Ukrainian security investigating deputy governor – media reports

Ukrainian security services and prosecutors are investigating the country’s second most senior central bank official for commissioning a forensic audit, a Ukrainian newspaper has said.

The Kyiv Post said on March 18 that National Bank of Ukraine’s first deputy governor Kateryna Rozhkova was under investigation by three separate agencies. It said that a leaked document showed the Security Servce of Ukraine, the State Investigation Bureau and the Prosecutor General’s office were investigating the NBU’s Rozhkova. 

The newspaper said that the three agencies were compiling a criminal case against Rozhkova for her work in a fraud investigation at the country’s biggest lender, PrivatBank. The lender was nationalised by Ukraine’s then-president in December 2016 on NBU advice, after officials discovered what they said was massive fraud.

The Kyiv Post is an English-language Ukrainian newspaper with a reputation for investigative journalism. The Security Service of Ukraine, the State Bureau of Investigation and the Prosecutor-General’s office did not reply to questions sent by Central Banking.

The Kyiv Post said the agencies were probing the decision by senior NBU officials to share information on PrivatBank with four specialist firms. They were forensic firm Kroll, consulting company AlixPartners, and law firms Hogan Lovells and Asters.

Kroll wrote a report in 2017 for the NBU on PrivatBank. The NBU said Kroll found that the two co-owners of PrivatBank, Ihor Kolomoisky and Gennady Bogolyubov, had stolen around $5.5 billion from depositors.

The NBU has not commented publicly on the newspaper report, but Rozhkova made an angry statement on social media. Writing in Ukrainian, she wrote that she did not know about any investigation but was not surprised by the media report.

Rozhkova said on Facebook that an investigation would strike a powerful blow against Ukraine’s reputation. She said Kroll and the legal firms that worked with the NBU had played a leading role in uncovering massive fraud at PrivatBank.

She said that there had been a campaign of public attacks aimed at discrediting NBU officials and those running the nationalised PrivatBank, claiming that PrivatBank’s former owners were trying to use the law enforcement agencies and judicial system against the central bank.

She added that some unnamed people were failing to protect Ukraine’s national interests, illustrating her words with a picture of a sign reading “Danger – Thin Ice – Keep Off”. The NBU did not respond to questions on the subject from Central Banking.

Kolomoisky and Bogolyubov have both denied that they stole from PrivatBank. A panel of judges in London’s High Court found in 2019 that there was a “good arguable case” that Kolomoisky had stolen large sums from PrivatBank.

The US placed Kolomoisky and his family under personal sanctions earlier this month. It accused him of large-scale corruption and “ongoing” attempts to subvert the rule of law. The Federal Bureau of Investigations is also investigating alleged large-scale money laundering by Kolomoisky in the US.

Bitter campaign

PrivatBank’s nationalisation has been at the centre of what senior NBU officials say is a concerted campaign against the central bank. The dispute over PrivatBank played a major role in Ukrainian president Volodymyr Zelensky’s dismissal of the NBU’s then-governor Yakiv Smolii on July 1.

Smolii’s dismissal and general concerns over central bank independence and banking sector reform led to the International Monetary Fund suspending loan disbursements to Ukraine. Rozhkova has also been involved in a very public dispute with Kyrylo Shevchenko, Smolii’s successor as NBU governor.

Smolii frequently said before his dismissal that powerful forces were co-ordinating media smears, political influence and lawsuits targeted at senior central bank officials, including Rozhkova. He did not name the people he thought were co-ordinating the campaign.

But Valeria Gontareva, his predecessor as governor, has accused Kolomoisky of doing so in order to reverse the nationalisation of PrivatBank. Gontareva has also accused Kolomoisky of being behind an arson attack on her home in Ukraine.

She told Central Banking that her life would be in danger if she returned to Ukraine from London.

Kolomoisky has publicly rejected all charges that he is running a campaign against the central bank and its officials.

Gontareva told Central Banking in 2020 that IMF officials should withhold aid from Ukraine until they were sure the government was safeguarding financial sector reforms and central bank independence. In response, the Security Service of Ukraine publicly warned Gontareva that she was breaking the law by undermining the economy.

Rozhkova was publicly censured by the NBU’s council, including Shevchenko, for making public statements on central bank matters. Shevchenko then stripped Rozhkova of most of her responsibilities, including her oversight of banking supervision.

The first deputy governor made further statements criticising the central bank’s leadership on March 10, accusing the governor of censorship and saying she had been excluded from supervision meetings. She oversaw the NBU’s closure of around 89 banks under Valeria Gontareva and is seen as a key reformer by Western officials working with Ukraine.