The Asset Recovery and Management Agency has just reported record-breaking results. But do the figures correspond to reality? Auditors have recorded systemic violations, millions of dollars in losses and inefficiency, which undermines the very idea of turning seized property into a resource for the state.
All is well in the reports
ARMA reports that it is doing better every year. In 2024, the National Agency "achieved record results", including in the management of seized assets. "We have turned seized property into a resource that works for the state. And we have proven that the system works. It is transparent and effective," said ARMA Head Olena Duma during the presentation of the latest report.
The report on activities, which was published on 15 April in accordance with Article 12 of the Law of Ukraine "On the National Agency of Ukraine for Finding, Tracing and Management of Assets Derived from Corruption and Other Crimes", states that despite the difficult economic situation under martial law, in 2024 the asset managers received income from asset management in the amount of UAH 2,962,118.11 thousand, which is 175.36% more than in 2023. Based on the results of asset management, UAH 1,145,739.52 thousand was transferred to the state budget, which is 964.49% more than in 2023.
At the same time, the managers selected by ARMA spent about UAH 1,870,918.02 thousand to preserve the economic value of the seized assets, which is 24.27% more than in 2023. These are the costs of asset protection and insurance, repairs, staff remuneration, utilities, etc. The National Agency explains that these expenses allow the assets to be maintained in good condition and used for their intended purpose during the seizure.
In addition, the agency began to monitor asset managers. A total of 323 control measures were carried out to monitor the effectiveness of asset management, including 313 in the form of desk audits (checks on the implementation of a set of asset management measures at the ARMA premises) and 10 control measures in the form of on-site audits (direct checks on the implementation of a set of asset management measures at the asset's location and/or place of management). And for the first time since ARMA's inception, in 2024, 8 orders were issued to asset managers for violations of the law on issues related to asset accounting and management.
Everything looks great on paper! But one should be very careful with such indicators. And here's why.
Confusion with accounting
At the end of 2024, the Accounting Chamber approved its report on ARMA - on the results of the audit of compliance with the use of state budget funds and asset management (decision of 25.12.2024 No. 59-1). Although it covers the period of the National Agency's activity between2022 and the first half of 2024 [up until] July, this document seems to reveal systemic problems of activity and raises doubts about the integrity of officials and the reliability of ARMA data.
In reality, the share of seized assets managed by ARMA is not that significant. As of 30 June 2024, there were 100447 court rulings on the seizure of assets in criminal proceedings. Only 1195 (1.1%) provided for the transfer of assets to ARMA. Of the court rulings on transfer of assets, prosecutor requests were made in respect of 1146 court rulings (95.7%), i.e. almost 5% of the court rulingsremain unexecuted.
Thus, between 2022 and the first half of 2024, 684 court rulings were made, with a total value of assets of over UAH 51.5 billion. Out of this amount, assets were accepted for execution under 135 rulings worth UAH 12.1 billion. That is, 549 decisions have not been enforced, and the agency has not accepted over UAH 39.4 billion for management. This means that revenues for the state budget are not generated under these rulings.
It is noteworthy that due to the uncertainty of the procedure for ARMA's interaction with law enforcement agencies, there is even a significant discrepancy between the agency's data and the information provided by the Prosecutor General's Office regarding the assets taken into ARMA's management.
Analysing the reasons for this situation, the Accounting Chamber noted that since the establishment of the agency, a comprehensive asset management system has still not been created.
Assets (other than cash) worth billions of hryvnias transferred to the Agency were not recorded in the accounting registers. Management accounting is carried out on the basis of the Unified State Register of Assets Seized in Criminal Proceedings (USRA) created by the Agency. USRA does not contain complete and reliable information on the value and generalised characteristics of each asset.
Although the Ministry of Finance has repeatedly provided recommendations in this regard, ARMA has never initiated or submitted a draft regulatory act for approval by the Ministry of Finance for more than four years to regulate the accounting of seized assets transferred to the Agency for management.
Therefore, the Accounting Chamber concluded that assets (other than monetary) transferred to ARMA worth billions of hryvnias were not recorded in the accounting registers, which cast doubt on the reliability of the data on their valuation and safekeeping. In such circumstances, the organisational and managerial decisions made by the participants in the process led to unsystematic and inconsistent actions.
It was only in December 2024, when the audit was completed, that ARMA amended its accounting policy by Order No. 542 of 04.12.2024. Thus, for the first time in the 8 years since its establishment, ARMA has introduced the recording of all assets transferred to ARMA's management in the relevant accounting registers.
Management issues
The Accounting Chamber noted that the lack of organisational and management decisions in the context of inadequate regulatory support and failure to ensure effective and comprehensive control did not contribute to the efficiency of asset management, and the imperfection of the procedure for selling assets led to a significant understatement of their value.
