Almost three years ago, on October 30, 2016, the first wave of electronic declarations of public officials and MPs was submitted in Ukraine ended. Over these three years, society has learnt of the millions of wealth of some officials, acres of real estate, car parks, extravagant collections and cash stacks in the closets.
During this time, we the team of Anti-Corruption Action Center analyzed thousands of electronic declarations of MPs and officials both for our own investigations and for monitoring competitions for various public positions. In doing so, we have learnt to use declarations to identify suspicious information that may indicate the declarant's dishonesty or the suspicious origin of his or her assets. We decided to use this unique experience to create an automatic analytics tool that can help banks and other financial institutions analyze wealth of politically exposed persons (PEPs).
According to FATF Recommendations, prior to carrying out financial operations, the beneficiaries of which are PEPs, banks or financial institutions must establish source of wealth of this PEP. Considering Ukraine, some of this information is already contained in electronic asset declarations, which just require relative expertise to analyze them properly.
We added to the Public Register of PEPs of Ukraine pep.org.ua a specialized scoring module that automatically evaluates information in electronic asset declarations based on our expertise and machine learning algorithms.
Algorithm analyzes information in declarations both with respect to previous declarations of this PEP and also with respect to all other PEPs. Scoring reflects the rating on a scale: low risk (1-3 points), medium risk (4-6 points), high risk (7-10 points). It also displays certain risk indicators established in the process of analysis of the declaration.
Among the approximately 52,000 PEPs and their close associates mentioned in pep.org.ua database, approximately 13,000 individuals file electronic declarations. According to our scoring, 113 PEPs are of high risk group, they are mainly MPs, heads of central governmental agencies, councelors of local and regional councils, as well as heads of state-owned enterprises. 976 PEPs are in the medium-risk group, all others are in the low-risk group. It should be noted, that being referred in a low-risk group does not mean guaranteed justified source of wealth. It is important to pay attention to certain risk indicator, which is offered by a scoring module for every PEP.
Топ-10 of the most risky wealth of Ukrainian PEPs is composed mostly by MPs.
1. Ruslan Bohdan - 10
2. Ihor Molotok - 9.82
3. Oksana Baloha - 9.12
4. Taras Kozak - 8.95
5. Serhii Melnychuk - 8.77
6. Lev Partskhaladze - 8.77
7. Ruslan Horbenko - 8.77
8. Vadym Novynskyi - 8.77
10. Mykhailo Blyzniuk - 8.59
At the same time, about forty more MPs scored within the high-risk group. It is worth noting that because of the legislative loophole, many newly elected MPs of the 8th convocation avoided declaring of assets, so we’ll be able to evaluate their electronic declarations only in 2020.
Among the councilors of local and regional councils, the high-risk group is headed by Oksana Baloha, the councilor of the Transcarpathian Regional Council, the wife of MP Victor Baloha, with a score of 9.12.
Scoring revealed that besides senior officials and MPs, the heads of state-owned enterprises are predominantly composing the high-risk group. For instance, Serhiy Vovkodavets, the director of SE “Cherkasy Military Forestry Enterprise”, known for the case of the alienation of the apartments of family of Liashko’s associate, got into the high-risk group with a score of 8.24.
The scoring of pep.org.ua is the first attempt to automatically evaluate electronic declarations to prevent money laundering. Of course, if a public figure did not provide all the information on the assets in the declaration or provided this information inaccurately, the scoring alone cannot reveal the origin of wealth, more access to the specialized databases and financial information is required. However, scoring can become an effective aid for employees of financial monitoring entities in the initial stages of evaluating declarations.
Please see more information on how the scoring module works here.