection and Search of Assets

ARMA searches at the request of an investigator, prosecutor or court the assets derived from crimes. Business may also use this tool to detect the property of corporate fraudsters, however not directly, but only through an investigator within the framework of criminal proceedings. Meanwhile, notice of suspicion is not required for search.

ARMA does not have its own detectives in the classical sense of this word. Its experts use and analyze the following sources of information: (1) 19 public registers and databases (2) open data, in particular ORBIS, STRABIS, etc. (3) trans-boundary networks.

Main difference from similar actions of law enforcers is a direct access to registers (often only theoretically) and efficiency, in particular, with regard to search in foreign jurisdictions.

Thus, ARMA uses for cross-border search such international networks as СARIN, StAR, Interpol, Europol. There are also regional networks, which also include ARMA, for example, a network of the countries seeking property in the Caribbean region.

Receiving such information by investigators under the procedure of international cooperation may take about half a year. ARMA may receive such information within a few days.

In 2018, ARMA (1) handled more than 1,000 requests, (2) sent 81 requests to other countries and (3) answered to 15 requests from abroad. Moreover, ARMA already received over 4 months of 2019 more than 1,000 requests from law enforcement agencies.

The following assets have been detected in Ukraine and abroad: (1) corporate rights valued at UAH21,160 million, (2) securities valued at UAH 557 million, (3) 3,758 vehicles, (4) 7,093 real estate objects, (5) 4,457 land plots, (6) 950 agricultural machinery units, (7) 848 – rights to trademarks and inventions, (8) UAH3,577 million, USD 97,8 million, Euro 1.9 million and (9) 2,522 units of other property.

After receiving from ARMA the information of detected assets, such property may be arrested and, if appropriate, transferred to management. 

Management of Seized (Arrested) Property

In fact, transfer of arrested property in management is the determination of the procedure for storing material evidence.

Assets may be placed under the ARMA management on the basis of a court ruling or an owner’s statement. However, no statements have yet been received from the owners of arrested property.

As of January 01, 2019, courts transferred to ARMA – 646 various objects – monetary funds, real estate, transport, corporate rights, and the like.

To manage assets ARMA Law and Criminal Procedure Code of Ukraine establish the following simultaneous obligatory terms and conditions:

a) material evidence should be provided with regard to property;

b) assets should be arrested in a criminal proceeding prohibiting disposal or use thereof;

c) value of the assets should be equal to or exceed 200 minimum living wages (in 2019 – UAH384,200).

ARMA independently determines the procedure for electing executive managers. Interested persons shall be preliminarily included in the list of managers for a particular type of property. And after receiving a court order, ARMA sends them information and selects the best business plan. However, order and criteria for such selection are not public.

Procedure for management shall depend on the type of asset: (a) cash and bank metals shall be deposited with the state bank, and (b) other property shall be transferred in management or for sale.

Difference for the owners in these procedures shall be an opportunity to earn income after cancelling arrest. Upon funds repayment, owner will additionally receive all accrued interest. Revenues from management of other property shall be transferred to the state budget and shall not be compensated to property owner.

The only way to return to an owner a control over his/its asset is to cancel the arrest. Appealing the procedure for transferring property to management or direct management is not efficient.

Problematic and Discussion issues in ARMA activities shall be as follows:

  1. Law enforcers may abuse and seek property of the persons “interesting” them.
  2. Victims may not independently address ARMA, but only through investigators and prosecutors.
  3. Proper judicial control is not always carried out in respect of compliance of property with mandatory features for its transfer into management.
  4. Property may be transferred into management even without notifying persons of suspicion
  5. Business may make money off of property management. However, this is a high-risk activity which depends on duration of arrest.
  6. Procedure for electing the managers of specific property is not sufficiently public and transparent. Therefore, abuses may be possible by ARMA.
  7. Property owner may receive compensation only after canceling the arrest of funds. Revenues from management of other property shall be transferred to the state budget.

Author: Mykyta Nuralin, attorney-at-law of VB PARTNERS