ASSET DECLARATIONS AS A CORRUPTION PREVENTION AND RISK ASSESSMENT INSTRUMENT
Longstanding loopholes and areas in need of improvement
State of play
Asset declarations are strong, but currently under-used instrument41 for corruption and illicit finance prevention among civil servants and in particular – the politically exposed persons (PEPs). There are multiple reports by media and civil society on the gap between the living standard of politicians and their families, and what is officially declared.42 PEPs hide wealth by giving it to family members, receiving advantageous loans from friends, or transferring money abroad. As part of their anti-corruption toolbox, all SEE-9 counties have put in place a legal framework regulating asset declarations. It aims to bring transparency to the political processes and to provide opportunities for society and investigative media to hold decision-makers accountable. However, in order for this tool to become effective, it is necessary to analyze the legal and institutional framework and overcome its current shortcomings.
Box 3. Need to investigate the lifestyle of PEPs, beyond the officially declared assets
According to data provided by MANS, the officially reported revenues of the former minister of Economic Development, former minister of Spatial Planning and former Deputy Prime Minister of Montenegro – Branimir Gvozdenović, are far lower than the costs of schooling of his children. MANS has uncovered, that he has spent at least EUR 370,000 from 2007 to 2016. This includes tuition fees at the University of Bocconi, St Claire School in Oxford and City of London University Cass, as well as minimal living costs in Milan and London. The official investigation was limited to questioning Gvozdenović on the origin of the money, and the case concluded with the response that he had help form wider relatives.43
PEPs and civil servants who do not declare assets
A reason for concern presents the fact that some PEPs, as well as other categories of civil servants, are not obliged to declare assets, and hence – their wealth remains hidden from the state institutions and the general public. This problem is most pronounced in regards to the senior managers, directors and board members of state-owned companies, who are not obliged to declare assets in Serbia (unless they are appointed by the government) and in BiH. Customs officers do not declare assets in Serbia, unless they have a managerial position and are appointed by the government. The number of persons obliged to declare assets in Serbia shrunk even further in February 2021.44,45 While the political parties are usually associations of citizens, it could be argued that it would be beneficial for members of political parties outside the parliament to also declare assets (especially of they receive government subsidies).46
Type of declared data
Despite the legal efforts made till 2022, the information that is obligatory to be declared is rarely all-encompassing. The loans from private individuals do not always have to be declared (e.g. in Hungary) while presents to close family members are not made public due to asset declarations rules.47 Similar legal inconsistencies are observed in Bulgaria and Croatia, where spouses and cohabitants are not obliged to inform their respective partners of the assets they own, providing an escape clause for non-declaration. Another issue concerns the declaration of assets related to legal entities (i.e. legal persons instead of physical ones). In both Hungary and North Macedonia, PEPs are required to declare ownership of shares in companies but not the assets held by these companies. Thus, personal assets could be written off as a firm’s property, and declaration could be avoided. This transfers the responsibility for uncovering the illicit assets towards the tax and money laundering authorities.
Gifts received by the immediate family are not declared as a rule, although countries like Croatia, Romania, and Hungary require the declaration of gifts of value over a certain amount (e.g. over EUR 67 in Croatia, EUR 500 in Romania, 1/12th of the official’s salary in Hungary). North Macedonia has a Gift Catalogue, established by law. This register however is rarely used, as people are either not aware of the legal obligations to do so, or they are afraid that any declaration of gifts would result in further scrutiny by the authorities, as well as by the media. Movable assets such as jewelry are not declared in Bulgaria. Thus, wealth kept or co-owned by the family members would remain undeclared and unaccounted by taxing mechanisms. These contradictory regulations lead to legal difficulties down the road, facilitate illicit wealth accumulation and tax fraud, and hinder the sanctioning.
There are multiple cases of undeclared assets and illegal wealth, uncovered by national authorities, investigative journalists, and the civil society. The current analysis does not have as an objective to reveal any additional evidence or circumstances related to these cases, nor focus on specific individuals. However, the methods of operation of the typical schemes of non-compliance could still be exemplified by reviewing some of the most prominent cases, presented in Box 4. Thus, these cases could help identify the crucial areas in need of improvement in the authorities’ review mechanisms.
Box 4. Failure to declare own commercial activities and/or assets
Viktor Orbán, the prime minister of Hungary has declared only a flat in Budapest and a house in Felcsút in his asset declarations (without any savings). Győző Orbán (Viktor Orbán’s father) however has bought the 13 acers estate in Hatvanpuszta in 2011, shortly after his son Viktor won the parliamentary elections.48 The Orbán family obtains its wealth mainly from mining companies belonging to Győző Orbán and his two sons, Áron and Győző Orbán Jr. These firms generated around EUR 9 billion income solely in 2020.49 NGO Direkt36 gained access to documents showing that allegedly the companies worked for several government projects as subcontractors, however their contribution was not listed in any public registers. The companies of Lőrinc Mészáros, Viktor Orbán’s childhood friend, have won several lucrative public procurements and state subsidy programs. These companies are also a source of income for Orbán family’s mining business.50
The Constitutional Court of Albania revoked the mandate of a Socialist MP in 2011. This was due to the fact that in 2009 the company where he was a co-owner won a tender from the Municipality of Durres, related to the delivery of computers. The contract worth over EUR 170,000.51
Other examples of PEPs who failed to declare their own assets and commercial activities include:
- The President of the Constitutional Court in Albania (2012-2017) (non-declaration of an apartment seized by Special Courts against Corruption and Organized Crime).52
- A Bulgarian MP, connected to three offshore companies (sanctioned by Global Magnitsky, not in Bulgaria).53
- The former North Macedonian Prime Minister (sentenced to prison and a monetary fine for using party donations to acquire land plots through a shell company registered in Belize – a tax haven – under the name Syrah, run by his best man. It is unclear if he will do any jail time after fleeing to Hungary in 2018.54
- Romanian civil servants and counselors to public officials who did not declare expensive property in Dubai.55
- Ex-mayor of Belgrade (in office between 2018 and June 2022), who allegedly has not declared his apartment in Belgrade, land on Zlatibor mountain, and a holiday cottage (not sanctioned).56
- The director of the Serbian Primary Health Centre in Gračanica, a state-owned, public health institution who allegedly has not declared six apartments on the Kopaonik mountain (criminal charges filed by the Serbian Anti-Corruption Agency).57
- A former MP, Minister of Telecommunications and Minister of Infrastructure of Serbia failed to declare ownership of the company Habit Invest in his asset declaration although official data from the Central Business Registry prove contrary. The company is registered in Montenegro, and was given to the former MP without any compensation.58
Main prerequisites for efficient checks of asset declarations
The regional and country-level specifics related to asset disclosure, data availability, the process of performing checks and imposing sanctions, presented in the current report, reveal several critical areas in need of improvement. While the procedural and legal gaps differ across the countries, the analysis highlights the need of a coherent policy, focused on uncovering non-declared assets, and other related law violations. A short overview of the key prerequisites for efficient checks of asset declarations is presented in Figure 1, while detailed policy recommendations are listed at the end of the report.
