Eight possible corruption risks during reconstruction: research and recommendations of the NACP

Experts of the National Agency on Corruption Prevention (NACP) together with the Institute of Applied Humanitarian Research identified the most common corruption risks during the reconstruction of real estate objects that were damaged or destroyed as a result of the armed aggression of the Russian Federation, and also formulated recommendations for their minimization / elimination. The comprehensive expert analysis involved the study of regulatory and legal acts, media materials and social media, as well as in-depth interviews. The NACP modeled possible corruption schemes that may arise in the future and offered recommendations for implementing anti-corruption prevention measures and ensuring transparent reconstruction. Corruption risks were modeled in relation to:

1. processes of forming and maintaining data of the Register of damaged or destroyed property;
2. activity of commissions for consideration of compensation issues;
3. creation and administration of a temporary housing fund;
4. recording the facts of damage to objects, their examination and drawing up a conclusion on the possibility of further exploitation;
5. determining the right to compensation, making the appropriate decision and receiving compensation;
6. activities of the Fund for the Liquidation of the Consequences of Armed Aggression and the Destroyed Property and Infrastructure Restoration Fund;
7. making decisions about dismantling buildings based on survey results;
8. determination of the amount of damage caused.

After analyzing the corruption risks, the NACP formulated a number of recommendations for their minimization and elimination. First of all, it is necessary to make changes to the Land Code of Ukraine, Law of Ukraine No. 2923-IX, Law "On the State Land Cadastre", as well as a number of resolutions of the Cabinet of Ministers of Ukraine and other legal acts. In addition, the NACP provided proposals for the introduction of anti-corruption prevention measures during the verification of information entered into the relevant registers, as well as the use of digital tools in the reconstruction of real estate objects. The implementation of the recommendations proposed by NACP is preventive in nature and will help to correct relevant decisions, eliminating possible corruption schemes and negative reputational, social and economic consequences. This research is intended to become a road map for the Verkhovna Rada of Ukraine, the Cabinet of Ministers of Ukraine, Regional State (Military) Administrations, local self-government bodies during the preparation of reconstruction concepts and programs, as well as the minimization of corruption risks during decision-making. You can get acquainted with the recommendations of the NACP and the executive summary on the research "Corruption risks of reconstruction of real estate objects that were damaged/destroyed as a result of the armed aggression of the Russian Federation: modeling and proposals for their minimization/elimination" down bellow. For reference As a reminder, on May 22, 2023, the Law of Ukraine entered into force, which defines the legal and organizational principles for providing compensation for damaged and destroyed real estate objects as a result of hostilities, acts of terrorism, and sabotage caused by the armed aggression of the Russian Federation against Ukraine. During the full-scale Russian invasion of Ukraine, a large number of residential buildings and public infrastructure facilities were damaged or destroyed. In March 2023, the World Bank updated its estimate of the funds that Ukraine will need for recovery and reconstruction - this amount increased to USD 411 billion dollars. The full research in Ukrainian can be found via the link. Executive summary THE PROBLEM Any reconstruction model involves compensation for losses caused by military aggression. The processes of registration, assessment and compensation for damage to real estate are vulnerable to corruption risks. The international experience of the last 50 years indicates that in almost all cases these processes were accompanied by the fight against specific forms of corruption, which reflected the “reconstruction conditions and factors”. As the russian aggression continues, the general needs for Ukraine’s reconstruction are not yet known. Nevertheless, it is important to predict the main constituent elements of these international efforts now. On 23 February 2023 the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Compensation for Damage and Destruction of Certain Categories of Real Estate as a Result of Hostilities, Terrorist Acts, Sabotage Caused by the Armed Aggression of the Russian Federation against Ukraine and the State Register of Property Damaged and Destroyed as a Result of Hostilities, Terrorist Acts, Sabotage Caused by the Armed Aggression of the Russian Federation against Ukraine” (further – “the Law on Compensation”) . It should be note that the above Law on Compensation came into force on 22 May 2023. This Law defines the legal and organizational framework for providing compensation for damage and destruction of certain categories of real estate as a result of hostilities, terrorist acts, sabotage caused by the armed aggression of the Russian Federation against Ukraine. These circumstances explain the relevance of identifying corruption risks in the processes of registration, assessment and compensation for damage to real estate. ANALYSIS CONDUCTE SOLVING THE PROBLEM (NACP’s RECOMMENDATIONS ON CORRUPTION RISKS MINIMIZATION) Furthermore, suggestions have been made to introduce anti-corruption safeguards during the verification of information to be entered into the respective registries, as well as the use of digital tools in the reconstruction of real estate properties. RESPONSIBLE ENTITIES FOR MINIMIZING CORRUPTION RISKS The NACP’s research can serve as a guide for the Verkhovna Rada of Ukraine, the Cabinet of Ministers of Ukraine, regional state (military) administrations, and local self-government bodies during the preparation of reconstruction concepts and programs, and in making certain legislative and administrative decisions, taking into account measures to minimize corruption risks. The implementation of the proposed recommendations will be preventive in nature and will help to adjust relevant decisions to in order to prevent the realization of corrupt schemes and the occurrence of negative reputational, social and economic consequences.