In modern Ukraine, entrepreneurs face not only economic difficulties, but also constant pressure from law enforcement agencies, which becomes one of the main obstacles to business development. Regular inspections, searches, seizure of property, blocking of bank accounts and their tracking, increasing tax pressure – these actions, at first glance, are aimed at protecting the economy, but in practice often lead to a complete paralysis of business activity.
Law enforcement officers use a wide arsenal of methods to put pressure on businesses, forcing owners to spend resources fighting for survival instead of growing their companies. Tracking of financial transactions and accounts, endless interrogations, confiscation of equipment and blocking of working capital are not exceptions, but everyday reality for many entrepreneurs. All this leads to mass closure of businesses, loss of jobs and serious deterioration of the country’s investment climate, which repels both domestic and international investors.
Law enforcement pressure remains a top business complaint
Entrepreneurs are currently facing major challenges that hinder business recovery and growth: the instability of the domestic situation, unpredictable government actions that can negatively affect the business environment, the shortage of skilled labor and the low level of solvency of consumers in the domestic market. These factors create serious challenges for businessmen who seek stability and predictability for the development of their companies.
However, excessive pressure from law enforcement agencies, which is carried out even in extremely difficult wartime, when entrepreneurs are trying to survive in the economic crisis, was and remains too painful. Instead of supporting business at this critical moment, the government is acting in the opposite direction. Such actions only complicate the functioning of enterprises that play a key role in preserving jobs and supporting the economy during wartime.
According to the latest report of the Council of the Business Ombudsman, in the first quarter of 2024, complaints about the actions of law enforcement officers were once again in the first place among the claims of entrepreneurs. According to the report, complaints about the actions of law enforcement agencies not only did not decrease, but also remained at a consistently high level. 14% of all complaints by entrepreneurs relate specifically to illegal actions by the police, the prosecutor’s office, and the Bureau of Economic Security (BEB). More than 300 appeals to the business ombudsman — and almost every sixth of them concerns pressure on business.
The pressure on business in the form of numerous inspections, detentions, blocking of accounts and raids has become a systemic problem. Entrepreneurs face law enforcement officers using their powers to harass businesses, often in violation of the law. Exemplary cases of pressure on large companies and medium-sized enterprises only confirm the trend – the larger and more profitable the business, the greater the risks for its activity.
In 2024, despite numerous reforms and initiatives, such as new parameters for dividing business into “white” and “gray” invented by Danyla Hetmantsev, the main problem is that law enforcement agencies do not have sufficient control and responsibility for their actions. Although the Bureau of Economic Security is being reformed, law enforcement officers, including the SBU and the Prosecutor’s Office, continue to perform economic cases, which creates duplication of functions and additional opportunities for abuse.
Constant inspections and criminal cases force entrepreneurs to spend resources not on the development of the company, but on legal support and protection of their interests in courts. At the same time, many enterprises are forced to operate under conditions of constant stress due to possible confiscation of property, blocking of accounts and other actions by security forces. This not only worsens the work of enterprises, but also destroys trust in the system. And most importantly, it creates artificial barriers for attracting foreign investments, because international partners do not want to work in a country where there are no guarantees for business.
In particular, in the first quarter of 2024, offenses by law enforcement officers, such as extortion of bribes or raiding attacks, were frequent reasons for appeals to the business ombudsman. Investors are afraid of losing money, and Ukrainian entrepreneurs are afraid of business stability.
Criminal cases against business: statistics that are impressive
Law enforcement officers in Ukraine have found a convenient tool to put pressure on entrepreneurs — criminal proceedings, which are often groundless. Almost 20% of cases against businesses do not have any legal basis. This means that entrepreneurs are forced to spend huge resources on fighting illegal actions by law enforcement officers, which blocks business development, scares away investors and undermines confidence in the system.
In January 2024, the President of Ukraine tried to solve the problem with his decree, approving the decision of the National Security and Defense Council on urgent measures to ensure economic security during martial law. One of the main initiatives was the introduction of a moratorium on business inspections by law enforcement agencies. However, as practice shows, this measure had a limited and temporary effect.
According to the report of the General Prosecutor’s Office, after the end of the three-month moratorium, 77% of criminal proceedings related to economic activity do not reach court. These are almost 5,000 cases that actually remain without a result, but at the same time continue to block business operations. Thus, for 1218 proceedings, a decision was made to close them due to lack of evidence. In other words, these cases had no real basis at all, which indicates a deep systemic problem in law enforcement agencies.