Figure 1. Prerequisites for efficient checks of asset declarations
Source: Center for the Study of Democracy
Verification and checking
Frequency and depth of the checks
Most SEE-9 states have procedures for timely asset declaration submission and for performing the initial basic check of the discrepancies between income and declared assets (e.g. “arithmetic-logical” initial check in Albania). In case there is such a discrepancy,59 the law prescribes that a second detailed check takes place until the nature of the irregularity is established and the case is transferred to other authorities.
However, none of the nine analyzed countries has a system of comprehensive lifestyle audits. For example, in Bosnia and Herzegovina (BiH) the procedure is limited to checking that the declaration is not submitted empty. The reasons for this lie, among others, within the lack of human resources able to perform in-depth checks, including cross-checks in multiple registers at the national level and abroad where illicit wealth could potentially be kept. The issue is exasperated by the large number of persons obliged to submit declarations in some of the SEE-9 countries – about 300 000 in Romania60,61 (as of 2021). Due to the lack of inter-connected registers and electronic risk assessment systems based on big data, the countries have resorted to selecting a random sample and/or priority risk groups (e.g. the ones with high-level position and/or past infringements) for undergoing detailed checks.
This approach needs to be further enhanced. It is recommended that the an- ticorruption authorities set up a body or department dedicated fully to the detailed check (“lifestyle audit”) of asset declarations. It should verify not only the reported information but whether there are hidden or undeclared assets. Ideally, the procedure should ascertain the origin of assets. The checking procedure should be based on:
- a random sample undergoing detailed check / audit (e.g. 5% or 10% of the civil servants in a public body);
- checks of priority/risk groups;
- checks triggered by anonymous signals from third parties (whistle-blowers, CSOs, media articles, etc.).
By law, declarations’ submissions and the initial checks should follow an annual cycle, although the R2G4P members from Albania, BiH, and Hungary report that, in fact, the checks are performed once every few years or if there is a signal for irregularity. In countries such as Albania, detailed checks are performed every two to five years, which aim to uncover the reason for the inconsistencies between declarations accumulated over longer periods of time,thus missing some red flags that could be observed on annual basis. In North Macedonia asset declarations are not submitted annually, but only upon taking and leaving office, as well as ad hoc if change in circumstances occurs.
Table 1. When are PEPs and public servants required to submit asset declarations?
Source: Center for the Study of Democracy, based on review of the national legislation
Checks based on whistleblowing / anonymous signals
Ideally, checks should also be triggered by anonymous signals about illicit enrichment from third parties (whistle-blowers, civil society organizations – CSOs, media articles, etc.). However, according to national laws, anonymous signals are not accepted in Bulgaria, North Macedonia and Romania. In BiH such checks are foreseen in the law, but not always performed. In Hungary, only cases with provided strong evidence are inspected. Thus, it is necessary further procedures to be developed within the whistleblowers’ protection legislative framework.62,63
Table 2. Checking institutions and possibility for submitting signals about irregularities
Country
Checking institution(s)
Signals/referrals submission link
Signal is anonymous
AL
Could be anonymous according to the law
BiH
Could be anonymous if sent via mail
HR
Could be anonymous (initials needed)
HU
There is no official template. Private individuals can submit a signal to the Committee, or can submit an anonym form to the Ombudsman. (https://www.ajbh.hu)
Anonymous form can be submitted only to the Ombudsman
MNT
https://www.antikorupcija.me
(Submission is also possible by e-mail and telephone)
Could be anonymous
RO
Not anonymous, however the Agency can trigger ex-officio investigations
Source: Center for the Study of Democracy, based on the websites of the checking institutions.
Personal assessment of the assets’ value
A common type of violation concerns the discrepancy between the real market value and the lower price, noted on the official purchase documents. For example, there have been cases such as declaring two-story villas as “wine cellars” in Hungary64. Checking and comparing this information is a complicated procedure, for which the authorities rarely have the knowledge and capacity. Investigative journalists and the civil society thus remain crucial for the uncovering and warning against such irregularities.
Box 5. Asset declarations inconsistent with market values
The scandal known as Apartmentgate erupted in Bulgaria in the spring of 2019 and involved the purchase of property (apartments) by the then Minister of Justice, the chairman of the leading party GERB, the Deputy Minister of Youth and Sports, and the Deputy Minister of Energy, Environment and Water, among others. The value of the property that those officials purchased (listed in their asset declarations) was much lower than the real market price. The case was suspended due to lack of evidence but the ministers resigned their posts.65
On 28 January 2020, the PM of Croatia sacked the Health Minister after a series of media reports alleging he misrepresented the value of his property in the asset declaration66, although the officially stated reason for the dismissal were the insufficient efforts in preventing COVID-19 spread.
