UNCLAS SECTION 01 OF 03 KIEV 000521

SIPDIS

DEPT FOR EUR/UMB, G/TIP, INL/AEE, AND EUR/ACE
JUSTICE FOR OIA, AFMLS, NDDS AND OPDAT
TREASURY FOR MGAERTNER/NLEE/BCOX

SENSITIVE

E.O. 12958: DECL: N/A
TAGS: ECON EFIN
SUBJECT: UKRAINE: PROSECUTOR GENERAL SEES LIMITED ROLE IN
MONEY-LAUNDERING AND TIP ENFORCEMENT

REF: KIEV 340

Sensitive but Unclassified - Not for Internet Distribution


1. (SBU) Summary. Ambassador recommended to Prosecutor
General Oleksandr Medvedko on 3 February that he create
administrative divisions devoted to anti-money laundering
(AML) and to fighting trafficking in persons (TIP). In both
areas, Medvedko deflected blame for the low level of
convictions by stressing that the PGO functioned merely as
overseer for investigations, which law enforcement agencies
actually conducted. Medvedko said he did not see a need for
court prosecutors to specialize in these areas. He said the
Prosecutor General's Office (PGO) was engaged in the GOU's
law enforcement reform discussion and supported designation
of a single agency for pretrial investigation, and creation
of a specialized agency for investigation and prosecution of
crimes committed by high-level government officials.
Ambassador asked for fair and transparent treatment in the
trial of notorious hacker Dmitriy Golubov as well as in
court proceedings in Dniprodzerzhynsk against a business
partially owned by a U.S. investor. End Summary.

Anti Money Laundering - Poor Court Record Not Our Fault
-------------- --------------


2. (SBU) This was the Ambassador's first formal meeting with
Medvedko, who was appointed on November 4 after President
Yushchenko had fired previous incumbent Svyatyslav Piskun.
(Note: Piskun has won a lawsuit declaring his dismissal
illegal, but the GOU filed an appeal that will be heard on
February 7.) Medvedko was accompanied by his Oleksandr
Shynalsky (Deputy Prosecutor General), Serhiy Kravchuk and
Oleksandr Kovalenko(Director and Deputy Director of the
International Law Department), and Svitlana Olinyk
(Prosecutor in the International Cooperation Section of the
International Law Department). Ambassador was accompanied
by the U.S. Treasury Advisor on Anti-Money Laundering and
Counter-Terrorism Finance, Legal Attache, Resident Legal
Advisor (RLA), Chief of the Law Enforcement Section (LES),

and Econoff.


3. (SBU) After congratulating Medvedko on the decision by
the Financial Action Task Force (FATF) the day before to end
active monitoring of Ukraine, Ambassador noted that the
Prosecutor General's Office (PGO) had promised to FATF to
create an anti-money laundering (AML) division. (Note:
although the PGO did establish such a division in 2002, it
has since been downgraded to a unit. In January, Deputy
Prosecutor General (DPG) Kuornikova reassigned four of the
unit's eight remaining staffers, who only focus on oversight
of investigations and not on prosecutor's advocacy in the
courts. Only at the division level may the PGO oversee
local prosecution of cases. Local prosecutors rarely bring
cases to trial and let alone get convictions.) Ambassador
noted that of 179 cases Ukraine's Financial Monitoring
Department (FMD) had prepared and referred to the PGO, only
one had been brought to trial. Ukraine boasted some of the
best financial manipulators in the world, Ambassador said,
and the GOU should bring an end to money-laundering.


4. (SBU) Medvedko responded with a review of the development
of AML legislation since 2001. He noted that the PGO's role
was to oversee implementation of the law, not to investigate
money-laundering cases. A presidential decree in 2003 had
listed the agencies with investigative responsibility as the
Financial Monitoring Department (FMD), the State Tax
Administration, Customs, Border Guards, the Ministry of
Interior (MOI), and the Security Service. Nonetheless,
Medvedko said, the PGO had created an AML analysis unit,
though not a division, which, in his view, worked "rather
well."


5. (SBU) Medvedko said that the various agencies had
referred to the PGO around 1000 criminal cases, half of
which had been brought to court. (Note: He said nothing
about the number of convictions.) He conceded that the
proliferation of agencies with some AML jurisdiction made it
difficult to determine where responsibility for AML
enforcement responsibility lay. He had discussed this
problem with the heads of the law enforcement agencies and
with regional prosecutors.


6. (SBU) DPG Shynalski argued that the FMD's job was to
identify suspicious transactions and refer information to an
appropriate investigative body to determine if the
transactions constituted crimes. In this process, the PGO
functioned only as a mailbox for the FMD's information. The
investigative agencies may have poorly prepared the cases,
he said, or more probably the PGO may have concluded they
did not involve criminal activity.