Criminal proceedings are not just numbers. These are real businesses that are losing profits, can’t grow, are forced to downsize, or even shut down. At the same time, law enforcement officers continue to use the entire arsenal of pressure tools: searches, seizure of bank accounts, seizure of property. This often happens in cases where no suspicions have been raised at all. Thus, the business is effectively paralyzed without any hope of protection.
Legislative innovations: the path to impunity
At the end of 2023, the Verkhovna Rada of Ukraine adopted a law that abolishes time limits on the investigation of criminal proceedings. Previously, investigators had only 12 months to investigate minor crimes and 18 months for serious ones. Now this restriction has been lifted, which allows investigators to continue to drag out the proceedings for years, conducting endless searches, seizure of property and blocking of accounts.
This creates a situation where the business is in a constant state of uncertainty and fear about the future. Entrepreneurs cannot plan their development, because at any moment the law enforcement officers can come with new checks or calls for questioning. Moreover, procedural actions are often delayed without any progress. This leads to the fact that cases are not brought to court, but also not closed, leaving the business trapped in constant legal manipulations.
Bureaucracy and corruption
In addition to procedural problems, Ukrainian business also faces corruption among law enforcement officers. As legal practice shows, searches and arrests are often used as a tool for extorting bribes. Warrants to search or seize property are typically issued by courts without proper review, leaving businesses vulnerable to manipulation by investigators.
Moreover, entrepreneurs complain about the illegal confiscation of property, which is then not returned. This applies to documents, equipment, transport and cash. Without this property, the business cannot work, which creates additional pressure on entrepreneurs and forces them to seek “non-conflict” solutions with the investigators.
How to overcome the problem
One of the possible solutions to business problems is to establish clear legal restrictions on the actions of law enforcement agencies in economic matters. Currently, the legislation remains too vague, allowing law enforcement officers to use their powers at their own discretion. It is also necessary to ensure a full-fledged reform of the BEB, so that this body gets a monopoly on the investigation of economic crimes, and other law enforcement structures lose the opportunity to interfere in the business environment.
Another important component is the protection of the rights of entrepreneurs in the judicial system. Currently, most enterprises do not have the opportunity to promptly protect their interests due to the delay in the processes. This only contributes to the further abuse of rights by security forces. In this regard, judicial control should be strengthened – courts should carefully check requests for searches and seizures of property in order to avoid formal and illegal decisions.
It is also necessary to implement real control over the actions of law enforcement agencies. Independent institutions should be empowered to monitor the actions of investigators and prosecutors in order to reduce the number of baseless criminal proceedings.
Equally important is the return of time limits on investigations. It is necessary to restore the deadlines for investigations so that entrepreneurs can understand how long the proceedings can last and have certainty about their activities.
In addition, transparency should be introduced in interaction with law enforcement officers. Businesses should have access to information on the status of investigations to avoid uncertainty and delays. At the same time, increasing the responsibility of investigators and prosecutors is a very important step. Law enforcement officers must be held accountable for wrongdoing in order to avoid abuse of power.
Unfortunately, at the current stage, the adopted legislative changes will not have a significant impact on reducing the pressure on business. The reason for this lies in the lack of real political will on the part of the authorities to effectively reform not only the Bureau of Economic Security, but also the entire law enforcement system. Without fundamental changes in approaches to law enforcement, new laws and initiatives risk remaining only on paper, without affecting the daily life of Ukrainian entrepreneurs.
Therefore, despite numerous reforms and legislative changes, the situation with pressure on business in 2024 remains critical. Without real changes in the activity of the law enforcement system, legislative changes and increased control over the activities of law enforcement, entrepreneurs will continue to suffer from groundless criminal proceedings and corruption. The business climate in Ukraine will not improve without a clear and transparent legal system that will ensure the protection of the rights of entrepreneurs. At the same time, for a real change in the situation, not only legislative initiatives are needed, but also active actions at all levels of government aimed at reducing arbitrariness and ensuring the protection of business rights. Only then will it be possible to hope for an improvement in the business climate and restoration of trust on the part of both Ukrainian entrepreneurs and international investors.
If the necessary measures are not applied, Ukrainian businessmen will continue to massively close their enterprises within the country and transport them abroad, which will contribute to the development of the economies of other countries. Without the creation of a favorable business climate and protection from illegal pressure from law enforcement agencies, entrepreneurs will seek safer conditions for conducting their activities in neighboring countries or international markets. The loss of businesses, investments and jobs within Ukraine will further weaken the already weak national economy, undermining its competitiveness and post-war recovery.
Oksana Ishchenko