A 2021 investigation by the North Macedonian State Commission for the Prevention of Corruption (SCPC) revealed that part of the vehicles declared in asset declarations were undervalued. The checks were prompted by a case, related to the former Secretary General, and a publication by the investigative outlet 360 Stepeni which exposed that he is driving the latest Volvo XC90, missing in his asset declaration.67
Removal of asset declarations from the public registers
Another issue of concern is how long the asset declarations remain public. In North Macedonia, asset declarations are removed immediately after a PEP leaves office68. In Croatia and Hungary, the asset declarations are removed from the public registers one year after the end of the PEPs’ term in office, and after three years in Serbia. This further restricts the work the investigative journalists and the civil society.
Need of inter-connection of multiple registers and performing cross-checks
Performing cross-checks in multiple public registers and exchanging information with other public institutions at national level and abroad is vital. Such mechanisms exist at various stages of development across the SEE-9. For example, in Croatia, the Conflict of Interest Commission (CIC) performs checks in other registers for assets that are missing from the declaration. The CIC also frequently requests data from other public bodies (including the tax authorities). The Agency for Prevention of Corruption of Montenegro has the technical ability to compare data in official databases through direct online access, including the databases of Ministry of Interior, Tax Administration, Real Estate Administration, Securities Commission, the Central Register of Companies, the Central Bank of Montenegro, as well as commercial banks (in case of the consent for access to bank accounts by public officials). The procedure for checking the discrepancies between the lifestyle of public officials and their declared income and assets, initiated in December 2020, did not show any significant results in practice.
Such cross-checking mechanisms are only partially implemented in BiH, Bulgaria and North Macedonia – limited to ad hoc requests and exchange of information from/to other public bodies. Despite multiple attempts to inter-connect national public registers in the analysed countries,69 these ad hoc cross-checks continue to be performed mostly manually. An additional obstruction presents the irregular update of the national registers, as well as the depth and quality of the data within them (e.g. lack of information on ownership structures of companies, including the ultimate beneficial owners, and the history of real estate transactions and securities).
Ideally, the process of inter-connecting all national registers should be implemented in two stages:
- First, the primary (basic) registers should be connected with each other: physical persons register (including civil status and family members), business (legal entities) register, and the property register.
- Second, all remaining registers should be joined one by one – tax, social security, land register, motor vehicles register, stocks and securities, patents and licenses registry, customs, court registries, party finance database, etc. If possible, databases of professional bodies and bank accounts should also be included or a procedure for information requests should be established.
Based on data from all (inter-connected) public registers, the governments from the SEE-9 countries, supported by the civil society, are recommended to elaborate electronic platforms for detecting corruption risks and patterns of abuses. Such platforms could benefit from the red-flags and indicators, tested in the framework of the R2G4P initiative and presented in the current and future reports. The next and final step would be to enforce the International Treaty on Exchange of Data for the Verification of Asset Declarations.70
Box 6. International Treaty on Exchange of Data for the Verification of Asset Declaration
An International Treaty on Exchange of Data for the Verification of Asset Declaration was signed during a ceremony in Belgrade, on 19 March 2021, under a jointly implemented initiative by the Regional Anti-Corruption Initiative (RAI) and UNODC. Republic of Serbia, Republic of North Macedonia and Montenegro were the first signatories of the document. The treaty is intended to enable anti-corruption bodies to communicate formally with each other regarding data on foreign assets and interests, and thus significantly enhance verification of declarations.71
Loopholes during the checking process
Several long-standing loopholes could be identified in the legislation and procedures for checking the asset declarations, based on the current analysis and the national-level information provided by the R2G4P members. Some of these gaps seem to be recurring in multiple countries, thus presenting a challenge for the whole region. Part of them necessitate amendments in the national legislation, while others are a matter of procedural enhancement and law-enforcement capacity.
Figure 2. Long-standing loopholes in the verification and checking procedures
Source: Center for the Study of Democracy
These loopholes facilitate hiding and non-disclosure of assets in a variety of ways, including, but not limited to:
- Transfer to extended family or friends (usually against no or low-value compensation)
- Moving the assets abroad (including in offshore companies/tax heavens)
- Converting them into company assets, which should not be declared according to national law (relevant to the countries where only the shares in companies should be declared)
- Hiding the assets in a complex chain of subsidiaries and mother companies (including the use of shell companies and straw persons)
Restrictions placed on civil servants and PEPs
In addition, gaps in the legal restrictions related to holding of an office, continue to undermine the rule of law and directly curb the division of powers (see Box 7). These gaps hinder even further the checking and sanctioning procedures, as some of the prerequisites for gaining of illicit wealth or conflicts of interest, are not required to be reported.
Box 7. Gaps in the legal restrictions to holding an office
Members of all three branches of governments are not prohibited to:
- Receive sponsored travel in Bulgaria, North Macedonia, and Serbia.
- Simultaneously hold policy-making and a policy-executing positions in Romania.
- Exercise private activities that generate revenue, including:
- Owning shares or parts of capital of a commercial company and/or a state-owned company in North Macedonia, Montenegro, Romania and Serbia. o Holding government contracts in Bulgaria, Hungary, Romania and Serbia.
- Family members having a concurrent employment in the public sector in all SEE-9 countries.
- Post-employment regulation in Hungary only prohibits (for two years) majority ownership in companies in the financial sector and only restricts employment in organizations that allocate public or EU funds. Thus, PEPs can work for state-owned enterprises (SOEs) and other large companies right after the end of their term in office.72 Post-employment restrictions in BiH remain unclear due to the large number of laws regulating this area. PEPs in Serbia can be involved in the control of commercial, public or private companies after leaving office (as well as have additional income while in office), provided that they obtain approval from the Agency for Prevention of Corruption.
Recommended risk indicators for checking asset declarations
The use of big data, interconnected public registers and enhanced cooperation among authorities at national and cross-border level is crucial for identifying those PEPs, who exhibit suspicious behaviour in regard to their wealth, professional and family relations. Focusing the scrutiny into a smaller number of persons and related to them companies could greatly alleviate the work of the relevant anti-corruption units. Thus, it is highly recommended that a unified checking procedure is introduced across all public bodies, based on a set of red flags and indicators. Such comprehensive list of risk indicators for checking asset declarations is presented in Figure 3. The list is compiled based on analyses published by the World Bank, Council of Europe, and OECD.
