Officers from Ukraine's security service SBU have raided the headquarters of Ukraine's state railroad administration, one of the county's largest organisations, confiscating over $1.5m in cash and documents relating to offshore firms, according to the SBU. The SBU said that the railroads had played host to "a money-laundering syndicate," and reform-minded officials at the organization have welcomed the raid.
SBU head Valentyn Nalyvaichenko said the cash and offshore documents showed that Ukrainian Railways, or Ukrzaliznytsia, had been involved in money-laundering for years. "The danger is that every railroads firm, every contractor of the railroads, every insurance agent has been incorporated by corrupt officials in one money laundering and budget embezzlement system," Nalyvaichenko said in an SBU press release on October 17, calling the operation "a really huge criminal mechanism."
"Other industries and ministries are next in turn," said Nalyvaichenko, as quoted by Interfax. "This isn't the last special operation – such money laundering centres will be liquidated in future."
The details of the operation have not been released, but it is likely to involve embezzlement from the railways by officials via the awarding of contracts to sham suppliers in Ukraine and abroad, with the money then being siphoned to foreign bank accounts or paid out in cash to railway officials.
The head of Ukraine's state railroad administration, Borys Ostapiuk, was suspended from his post in September when an investigation was started. Head of the railroad supply division that carries out procurement for the railroads, Oleksandr Lozinsky, was also suspended.
Acting head of Ukrzaliznytsia, Maksym Blank, a liberal reformer and former investment banker, supported the search on Facebook, writing that: "this is for what we fought: to have no untouchables."
Blank is an ally of a team of young investment bankers with an international background that is spearheading reform at the sprawling and deeply corrupt Soviet-era state monopolies such as Ukrainian Railways and state gas company Naftogaz, where his counterpart is new Naftogaz CEO Andriy Kobolev.
Blank has said that the first step in reform at the railroads would be to corporatize the structure, which has retained its Soviet-era form as a state bureaucracy. But the plans have been stymied due to the ongoing conflict in the east of the country. The railway division in the east is the cash cow for the whole of Ukraine's railways, due to its export-oriented mining and metals sector, but it is no longer under the control of Kyiv.
Graham Stack in Kyiv - Ukraine's largest lender PrivatBank has survived a stormy week of speculation over its future, but there are larger rocks ahead, with some market participants anticipating the ... more
Henry Kirby in London - Ukraine and Russia’s latest “Despair Index” scores suggest that the two struggling economies could finally be turning the corner, following nearly two years of steady ... more
bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more