7. (SBU) Ambassador reiterated his request for creation of
an AML division, underscoring that only the PGO had the
authority to take cases to court; i.e., that is where their
focus should be. He suggested that the PGO staff meet with
Law Enforcement Section Chief and with U.S. Treasury Advisor
to discuss ways of improving AML enforcement, including
possible training or visits to U.S. agencies. Medvedko
responded that, in light of the Ambassador's points, he
would consider reorganizing to create a division.

Trafficking in Persons (TIP): Same Story
--------------


8. (SBU) Ambassador reminded Medvedko that the State
Department had designated Ukraine as a Tier Two TIP Watch
List country and warned that if Ukraine slipped to Tier
Three, it could lose significant U.S. assistance. To avoid
slipping, and perhaps be promoted Tier One, the PGO should
create a division dedicated to TIP. Over the last year, the
GOU had created Ministry of Interior Department for
Combating TIP, harmonized its Criminal Code with TIP
provisions of the UN Palermo Convention, and had begun to
speak out on destigmitizing TIP victims, but the next step
would be to increase the number of successful prosecutions
of traffickers. (Reftel)


9. (SBU) Medvedko said in 2005 there had been 302 criminal
cases opened on TIP. The PGO, he said, worked closely with
the international community -- especially the International
Organization on Migration. Members of the PGO had attended
eleven TIP conferences in 2005 including events in Israel
and Germany, and would soon be attending a meeting in
Romania organized by the RLA. As he had when discussing
AML, Medvedko stressed that the PGO's role was to oversee
investigations conducted by law enforcement agencies. MOI,
for example, had a special Department for Combating TIP
charged with such investigations.


10. (SBU) Ambassador, once again, told Medvedko it was
important to remember that no one but the PGO was
responsible for bringing cases to court and thus the PGO
needed adequate and expert personnel. Medvedko replied
that, in his judgment, his prosecutors were capable of
presenting cases in court although they were "generalists"
with no specialization in these areas. He noted that in the
last year the Cabinet of Ministers had approved the addition
of more than 300 new prosecutors.

PGO View of Law Enforcement Reform
--------------


11. (SBU) Medvedko confirmed that the PGO had been actively
participating in National Security and Defense Council
(NSDC) development of a concept for law enforcement reform
There had been five meetings of the Heads of law enforcement
agencies, academics, and experts with the NSDC, most
recently on January 27. At that meeting a draft concept was
adoptedthat, Medvedko said, included most of the
recommendations of the PGO. The next step would be for the
NSDC to discuss the paper with the President. The President
would then issue a Presidential Resolution. (Note: USG is
funding experts to support this process. The goal is an
action plan for restructuring the Ukrainian law enforcement
community to be compliant with European norms and standards.
Final product is to be provided to the President the first
week of March. End Note).


12. (SBU) Medvedko said the PGO's office supported the GOU
designating a single agency for pretrial investigation, and
creation of an independent agency for investigation and
prosecution of crimes -- including corruption -- committed
by high-level government officials. MOI, he said, opposed
making this new agency responsible for investigation,
fearing it would be too powerful, but Medvedko thought the
same agency should handle cases from start to finish. He
added that another PGO suggestion was that there be a review
of the division of jurisdictions in the Criminal Procedure
Code (CPC). (Note: USG is providing assistance to the GOU
to draft a new Council of Europe compliant CPC. End Note)

Legal Cases
--------------


13. (SBU) Ambassador brought up the case of notorious hacker
and internet thief Dmitriy Golubov, noting that Golubov had
recently been released on bail. Ambassador said he hoped
Golubov would be brought to justice in an honest and fair
trial.


14. (SBU) Ambassador asked for the PGO's assistance in the
case involving U.S. investor Judge Thomas Fitzpatrick of New
York (reftel). (Note: Fitzpatrick and his family had
purchased a small parking and car wash business in
Dniprodzerzhynsk, which is operated by his brother-in-law.
According to Fitzpatrick, the previous owner tried last year
to force the investors to give up the business by getting
local officials to harass and threaten the brother-in-law.
Now the former owner has filed suit to get the business back
via the courts. End Note.) Ambassador said he had met
twice in early 2005 with PG Piskun, who managed to end the
harassment. Ambassador asked Medvedko to look into the
situation, and gave Medvedko a letter he had written on the
topic. Medvedko promised to make inquiries and report what
he learned.


15. (SBU) Comment: Medvedko's apparent goal was to deflect
blame for the meager number of convictions of criminals
involved in money laundering or TIP. He showed little
comprehension of the need for court prosecutors with
specialized expertise in these areas, though he did reveal
his appreciation of conferences and seminars abroad.
Nonetheless, the Ambassador's frank message, as well as LES
Chief's discussions after the meeting, may have gotten
through, as the PGO called on February 6 to request meetings
with the Law Enforcement Section, RLA, and the AML Treasury
Advisor on February 7.