Figure 3. Example of a comprehensive list of risk indicators for checking asset declarations
Sources: CSD, based on The World Bank, Automated Risk Analysis of Asset and Interest Declarations of Public Officials: A Technical Guide, 2021; Council of Europe, Practitioner Manual on Processing and Analysing Income and Asset Declarations of Public Officials, 2014; Poltoratskaia, V., Use of Asset Declarations and Procurement Data to Identify Risk, Presentation at the workshop “Developing Risk Indicators for Assets Declaration and Public Procurement Data”, Government Transparency Institute / Central European University, Armenia, Yerevan, 15-16 June 2022; OECD, Verifying Asset Declarations in Greece: Guidelines for Standard Procedures and Oversight Bodies, 2017.
Imposing sanctions through cooperation with other authorities
As a next step, the SEE-9 countries submit information about the uncovered irregularities to other relevant (e.g. tax and revenue) authorities, and to the prosecution. The follow up investigations could trigger criminal and administrative, and in some countries also civil procedures and sanctions. The sanctions in the region are usually financial (an administrative fine) and/or disciplinary,73 unless the inconsistency in the asset reporting is related to another criminal activity which triggers a separate investigation.74
Limited size and range of sanctions
The size and severity of sanctions, especially the ones imposed by the checking institution, are extremely low in all SEE-9 countries and do not deter PEPs from violating the rules. The fine for late or non-submission of asset declarations usually ranges between EUR 200 and EUR 1,000 which leads to the practice of the PEP to pay the fine and still not submit a declaration. For example, in BiH, the smallest sanction of EUR 150 was imposed in all recorded cases, despite the legal possibility for increasing the fine up to EUR 1,500. In North Macedonia, the fines applied in practice range between EUR 300 and EUR 500, although the maximum legal amount is EUR 1,000. In Romania, the fines for late submission or not declaring assets are between EUR 10 and EUR 400, which has no practical efficiency as law infringement deterrent. The same range of small and inefficient fines applies to institutions or civil servants in Romania who do not fulfil their legal obligations regarding collecting and publishing asset declarations or for not applying issued disciplinary sanctions.
Table 3. Legal limitations on the size and range of sanctions imposed by the checking institution
Source: CSD based on information from Albania: Law No. 9049/10.04.2003, Criminal Code of Albania (1995, amended up to 2021); BiH: Central Election Commission of BiH, Report on the implementation of laws within the competence of the Central Election Commission of BiH in 2020; Bulgaria: Anti- corruption and Illegal Assets Forfeiture Act, 2018; Croatia: The Act on the Prevention of Conflicts of Interest, 2011; Hungary: EuroPAM, Financial Disclosure – Hungary, 2020; NetJogtár: 40/2016. (XII. 30.) MvM instruction on certain rules concerning the obligation to declare assets, 2020; NetJogtár (2020): 2007 CLII. law, NetJogtár (2020): XXXVI of 2012 law about the National Assembly; North Macedonia: State Commission for Prevention of Corruption; Romania: Europam’s “financial disclosure” Romania; Serbia: Website of the Anti-corruption Agency (ACA); Montenegro: Website of the Agency for the Prevention of Corruption.
Sanctions are also imposed by disciplinary panels or committees, but the positive result from these measures could also be brought into question.75 In Croatia, a non-submission or incorrectly filled declaration results in only EUR 1,062 being retained from the salary, which is executed in eight equal consecutive monthly installments of EUR 133 – a negligible amount. In Hungary, the sanctions are only administrative.76 Moreover, PEPs in all countries except Croatia, Serbia, and Hungary do not face dismissal if they do not submit the declarations. Bulgaria is the only country which foresees additional increased fines for consecutive incompliance to asset declarations.77 This good practice is recommended to be replicated by the rest of the SEE-9 countries.
Table 4. Sactions imposed
Source: CSD based on information from Albania: HIDAACI Annual Report 2021 and website; BiH: Central Election Commission of BiH, Report on the implementation of laws within the competence of the Central Election Commission of BiH in 2020; Bulgaria: Annual Reports on the activities of CACIAF 2018-2021; Website of the Inspectorate to the Supreme Judicial Council; Montenegro: Data provided by the Agency for the Prevention of Corruption; North Macedonia: State Commission for Prevention of Corruption Annual Report 2021.
The most stringent sanctions are imposed by the courts, and in some cases – by tax authorities:
- In Albania, a court could impose a fine or up to six months of imprisonment for non-declaration, as well as a fine and imprisonment up to three years for hiding or false declaration of assets. HIDAACI also has the authority to impose fines.
- In Bulgaria, the courts could impose a prison sentence of up to three years or a fine between EUR 50 to EUR 150, for concealing and withholding the contents of a declaration. In proven cases of passive and active bribery, the prison sentence is extended up to ten years.
- In Croatia, the court could impose a fine of EUR 664 to EUR 6 640 for officials who enter into employment with a legal entity with which they had a business relationship with during their term in office, and prohibiting the performance of a certain activities for a period of one year. A fine of EUR 6,640 to EUR 132,802 is imposed on a legal entity, which employs a person who is a public official.
- In Hungary the tax office could impose tax-related sanctions based on its own investigations.
- In North Macedonia, the Tax authority could place a tax of 70% over any income that cannot be sourced.
- In Romania, the National Integrity Agency (ANI) can issue administrative fines for late submission of asset declarations, however other types of sanctions are issued by courts of law, the Parliament, the Prime-Minister or the President, the Constitutional Court, the Superior Council of the Magistracy, the prefects, or disciplinary committees within each institution. The reduction of the salary could range from 5% to 20% for a period of one to six months, while more severe, including criminal and administrative cases, may result in confiscation of the illegally gained wealth (about EUR 400,000 in 2021), resignation and termination of employment, and interdiction to hold office within an institution for three years.
- In Serbia, the PEP could face criminal charges once the 15-day notice period is over. For missing or wrongfully filled declaration PEPs also face the risk of imprisonment (between six months and five years imposed by the court), confiscation of illegally acquired property, or applying a special fine for gaining of illegal wealth (EUR 850 – EUR 1,275 for public officials and EUR 850,000 – EUR 1,701,152 for legal entities).
