Problem

The institution of anticorruption compliance in the private sector in Ukraine is underdeveloped, which hinders the implementation of anticorruption standards. The main reasons for this include: a lack of effective administrative, procedural, and legal incentives for businesses to adopt integrity practices; a lack of systematic interaction between business representatives and civil society institutions and government agencies; a lack of a common vision regarding the implementation of anticorruption standards in the operations of private sector companies among representatives of legal entities, civil society institutions, and government agencies; an insufficient level of methodological assistance to legal entities in matters of application of anticorruption standards and implementation of anticorruption programs; complexity of the process of developing and implementing the Code of Integrity for legal entities; a lack of effective mechanisms for verifying information contained in the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Associations about the ultimate beneficial owner of a legal entity;
slow de-bureaucratization of business processes; widespread corrupt practices in the form of unofficial payments; absence of a clear and specific legal requirement for internal auditors of legal entities to report the facts of corruption and corruption-related offenses they have discovered; difficulty in timely and effective restoration of the rights and legitimate interests of business entities violated by government agencies.
Failure to address the problematic aspects of liability of legal entities for corruption offenses, an insufficient number of non-monetary sanctions, and the lack of the possibility to conclude an agreement on deferral of judicial prosecution result in ineffective administrative, procedural, and legal incentives for the adoption of integrity practices in the private sector. The low level of interaction between business community representatives and civil society institutions and government agencies does not contribute to the proper protection of legitimate interests of businesses, solution systemic problems of business interaction with the government, and promoting a culture of doing business in a fair, ethical, and responsible manner.
The lack of a unified vision among representatives of legal entities, civil society institutions, and government agencies on how to integrate anticorruption standards in the activities of private sector companies and the insufficient level of methodological assistance provided to legal entities by government agencies result in fragmented and inconsistent implementation of anticorruption standards.
The absence of codes of integrity at the majority of Ukrainian private law entities makes it impossible to ensure proper implementation of ethical business standards, which significantly limits the opportunities for domestic producers to become more competitive and impedes the attraction of foreign investment.
The verification of information contained in the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Associations regarding the ultimate beneficial owner of a legal entity is not properly implemented due to the lack of proper bylaws, which hinders the further promotion of the principles of transparency of the ownership structure of legal entities and limits the capability to detect financial and other offenses.
The slow de-bureaucratization of business processes has a negative impact on the economic climate in Ukraine. The relations between business entities and the state, whereby the state defines the rights and obligations of such entities, are still regulated by several hundred laws and many other normative legal acts, which leads to abuse and corruption (each institution establishes its own rules of interaction with businesses). Therefore, it is much easier, faster, and often more profitable for businesses to tolerate corrupt conditions during administrative procedures than to resist and use legal instruments.
Unofficial payments are a widespread corrupt practice that leads to tolerance of corruption in the private sector of the economy. The reason for the emergence of these payments is the non-transparent and unorganized system of legislation on administrative fees.
The absence of a separate legal provision that would define the obligation of internal auditors of a private legal entity to report the facts of corruption and corruption-related offenses they have discovered, as well as cases of incitement to commit a corruption offense associated with the operations of a legal entity, often leads to ineffective fulfillment of this obligation.
Another reason for the high level of tolerance of corruption in the private sector is the difficult process of restoring the rights and legitimate interests of business entities violated by government agencies in a timely and effective manner. The controlling authorities often abuse their powers by using the coercive administrative instruments at their disposal. The judicial system does not always provide adequate protection of violated rights of entrepreneurs. This situation leads not only to a low level of trust of business representatives (both domestic and international) in the state authorities of Ukraine, but also to a low level of respect for economic freedoms.