Ukraine Country Profile

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Business Corruption in Ukraine

Ukraine FlagHigh levels of corruption among Ukraine’s top officials represents a major obstacle for foreign investment in the country. The private business interests of Ukrainian oligarchs have been influential in policy-making processes, forcing SMEs out of the market. A weak judiciary, persistent extortion of companies by administrative bodies and burdensome regulation have severely hampered fair competition. Furthermore, companies face challenges when dealing with Ukrainian customs administration and discriminatory tax inspections.

Ukraine has adopted a comprehensive legal framework for dealing with corruption. The anti-corruption law, 'On the Principles of Preventing and Combating Corruption', was amended in 2012 to provide for the formation of a National Anti-Corruption Committee. The law now includes an income declaration requirement for public officials. In addition, the anti-corruption legislation regulates conflicts of interest by government officials and criminalises gifts and hospitality. Facilitation payments are not allowed under Ukrainian law. Nevertheless, the anti-corruption regulations have had a minimal effect on the level of fraud in political circles because of a weak rule of law and an absence of adequate enforcement. The 2012 amendments to the Ukrainian public procurement regulations have eradicated transparency within government procurement, allowing for the embezzlement of state funds. Abuse of power by politicians for illegitimate private gain is indicated as the main reason for the unattractiveness of Ukraine’s business climate, according to recent reports by the US Department of State and the Heritage Foundation.

In June 2014, Ukraine has amended its anti-corruption legislation to comply with the recommendations given by the European Commission on improving the provisions of the country’s anti-corruption law in the context of negotiations on visa liberalisation with the EU. New amendment is aimed at fighting corruption in the public and private sector and decreasing corruption risks for companies looking to expand to Ukraine. Thus, the amendment expands the jurisdictional reach of the anti-corruption legislation to apply against foreign persons, individuals working in the private sector and provides for a duty to create a compliance demand to prevent corruption for companies. The legislation now includes extended whistleblower protection.

March 2014 (updated August 2014)
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