Limited capacity of the checking authorities
The lack of comparable data hinders the comparative analysis among all SEE-9 countries regarding the workload of the checking institutions, as well as other relevant indicators. Some annual reports by the checking institutions present data on the number of persons, while other – on the number of declarations.78 In North Macedonia, the State Commission for Prevention of Corruption (SCPC) is obliged to keep a register of elected and appointed officials, however in some cases the other institutions do not report their new appointments. Thus, SCPC is forced to review the national Official Gazette, as well as about 80 municipal level official gazettes, in order to update its list of officials. However, the gathered information is still not fully comprehensive and reliable. In addition, not all PEPs are obliged to submit declarations or be checked each year – SCPC had 7758 active records, but received only 2006 declarations of people who were appointed, left office, or had substantial increase in wealth in 2021. In Serbia and Hungary, there is no information available on the number of people obliged to submit asset declarations.
Still, some basic conclusions could be drawn based on the available data:
- The total number of employees at the checking institution varies between 20 and 300 people.
- The officials directly responsible for checking asset declarations vary between 4 and 45.
- The number of persons obliged to submit declarations is the greatest in Romania and the smallest in North Macedonia and Croatia.79
- On average, around 12% of the legally obliged persons submitted their asset declarations with a delay or failed to submit at all.
- The share of persons who have been checked by the relevant authority through a secondary/detailed check varies between 8% and 20%, except in Montenegro (0.32%), Romania (0.44%)80 and Croatia (1.19%).
- Between 6 and 30 persons are checked in detail by one inspector.
Table 5. Submitted and checked asset declarations, and persons referred for penalties
*The data refers to the number of declarations, not persons
Source: CSD based on information from Albania: HIDAACI Annual Report 2021 and website; BiH: Central Election Commission of BiH, Report on the implementation of laws within the competence of the Central Election Commission of BiH in 2020; Bulgaria: Annual Reports on the activities of CACIAF 2018-2021; Website of the Inspectorate to the Supreme Judicial Council; Croatia: Conflict of Interest Commission, Annual report 2020; Montenegro: Data provided by the Agency for the Prevention of Corruption, based on 2021 Verification Plan and Rulebook on Systematization and Organization of Work Positions; North Macedonia: State Commission for Prevention of Corruption Annual Report 2021; Romania: ANI, Annual Report, 2021 and request for information no. 10762/04.05.2022 sent to ANI.
Notes: The number of basic/initial checks could be greater than the number of persons who are obliged to submit declarations, due to different purposes of submitting – re-appointment, taking office, annual obligation, etc.
- Bulgaria: The number of persons who are obliged to submit declarations is higher than usual due to multiple elections and institutional staff changes in 2021. No 2021 data on CACIAF’s staff. There have been 339 trained employees in 2021, and 377 employees in 2019; 883 declarations submitted with delay, resulting in 679 acts for administrative violations. In addition to the 31 persons informed about discrepancies by CACIAF, there are also 14 penalty orders issued by the Supreme Judicial Council Inspectorate.
- Croatia: 260 issued invitations to submit the declaration. In 3 cases fines were not imposed because of the impossibility of execution of a sanction on ex-officials.
- North Macedonia: Data on number of persons obliged to submit refers to those that had such obligation in 2021. Total number of records (current PEPs) is 7758. Not all PEPs are obliged to submit declarations and to be checked each year.
- Romania: The data on the share of persons checked through a secondary/detailed check should be interpreted with caution, as Romania has the largest number of assets and interest disclosures’ deponents.
Another issue presents the selective approach when determining who should be investigated and punished, as well as the practice of utilizing very mild (and thus – ineffective) sanctions. For example, in the majority of the cases, the misdemeanor court in Montenegro determines less severe penalties than the Agency for Prevention of Corruption, in accordance with the Law of misdemeanors.81 Similarly, relatively small, misdemeanour penalties are applied in North Macedonia, even when the anti-corruption bodies refer the case with a recommendation for a more severe punishment.
Immunities and publishing of sanctioning decisions
The immunities generally do not prevent investigation and prosecution. Even in countries where immunity laws apply (e.g. Albania, Bulgaria, Bosnia and Herzegovina), in cases of high public interest the immunity could be withdrawn. Serbia however presents a specific case. According to the Constitution of Serbia and multiple laws, the members of parliament, the president of the republic, and the ombudsman enjoy immunity from legal prosecution. Thus, multiple civil society and international bodies, including GRECO’s 2022 report, call for removing of the immunities from Government members when it comes to corruption-related crimes.82
In addition, the sanctioning decisions are not being published online in Albania, as well as in Hungary.83 In BiH, the public information includes the number of sanctioned officials without their identity.84 The names of disclosed sanctioned people in Bulgaria are limited to the servants in the Judicial System and the Members of Parliament. Thus, the only good practices of full sanctioning decisions’ transparency remain Croatia,85 Montenegro,86 North Macedonia,87 and Serbia.88
Avoidance of (severe) punishment
There are four key methods, observed in the SEE-9 countries, for avoiding punishment or at least reducing its severity. These include:
- Omitting to declare assets, or under-evaluating the declared assets;
- Influencing the public authorities to drop the investigation/prosecution and/ or to replace a severe penalty (e.g. imprisonment) with a looser sanction (e.g. a fine);
- Retroactively changing the asset declaration’s document, so that the irregularity no longer exists on paper;
- Changing the legislation so that certain types of public officials (or their relatives) are not obliged to declare assets, company or family relations.
Serbia once again presents a particular case in that regard. Despite the fact that the country has a rigid penalty system, many cases of false disclosure, concealment and undeclared assets, resulted in failed prosecution cases. This is due to the legal possibility for public officials to avoid criminal charges by paying money to charity organisations, weakening the prosecution efforts upon the Principle of Opportunity.