As a result, the state lost an estimated UAH 850.6 million in revenue (UAH 362.0 million in 2022, UAH 461.0 million in 2023, and UAH 27.6 million in 2024) from measures taken by the authorised bodies to combat corruption, economic and other crimes.
At the same time, state auditors noted a trend towards an increase in state budget revenues from asset management. In 2022, it was UAH 34.8 million, in 2023 — UAH 101.8 million, and in the first half of 2024 — UAH 296.5 million. On 19 December 2024, ARMA provided the Accounting Chamber with an update, according to which the proceeds from asset management amounted to UAH 1127.1 million. However, this trend should be taken with a grain of salt.
After all, ARMA's management accounting data does not match the National Agency's monitoring of the state budget's receipts from asset management conducted by the State Treasury Service of Ukraine.
For the period from 2022 until the first quarter of 2024, the deviations amounted to UAH 5.3 million, 5.9 million and 146.95 million, respectively. "The lack of complete and reliable information makes it impossible for ARMA to further monitor the effectiveness of the management of the transferred assets," the Accounting Chamber concludes. And the lack of control over the effectiveness of the management of the transferred assets (under a third of the management agreements) led to a shortfall in the expected result from asset management (economic benefit or projected income), estimated at UAH 74.8 million, which created the preconditions for reducing the economic value of these assets.
In support of this assertion, the state auditors cite several examples of the fulfilment of the terms of contracts with individual asset managers.
TPP case study
According to ARMA's reports for 2022-2023 and the first half of 2024, the management of the property complex of Energia-Novyi Rozdil LLC under the management agreement of 19.11.2019 No. 5180 has shown a net loss of UAH 161.8 million in 2022, UAH 126.8 million in 2023, and UAH 59.3 million in the first half of 2024.
In particular, the property complexes of Novorozdilska and Novoyavorivska thermal power plants were seized in connection with an investigation into the receipt of natural gas at a reduced rate in 2013-2017.
Initially, Garant Energo M PE was the manager, but after assessing the company's preparation for the 2019/20 heating season, it was decided to terminate the relevant agreements. Subsequently, given the need to ensure the stable operation of the facility, the ARMA Tender Committee selected a new manager, Naftogaz Teplo LLC. The selection was based on the so-called negotiation procedure. In order to apply the simplified procedure, a threat of the possibility of a man-made emergency was deployed and a separate Cabinet of Ministers' Order No. 1040-r of 06.11.2019 was adopted, containing signs of abuse of office by the persons who prepared and adopted it.
According to reports, after the companies were transferred into management, their operations were accompanied by financial losses. The total net loss over the past 2.5 years was UAH 348 million, or 273.2%.
In addition, the Accounting Chamber's report states that under the terms of the agreement, the manager was to transfer 75% of the asset management income (net of taxes and fees) to the state budget. According to the results of the control over the effectiveness of asset management in May, July and September 2023, an excess of income over expenses was recorded (by UAH 7.8 million, 5.6 million and 250.6 thousand, respectively). At the same time, the auditors noted that the terms of the agreement on the transfer by the manager to the state budget, estimated at UAH 10.27 million, were not ensured.
A similar situation was found in the other three contracts concluded with the manager of Naftogaz-Teplo LLC. According to reports, management revenues under these contracts exceeded expenses by UAH 84.3 million, and an estimated UAH 63.2 million was not transferred to the state budget.
The case of Morshynska
Fulfilment of the contract with the manager of Karpathian Mineral Waters LLC was accompanied by a number of difficulties and public scandals regarding the transfer of assets to competitors with an offshore component of corporate ownership.
As a reminder, in June 2022, the Bureau of Economic Security initiated the seizure of the corporate rights of IDS Ukraine (the owner of the brand) due to the presence of sanctioned persons among the shareholders.
In November of this year, the Shevchenkivskyi District Court of Kyiv transferred the seized assets of IDS Ukraine to the management of ARMA. The following February, the agency announced a tender, and in March, Karpathian Mineral Waters was the winner. IDS Ukraine immediately reported violations of the law in the transfer of assets to management, including the absence of an asset valuation and a merger clearance from the Antimonopoly Committee of Ukraine. Experts of Transparency International Ukraine also drew attention to certain procedural issues during the selection of the manager and the overall unsuitability of this management model.
Subsequently, the Antimonopoly Committee of Ukraine concluded that there was a risk of market monopolisation and restriction of competition in the drinking and mineral water segment. In this regard, on 2 April 2025, ARMA terminated the agreement with Karpathian Mineral Waters LLC and announced the start of market consultations and a new valuation of the asset.
According to Anastasiya Radina, Chair of the Verkhovna Rada Committee on Anti-Corruption Policy, the main reason for the failure was that ARMA transferred Morshynska to the management of a direct competitor, the company that produces Karpatska Dzherelna. Incidentally, the National Agency made a similar mistake in the TPP case, as the assets were transferred to the management of a subsidiary of Naftogaz, which is listed as a victim in the criminal case in which the assets were seized.
