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. Last Updated: 07/27/2016

Ukrainian Tax Officials Fight To Stem Money Laundering

KIEV — Ukrainian tax authorities, worried by black economy money laundering, called for tighter controls on export and import deals in order to control capital flows in the cash-strapped country.

Anatoly Brezvin, deputy head of the State Tax Administration, told reporters Monday that local banks were often used to transfer or hide what he called ill-gotten money. He said the tax office had prepared a bill aimed at tightening controls on export/import operations, because there was still no adequate anti-laundering legislation in Ukraine.

He also urged the Central Bank to impose tighter controls on accounts held by foreign banks in Ukrainian banks, alleging that they were used for illegal hard currency transfers abroad.

"Some 98 percent of payments to these banks are money from fictitious firms," Brezvin said, adding that his office has so far detected 2,500 local companies engaged in money laundering.

"These volumes are huge," Brezvin said.

Experts estimate the underground economy in the country of 50 million people to be about the size of the official economy.

Capital flight abroad after bypassing the tax system is estimated to have reached $10 billion to $20 billion since the 1991 collapse of the Soviet Union.

In March this year President Leonid Kuchma issued a decree ordering the government to declare an amnesty on "gray capital" which is illegally transferred abroad. The decree allowed declaration of this money without revealing its source and stipulated that the legalized capitals should be taxed at no more than the minimum rate of 10 percent.

But the decree stopped short of mentioning any technical framework for its implementation. Tax officials are tight-lipped on how much money has returned so far. Brezvin said the economic situation in Ukraine would improve considerably if the authorities fought money laundering more efficiently.