Box 8. The Principle of opportunity: avoiding fines and prison by funding charity organizations
Research by the Serbian investigative media showed that the Prosecutor’s Office “saved” 137 public officials from serving a prison sentence by using the principle of opportunity. This principle envisages that the accused could avoid criminal charges by paying money for humanitarian purposes, compensating for damages, performing community work or any other service ordered by the prosecutor. The principle could be applied in cases of all criminal charges where the prescribed punishment by law is a financial fine or a prison sentence of up to five years.89
Loopholes in the sanctioning process
The analysis above and the expert opinion provided by the R2G4P partners reveal several long-standing loopholes in the process of sanctioning irregularities in the asset declarations.
Figure 4. Long-standing loopholes in the sanctioning of irregularities in the asset declarations
Source: Center for the Study of Democracy
Typical schemes of non-compliance
Types of assets often omitted from asset declarations
The most common types of violations observed in SEE-9 concern the exhaustiveness and accuracy of the declared information. This includes: failure to declare own assets; failure to declare assets of family members; evasion of declaring conflict of interest (incompatibility between public service and private company ownership), as well as incompatibility between declared and actual value of assets. In particular, the loopholes concern non-reporting of:
- assets owned by companies where the PEP is a shareholder
- shares in companies where the PEP is not a majority shareholder
- different valuables such as expensive watches, jewelry and other physical possessions (for which the definition of ‘assets’ is non-definitive or unclear)
- used items which are not in legal possession
- loans (especially personal)
- services of high price
- assets owned prior to entering office or history of ownership
- expensive trips and holidays
- cryptocurrencies
Need of detailed checks of family members, friends and associates
A very common form of hiding assets is for the PEP to transfer them to family members or close relatives, and/or for the PEP to facilitate the “generation” of the illicit wealth by ensuring preferential treatment or other competitive advantage to the extended family. However, as of 2022, only assets owned by spouses and cohabitants (and sometimes children) need to be declared and are consequently checked by the responsible body in a majority of the analysed countries. In Romania children of PEPs are not included in the asset declarations after the age of adulthood, making it harder to identify conflict of interest or potential hidden assets’ ownership. Parents are checked in about half of the countries. This relatively narrow scope of family members provides ample opportunities for the PEPs to transfer assets to siblings, cousins, brothers, and sisters-in-law, as well as the PEP’s friends. A clear example is the exclusion from the mandatory asset declaration of close personal ties of public officials – i.e. kumstvo – in North Macedonia, which represents the most common form of private-turned-to-business relationship in the country. The membership in associations, clubs and other organizations (e.g. hunting lodges, war veterans’ associations, etc.) is also a pre-condition for conflict of interest and/or illicit transfer of PEP’s assets.
Table 6. Which family members are declared and checked?
* Only if living in the same household
** In Albania parents declare assets if the subject is part of the justice system or upon request of the Inspector General.
*** In BiH, the scope of people covered by asset declarations is extended to household members to whom the declarant has legal maintenance obligation. Conflict of interest restrictions and checks usually cover a wider range of related persons.
**** In Serbia, public officials are obliged by law to notify the Anti-corruption Agency of all “connected persons”, however in practice these are not always declared and checked.
Source: CSD based on information from Albania: Law no. 9049 from 10 April 2003 on the declaration and control of assets, financial obligations of elected officials and some public servants; Bulgaria: Anti-Corruption And Asset Forfeiture Act, 2021; BiH: Election Law, 2001; Croatia: Conflict of Interest Prevention Law, 2021; Hungary: Act XXXVI of 2012 on the National Assembly; Montenegro: Law on Anticoruption from 2014, amended 2017; North Macedonia: Law on Prevention of Corruption and Conflict of Interest, 2019; Romania: Law no. 176/2010 on the integrity of exercising public positions and offices, amended 9 July 2020; Serbia: Law on preventing corruption of 21 May 2019, amended 7 February 2022.
Box 9. Failure to declare family members’ commercial activities and/or assets
In 2019, journalists of Zurnal.info discovered90 that the private company Termo Metal resist d.o.o. Sarajevo (TMR) is owned by the family members of the Prime Minister of the Federation of BiH and the Minister of Energy, Mining and Industry of the FBiH. The prime minister has failed to enlist this company into his asset declarations. The company is reported to have had the long- standing business arrangements with Pretis d.d., a public company owned by the Government of the FBiH. The brother of the director of Pretis d.d. is the director of the TTU Energetik, a public company owned by Elektroprivreda BiH. Their family relationship has not been stated in any asset declaration. Nap.ba claims91 that Pretis d.d. was accumulating enormous debts for years, however government cash injections secure its liquidity.92
According to the investigation conducted by BIRN, a private company represented by Branko Stefanovic, father of then Serbian Interior Minister Nebojsa Stefanovic, who served as a Minister of Defence until 2022, has been buying weapons from ammunition company Krusik at preferential prices, below the cost of production. The investigation concluded that by selling weapons at a cost less than that of production, the state both ensured that a private company, represented by the relative of a high-ranking politician, benefited and also caused an economic loss to the Serbian state.93
The company AGTCC Hotel Management received the status of “strategic investor” for the construction of a five-star hotel in Dhërmi from the Strategic Investment Committee, led by the Prime Minister of Albania. The company is owned by the longtime partner of the brother of Europe and Foreign Affairs Minister. Her company acquired the right to use the land on the coast through an agreement with the company AG.TCC Sh.pk – 100% owned by the former Socialist MP and at the same time husband of the minister.94
The legislations in Bosnia and Herzegovina, Hungary and Montenegro differ from the rest of the region, as family members are subject to submit their own assets declarations instead of being included within the public officials’ document and are subject to the same contents and fines. Albania represents a middle-case, as the regulations impose family members to submit their own asset declarations only if they have their own separate property. In case of a joint property with the subject, the public official declares it.95 In Hungary the declarations of spouses, cohabiting parents, children and other individuals are not published. Thus, the Committee on Immunity, Incompatibility and Mandate Control is not able to receive signals and check the immediate family’s assets. Several selected cases of a failure to declare family members’ commercial activities and/or assets are presented in Box 9, as an example on the way these schemes operate, their negative consequences, and the need for counter-measures.
