"Even if the value of withdrawn assets is equal to several million dollars one can engage in their search rather effectively", — Nickolas Likhachov, Counsel at Spenser & Kauffmann, believes
— Was the service for the search and return of assets formed as a separate area of legal practice on the Ukrainian market?
— This is one of the main practices which is actively developing. At this particular time we, shall we say, have faced a so-called wave of defaults on credits and loans. Business is faced with the impossibility of their refund through conventional means, as there are no assets in Ukraine and they are withdrawn in such a cunning manner that professional help is vital.
The search for assets was a relatively novel service a few years ago, but now it is not only the state authorities such as the Deposit Insurance Fund, but also commercial banks and even private companies that are actively interested in these issues.
— Are related services, for example, in the field of detective work, developing in Ukraine?
— This area is rather specialized and usually the services of analysts, experts and detectives are not required in Ukraine; the assets have already been withdrawn from here. Local support which can be performed by law firms is required in Ukraine. I consider their main tasks to be the preliminary analysis of documents and information regarding the existing types of stolen assets and the ways in which they were withdrawn (finding out the ways in which they left Ukraine, using which financial instruments, etc.), and clear instructions to foreign colleagues. If you do not give such a clear regulation, but give carte blanche to the search all of the assets of a particular debtor, the bill for the work done can be quite impressive.
— And what about financial intelligence? Do we have such specialists? And do Ukrainian courts or law-enforcement agencies accept evidence from "intelligence officers"?
— We should understand that a case on the withdrawal of assets in Ukraine is built up in different directions, as a rule, in the criminal and economic. Under criminal proceedings the law-enforcement agencies act in accordance with the specific algorithms. They can ask for certain assistance from foreign colleagues, if we have a treaty of assistance in cooperation with the country concerned.
In my practice I have not encountered situations of joint work with the investigating authorities. This is a sufficiently regulated procedure: nobody will tell you the information the investigation has in its possession, and even if you have a desire to help, it is unlikely that your arguments will be heard and that the discoveries will be attached to the case.
Look at high profile cases, such as the case of banker Abliazov: all the achievements of foreign detectives and companies specializing in financial intelligence are used mainly in foreign, primarily British, courts, which can issue a determination on the global seizure of assets or make an order according to which the registration agents and service agents nominally owning the offshore structures should disclose the information in whose behalf they work to the court. Financial intelligence activity is required to prove to the English court that there is a need to perform the arrest. This is due to the fact that one needs to identify the circumstances that give us reasons to believe that certain companies belong to a particular beneficiary in respect of whom there is an unfulfilled ruling in Ukraine, but we can collect nothing here because he is hiding everything abroad. Accordingly, the assistance of an English court is required in this case.
— Is the existing Ukrainian legal framework sufficient for the effective implementation of activities on the search and recovery of assets?
— The current legal framework we have is related primarily to criminal proceedings. It does not accentuate the search and recovery of assets, as in the UK. Our country was not prepared for the fact that this area of activity would become so popular and in demand. And we have no legal framework for it as such. However, I would not say that this somehow interferes with our work. After all, Ukraine is the last place to search, one should start abroad. If the search is performed only in Ukraine, the desired result may not be achieved.
— How is cooperation with foreign colleagues arranged in practice?
— Usually the search for assets begins with the creation of an international team, if you will, a consortium of Ukrainian and foreign companies (depending on the circumstances of the case). If we at least roughly understand which jurisdictions may be involved, we know who of our foreign colleagues should be involved. A Ukrainian law firm provides the service to a client in Ukraine and abroad, it should at least enlist a company which is engaged in financial intelligence, as well as lawyers practicing in jurisdictions where a potential need can emerge for specific actions. Processes are different in different countries, it is not always possible to have an all-inclusive team, therefore, I would say that the Ukrainian law firm and foreign companies engaged in the financial intelligence make up the backbone of the team; the rest will be involved as needed.
— When is the search for the debtor's assets profitable. That is, at what ratio of debt amount/cost of search should the procedure be started?
— One can always choose the team that will fit the budget of the project. Even if the value of assets is equal to several million dollars, their effective search using a rather small budget can be started. However, the bigger the amount stolen, the more thoroughly it is hidden: more jurisdictions are used, the schemes are more complicated, and more financial instruments are engaged. It takes more time and money to unravel this scheme.
In our practice we have come across cases running into sums of tens and even hundreds of millions of dollars. The budgets are rather big here, however, they are not related to the value of assets; it's just that on the other side we are confronted by a man who is willing to spend a lot of money to not be found. Therefore, we need to spend more resources for the search, seizure and recovery of assets. No complex schemes exist in small cases because they hit the fraudster significantly in the pocket.
— In which cases can external funding be expected?
— International companies that fund international judicial and arbitration disputes, as well as the companies that directly fund the process of assets search, are ready to work with assets totaling an amount starting from 5 mln USD. However, it should be understood that their services make up a certain percentage of the amount collected. That is, it makes sense to apply to such companies if the client is willing to give up part of what is found. At the same time, the client reduces personal risks: if the assets are not recovered, he or she will at least not spend money on the process.
And the most interesting thing is that major funding has not been risen in our big cases. Clients rely solely on their own resources, and this is understandable, as the amount of investments is much less than the company doing the financing will receive in the event of success.
The following should also be noted: in case of cooperation with competent lawyers and intelligence officers the risk that nothing will be found is minimal. The proper use of existing tools for securing claims and the disclosure of information excludes the situation where nothing can be done. At the very least you can place the counterpart at the negotiating table and agree on restructuring. And when we find evidence that the debtor has assets abroad, what is more, arrest them and even justify the reality of criminal prosecution abroad (this is real, a reminder about M. Abliazov), he will be more willing to negotiate.
— Who in the main are the customers?
— Approximately 60% are banks (both those operating and others in the Deposit Guarantee Fund administration or under liquidation). The remaining 40% of those who come to us are large financial and industrial groups owning real business. It so turned out they are also interested in this service. Where there are big finances, there are always those willing "to earn extra money". Therefore, this part of the market also responds positively to offers on the search and recovery of assets.