According to the Accounting Chamber, due to the fact that the assets were not properly transferred, UAH 1.1 million was not transferred to the state budget.
As of today, the Ministry of Justice has decided to "fix" the fate of this asset and filed a claim with the HACC to recover corporate rights to these assets under Article 5-1 of the Law of Ukraine "On Sanctions". The case is still under consideration and it can be assumed that the fate of this asset will be resolved using the sanctions mechanism. Although the Ministry of Justice believes that the deprivation of property under the Sanctions Law is not expropriation or nationalisation, it violates the investors' right to peaceful enjoyment of their property under Protocol 1 of the Convention for the Protection of Human Rights and Fundamental Freedoms.
It is also interesting to note that, according to the ARMA Law, in the case of asset management in the form of a share in the authorised (share) capital or shares or units, the manager, when exercising the powers of the owner of such assets in the supreme governing bodies of the relevant legal entity, is obliged to coordinate its actions with the owner of such assets. However, in practice, due to the clarification of the court ruling, this procedure has been cancelled, as in the case of IDS Ukraine.
Gulliver's case
The situation around the seizure of assets of the Gulliver shopping mall in Kyiv is also quite illustrative (although it was not included in the AC report).
In the spring of 2024, journalists of the Schemes programme published an investigation into the owner of the centre, which revealed its debts to banks and the purchase of luxury cars despite financial difficulties.
In April, the Kyiv Court of Appeal seized the property of Tri O LLC, including a shopping mall of over 150 thousand square metres, as part of a criminal investigation into tax evasion. The Shevchenkivskyi District Court transferred Gulliver to the management of ARMA, which started the valuation of the property.
As early as the beginning of this year, an auction was held on the Prozorro platform and the manager, Millennium BC LLC, was selected, offering the most favourable conditions for the state - 0.15% of the management fee. Other participants wanted more. The tender was attended by the Esplanade Management Company Consortium (asking for 0.35%) and Alakor City LLC (offering 0.49% of the fee).
But in March 2025, it turned out that ARMA had made a decision in principle to reject all three bidders.
The agency carefully checked the documents submitted by the bidders for compliance with the requirements of the tender documentation, including the technical specification, qualification requirements, etc. And in the course of processing the documentation, it sent inquiries to law enforcement and intelligence agencies to verify the bidders' involvement with the owner of the seized asset, either the aggressor country or countries associated with the aggressor country. Obviously, the answers were disappointing. Although it is unclear what prevented this from being carried out at the stage of submitting proposals, so as not to waste (literally) precious time.
Now the National Agency is ready to announce a new tender. Given that the valuation of the Gulliver shopping mall was set at UAH 7.6 billion, one can only guess what losses the state suffers every day due to the disorganisation of the process and the slowness of ARMA.
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Thus, the analysis of public reports and conclusions of independent bodies shows that there are certain discrepancies between the declared achievements of ARMA and the actual results of its activities. In particular, the reports of the Accounting Chamber and the State Treasury Service point to cases where the financial indicators provided in the agency's reports are not always supported by proper accounting or differ from those of other government agencies.
The main challenges identified by auditors and experts include the enforcement of court decisions on the transfer of assets into management, coordination with law enforcement agencies, and the creation of an effective accounting system. According to official sources, work to address these issues intensified at the end of 2024.
Certain examples of asset management, such as thermal power plants, the Morshynska brand and the Gulliver shopping mall, illustrate the difficulties encountered in selecting managers and organising the management process, which can lead to financial losses, failure to fulfil obligations to transfer funds to the state budget, and affect the competitive environment in the market.
The Accounting Chamber's reports emphasise that in order to improve the efficiency of management of seized assets, it is necessary to improve organisational and control mechanisms, ensure transparency and rational use of public resources.
At the end of 2023, a new Deputy Head for European Integration, Grigol Katamadze, joined the ARMA leadership team. In its response, ARMA left open the question of whether the "new Ukrainian" renounced his Georgian citizenship, having been appointed without following the procedure for holding a competition for the position of a category A civil servant. It is possible that the National Agency of Ukraine on Civil Service will be able to provide answers to these questions in the course of the next control measures.
The above once again confirms the conclusions of last year's Report of the Organisation for Economic Co-operation and Development (OECD) dated 14.03.2024, in particular regarding:
All this increases distrust in this body and the possibility of its use for political influence and as a mechanism for "redistribution" of assets, and legislative initiatives of parliamentarians arise only under pressure from the EU when it comes to funding programmes.
Volodymyr Bohatyr
Attorney-at- law, PhD in Law
Honoured Lawyer of Ukraine
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