Data availability
None of the SEE-9 authorities provide a machine-readable and downloadable in bulk open database, containing all assets declarations received. All countries (except Albania) provide access to public registers and portals where assets declarations are published and authorities are available for consultation. The information contained in these declarations, however, needs to be scraped or downloaded on case-by-case basis for each public official, complicating the process of checking and analysing irregularities. The analysed countries could be split into the following categories:
- No database. The outlier in this respect is Albania, as the High Inspectorate of Declaration and Control of Assets and Conflict of Interest (HIDAACI) does not provide any link to a public database. There is a register of Requests and Answers of the High Inspectorate where answers to official requests are published.
- Hand-written photocopies. The next problematic country is Hungary, where the asset declarations are included in a searchable database, however the documents are hand-filled photo-copies, and hence – not machine-readable. Romania experiences similar issues as many declarations have been submitted in hand-written format up to 2021, before the obligation to submit machine-readable PDFs entered into force in 2022. From 2023, only declarations with digital signatures will be accepted, except for candidates during the elections.
- XML format (available only on case-by-case basis). This format is used by the majority of the countries – Bulgaria, Bosnia and Herzegovina, Montenegro, North Macedonia, and Serbia. However, despite being machine-readable, the information cannot be downloaded in bulk, as a full database. Thus, any big data analysis will require for the information to be scraped or copied directly from the webpage. Croatia provides a hybrid case, as the declarations are available in both XML, JSON and PDF formats.
The lack of digitized databases obstructs not only the checking and investigating procedures of the respective institutions dealing with them, but also representatives of civil societies and journalists who analyze and investigate independently publicly available data. Fostering integrity and holding powerful actors accountable requires civic engagement in addition to the administrative responsibility of the respective authorities. Accessible, user-friendly and transparent databases with publicly available information would allow the cooperation between civil society and institutions, where civic actors and researchers fill the gaps in the existing procedures and capacity.
Table 7. Data availability, access and reliability
Country
Link to asset declarations register
Download options
AL
Does not exist
Does not exist online, there is a possibility to submit an official request for information
HU
Case-by case, in PDF format (hand-written photocopy)
HR
Case-by-case, in XML format
MNT
Case-by-case, in XML format
Source: Center for the Study of Democracy based in information from websites of asset declaration registers – Albania: Website of High Inspectorate of Declaration and Control of Assets and Conflict of Interest; Bulgaria: Website of the Commission for Combating Corruption and Confiscation of Illegally Acquired Property (KPKONPI); BiH: Website of the Central Election Commission of Bosnia and Herzegovina; Website of the Agency for the Prevention of Corruption and Coordination of the Fight against Corruption; Croatia: Website of the Conflict of Interest Commission; Montenegro: Website of the Anticorruption Agency; Hungary: Website of the Committee on Immunity, Incompatibility and Mandate Control (CIIMC); North Macedonia: Website of the State Commission for Prevention of Corruption SCPC; Romania: Website of the National Integrity Agency (ANI); Serbia: Website of The Anti-Corruption Agency (ACA).
On the positive side, it should be noted that the State Commission for Prevention of Corruption (SCPC) of North Macedonia plans to introduce a tool for electronic submission of machine-readable assets and interest declarations in 2023. HIDAACI in Albania has received a technical assistance from USAID to improve the system and create the opportunities for a full and free access to the declarations for the general public in 2023.96
National focus: pressing issues in the SEE-9 countries
The SEE-9 countries have a long and challenging way ahead of them on the road of developing the necessary tools for efficient identification and tracking of ill-gained wealth – inter-connecting public registers, setting red-flags and indicators, creating electronic risk assessment platforms, improving the legislation and establishing procedures for national and cross-border cooperation, increasing the size of the fines and the severity of other penalties related to administrative and criminal law violations. In order to achieve a positive impact, each county is recommended to set up its own comprehensive strategy on the steps and actions needed to implement these reforms, thus turning the asset declarations into an efficient corruption prevention and risk assessment instrument. Table 8 highlights some of the most pressing issues observed in each country, where further refinement of existing procedures is needed. While not exhaustive, the list aims to provide a starting point and support the creation of future action plans.
Table 8. Country-specific issues observed in the SEE-9 countries
Albania
Bulgaria
- There is no access to the declarations submitted by public officials.
- The checking institutions do not start any proceedings on the basis of media-based suspicions.
- Names of the sanctioned high-public officials are not published.97
- Immunities prevent investigation and prosecution.
- The asset declarations are scattered across the websites of several public bodies.
- Public officials (apart from the higher officials in the justice system) are allowed to receive other types of income.
- Some PEPs are obliged to declare only income from other activities different than the public position.
- There is no gift register.
Bosnia and Herzegovina
Croatia
- Public officials often do not submit asset declarations, and the low fine (EUR 100 – EUR 1,500) does not encourage them to do so.
- The legal obligation on data validation is limited to ensuring that declaration is not submitted empty.
- The asset declaration includes “personal assessment” of the value for immovable and movable assets.98
- The period for serious assessment of asset declarations is too short.
- Spouses and the cohabitants are not obliged to inform their partners about their own possessions.
- The asset declaration does not show the name of the spouse or cohabitant.
- The authorities do not have efficient procedure to check how someone obtained property before taking office.99,100
Hungary
Montenegro
- Checks are performed only if a third party provides a proof of irregularities.101
- Assets of family members living in the same household must be submitted, however the information is not made public, preventing civil society and media investigations.102
- Post-employment regulation only prohibits (for two years) majority ownership in companies in the financial sector and only restricts employment in organizations that allocate public or EU funds. Thus, PEPs can work for state-owned enterprises (SOEs) and other large companies right after the end of their term in office.103
- The asset declarations are almost always hand- written photocopies that cannot be processed automatically.104
- The Agency for Prevention of Corruption applies a formalistic approach towards checking asset declarations, which does not constitute a sufficient tool
for control. - There is no procedure for checking the property of officials acquired before 2016 (as the Law on the Prevention of Corruption came in force on 1 January 2016).105
- When registering companies, the tax administration does not record whether owners / founders are public officials.
North Macedonia
Romania
- Asset declarations are not submitted annually.
