Grandiose Searches at Customs: Fighting Corruption or Rivalry Among Protectors?

Grandiose Searches at Customs: Fighting Corruption or Rivalry Among Protectors?

Some smuggling schemes are impossible without political protection. And fighting them requires political decisions. Customs is confidently competing with the tax authority for the title of the most scandal-prone agency.

10 February, the SBU and the SBI announced a new wave of searches that affected the central office of the State Customs Service and nine regional customs offices on the northern and western borders: Kyiv, Zhytomyr, Rivne, Volyn, Lviv, Zakarpattia, Chernivtsi, Ternopil and Odesa.

How the scandal unfolded

Recall that 2023 the year began with news about the discovery of massive corruption in the “grain corridor.” 3 January, the NABU and the SBU reported carrying out 30 searches in the administrative premises of the State Customs Service, the Odesa customs office, and at the residences of State Customs Service officials. In addition, from 3 to 31 January the SBI, SBU, and NABU reported uncovering other corruption schemes in the Zhytomyr, Kyiv, Odesa and Rivne customs offices.

The government was forced to react to the scandals and on 1 February carried out a reshuffle at the State Customs Service. Instead of Vyacheslav Demchenko, acting duties of the head of the service were assigned to Deputy Head Serhii Zvyahintsev. At the same time, Demchenko kept the portfolio of director of the department for combating smuggling and customs violations. Another deputy head of the service, Ruslan Cherkasskyi, was suspended from performing his duties during disciplinary proceedings, which are to be conducted by the Commission on the Higher Civil Service until 1 March.

That same evening Volodymyr Zelensky boasted about the purge at customs in his video address. “Thank you to the government of Ukraine for the prompt personnel response. In particular, today the heads of customs were dismissed. I was told that disciplinary proceedings have been initiated against some of those dismissed,” he said. Although in reality Cherkasskyi was not dismissed but only temporarily suspended, and Demchenko was left to continue fighting smuggling.

The scandal did not subside. From 3 to 9 February the SBI and the SBU reported uncovering several more corruption schemes in the Odesa and Chernivtsi customs offices. And now they speak of the largest wave of searches across the entire customs vertical.

According to the SBI, all this was prepared over a long period: in recent months extensive painstaking work was carried out to identify shadow schemes at customs. As a result, about 50 business entities that help customs officers implement shadow schemes have been identified. Their activities are now blocked.

Preliminary estimates indicate that these schemes siphoned up to 10 billion UAH from the state budget each month — a third of what customs should collect in a month. “So every third hryvnia of customs revenues went into the pockets of corrupt officials,” the SBI states.

For comparison, note that during the entire 2022 year the SBI uncovered customs crimes with total damage to the state of 372 million UAH. On average, that is 31 million UAH per month. And now they are talking about uncovering schemes with a monthly amount 300 times greater — 10 billion UAH per month.

A struggle for seats and for flows?

Of course, the question arises who is behind this scandal. With all due respect to the SBU and the SBI, they are not entirely independent. At a minimum, they act under the procedural guidance of the Office of the Prosecutor General. And it is doubtful that no one at Bankova knew about the preparation of a large wave of searches at customs.

This question is directly connected to another — motives. One can assume noble motives: that Bankova waited three and a half years for something, but finally decided to break all smuggling schemes at customs. But one can also assume motives, let’s say, less noble: competition between centers of influence and a struggle for control over corrupt financial flows.

The second version is supported primarily by the fact that customs is currently in a suspended state. After the personnel reshuffle on 1 February, 10 days have already passed, but no one has announced what will happen next.

An interesting point is noted by MP Yaroslav Zhelezniak (Holos faction), who heads the temporary investigative commission of the Rada on economic security. His TIC investigates, among other things, corruption schemes at customs. Zhelezniak emphasizes that changes at customs stalled on the figure of Ruslan Cherkasskyi, whom the Cabinet did not dismiss but only suspended.

“According to information from many sources, he was the one who effectively ran customs. And importantly, in private conversations he was very often called ‘systemic.’ In slang this means not reformist abilities but the systematic building of ‘influence’ with all the consequences. Therefore, without the dismissal of this gentleman, all other personnel rotations are more likely a farce,” he said on the evening of 1 February.

The next day the head of the parliamentary faction Servant of the People, Davyd Arakhamia, reported that “Cherkasskyi wrote a resignation letter at night, it will be considered at the next Cabinet meeting.” However, this statement is cynically ignored by the Cabinet: at the meetings held after 1 February (4, 7, 8, 10 February) no decisions regarding Cherkasskyi were made. “He is still hiding on sick leave,” Zhelezniak explained. And he emphasized: “The law enforcement agencies have not just a wagon but an entire train of materials on Cherkasskyi. So he is certainly not a suicide to cling to his position after the president’s words. The question is who covers him. And who gave guarantees of immunity.”

At the same time Arakhamia made another interesting admission. In an interview with forbes.ua he said that the authorities currently do not have a list of candidates for the position of the new head of the State Customs Service. “Moreover, whereas we usually have many willing candidates, now there are zero such candidates,” he complained.

This statement drew a great deal of biting criticism. “When Ukrainian politicians say ‘we have no volunteers to take this post,’ it means — ‘we have no OUR people for this post.’ But to say that in a 40-million country there is no worthy candidate for the head of customs — is to consider us all fools and scoundrels,” said, for example, financial analyst Oleksii Kushch.

At a minimum, a competition is needed. Zhelezniak and the head of the parliamentary committee on finance, tax and customs policy, Danylo Hetmantsev, say this. But the competition has still not been announced, although it should have been done back in November 2021, when Vyacheslav Demchenko was appointed acting head of the State Customs Service. Until there is a competition, the scandals around customs look only like a manifestation of a fierce struggle for control over this structure, not evidence of a determined intention to restore order there.

When will the schemes end

The problem, of course, is not only with the leadership. The fight against corruption at customs was one of Zelensky’s first initiatives as president. Back in 2 September 2019 he ordered the Cabinet: “Ensure the launch of the State Customs Service of Ukraine. Do not allow all the old corrupt officials to work in it. I will personally help you. Deadline until 1 December 2019.”

Leaders of the State Customs Service have changed six times under Zelensky. Zvyahintsev is already the seventh in this position. Therefore, along with a competition, political decisions are needed to eradicate corruption schemes at customs. Currently the SBU, SBI, NABU, and Zhelezniak’s TIC are working on customs officers and their accomplices involved in schemes. But this is not enough — the schemes themselves must be eradicated.

The Ukrainian Institute for the Future studied customs for two years. It identified 11 main smuggling schemes. Some of them are impossible without political protection. And fighting them requires political will, which must be manifested in political decisions.

“All customs leadership knew about these schemes,” explains the institute’s executive director Vadym Denysenko. “For example, a simple routine reconciliation of tax declarations with customs of neighboring countries makes it impossible to clear goods at a ‘favorable’ tariff. And this is no less than a third of all smuggling. But for some reason there was no agreement with neighbors. In short: the schemes are known. They can be minimized within 2–3 months. If there were the will.”

For each scheme it is necessary to develop specific countermeasures. A universal approach may not produce results and could even cause harm. At the same time, every scheme must be eradicated, not just some of them while leaving a few ‘pocket expenses.’ And one cannot rely on departmental instructions for this work. Decisions are needed at the level of laws or at least Cabinet resolutions so that strict action algorithms are set for the entire customs vertical (central office — regional customs — customs posts).

Instead, we are shown spectacular productions like searches and personnel reshuffles, which may turn out to be no more than a redistribution of spheres of influence. And such a struggle raises more questions than it answers.

Yurii Vyshnevskyi, published in the outlet “Dilova stolytsia”