- The final and up-to-date list of public officials is not available to the State Commission for Prevention of Corruption (SCPC) due to failures regarding the notifications on appointments.106
- The Gift Catalogue is rarely used.
- Delayed setup of software solution which ought to interconnect multiple public bodies’ registers (initially planned to be introduced at the end of 2019).
- Need to improve the risk-based methodology for selection of PEPs to be checked.
- Lack of cross-border information sharing.
- The National Integrity Agency (ANI) has high workload (estimated an average of 77 files checked per integrity inspector in 2021).107
- Extended family and friends of the PEP can bid in tenders where the PEP can exercise decision-making power.
- Members of the legislative and executive branches are legally allowed to be shareholders in public and private companies, so long as they do not occupy decision-
making positions.108 - The law does not prevent civil servants from overseeing private companies that they used to work for before joining the civil service.109
Serbia
- Since February 2021, a smaller number of persons is obliged to declare assets110.
- The cadaster is not updated regularly, hindering the annual checks of asset declarations.111
- Most criminal cases end up with settlements and financial fines, while the statute of limitations expires after five years.112
- The accused public officials can avoid criminal charges by paying fines to charity organisations or doing community work.113
Source: Center for the Study of Democracy
Good practice examples
In addition to the legal and procedural loopholes described above, there are also some good practices, that could serve as an inspiration and example to the rest of the SEE-9 countries. These include the use of electronic platforms which provide automatic integrity warnings, cross-checks in multiple registers, gathering of information on the ultimate beneficial owners, increasing the scope of people obliged to declare assets, raising awareness, expanding the authority and role of other public bodies in checking suspicious circumstances and filing criminal charges, as well as setting procedures for cancelling immunities.
Cross-checks, increasing the frequency of declaration and raising awareness (Croatia)
Croatia is among the countries that could provide many good practices and measures, despite some remaining procedural gaps. For example, asset declarations are verified in detail for possible inconsistencies. The Conflict of Interest Commission (CIC) cross-checks the data in other registers for assets that are missing from the declaration (e.g. business register, property register, land register, tax administration’s database, court registries, etc.). In some cases, the CIC requests specific data from other public bodies.114 The new legal base, voted in 2021 and in force since the beginning of 2022, obliged at least 1,500 government officials to submit their property cards to the CIC for the first time. In addition, by the end of January 2022, about 2,400 current government officials also had to submit their property cards as part of the new annual procedure (the previous legal base obliged them to submit only at the beginning and end of their term).115 Immunities do not prevent investigation and prosecution by the CIC, and for all responsible officials there is a possibility of cancelling immunity. Individual decisions on sanctions are published on- line.116 A significant progress has also been made in raising public awareness of the dangers of neglecting conflict of interest issues. This has been achieved with the systematic preparation of educational and informational materials117 by the CIC, and as a result of CIC’s training programmes in various parts of Croatia on this topic (held in 2013-2022).118
Electronic submission platform, providing integrity warnings (Romania)
The National Integrity Agency (ANI) of Romania experiences high workload, due to the physical submission of declarations (the number of people that need to submit asset and interest declarations is estimated to be around 300,000 for 2021). However, it is expected that this will change with the increased use of the e-DAI electronic submission platform, introduced on 1 January 2022.119 From this date, the National Integrity Agency no longer receives declarations of assets and interests in paper format. All categories of personnel in the public system who have the obligation to submit declarations of assets and interests are able to do so either with a holographic signature or certified with a qualified electronic signature.120 In order to facilitate the process, the public institutions or units to which these persons belong to, have the obligation to provide depositors with certificates qualified for electronic signature. By June 2022, 340,000 people registered as depositors in the e-DAI platform, 7,883 institutions, authorities or public companies have at least one account creat- ed in the platform, and 441,067 documents (asset and interest declarations) have been sent electronically to the Agency. The information entered in the e-DAI module will allow integrity inspectors to issue reports and apply sanctions, if required, within a very short timeframe, since mailing, physical storage and manual verifications will be eliminated. An integrity inspector within ANI has been appointed to respond to depositor’s queries regarding the electronic submission of the declarations, supported by a chatbot (e-DAI Virtual Assistant) operational since May 2022.121
In addition, ANI uses a special mechanism (“Prevent System”) for preventing conflict of interest in public procurement, set up by Law 184/2016,122 which interconnects several national datasets to produce an integrity warning. These datasets include the national public procurement platform (SICAP), population records, and Commercial Registry records. The system can be expanded further, although lack of inter-connectedness and inter-operability of digital records is a limiting factor. Asset declarations are archived after three years but are not removed from official records. Thus, all declarations ever submitted can still be found on ANI’s portal.123
Empowering the Tax Administration to investigate property changes and illegally obtained assets in the country and abroad (Serbia)
With the Law on Determining the Origin of Property and Special Tax, adopted in 2020 and in force since 2021, the Tax Administration Unit of Serbia was entrusted with a significant role in relation to the asset declarations.124 In particular, the Tax Administration received the power to investigate property changes of individuals and legal entities, including public officials. It can start a preliminary procedure and a control procedure, if it identifies a difference exceeding EUR 150,000 between the reported assets and reported income for the last three years.125 In case the preliminary and control procedures result in uncovering evidence of illegally acquired property or assets in the country and abroad by public officials and individuals, the Unit files criminal charges.
Obligation to declare ultimate beneficial owner (Albania)
The Albanian Parliament adopted Law no. 112/2020 on “Beneficial Owners’ Registry”, which entered into force on 28 August 2020. The law obliged legal entities (including non-governmental organizations) to declare their ultimate beneficial owner. Non-compliance with this obligation within the statutory deadline is subject to penalties amounting to ALL 150,000 (EUR 1268) for individuals, and ranging between ALL 250,000 (EUR 2113) to ALL 500,000 (EUR 4227) for legal entities. The penalties are doubled in case the contravention is repeated.126 The legal change improved the procedure for checking the declarations of assets and conflict of interests since 2020. Part of the audited declarations were related to officials of the justice system as a result of Judicial Reform and Vetting.
