A New Reality for Business-ESBU Interaction: Presentation by Yevgen Riako

Tax disputes are increasingly transcending financial penalties and entering the realm of criminal prosecution. For businesses, this entails not only audits but also genuine risks to owners, senior management, assets, and reputation.

This subject was the focus of a presentation by Yevgen Riako, CEO of RIYAKO & PARTNERS, at the VIII International Criminal Law Forum.

During his address, Yevgen concentrated on the practical aspects of criminal tax proceedings and the shifting approaches of law enforcement agencies towards businesses:

• Key triggers for initiating criminal tax proceedings;
• Typical errors made by businesses during the early stages of audits;
• The use of criminal proceedings as a tool for pressure;
• The new logic of business interaction with the Bureau of Economic Security (ESBU).

“The system is gradually changing. Although many remain sceptical, our practice demonstrates that a partnership with the ESBU is possible if the business and its legal counsel understand the logic behind the detectives' work and their KPIs. The Bureau is shaping a new philosophy of conduct for businesses and communicates specific ‘red flags’ to help firms stay off the law enforcement radar: employment percentages, salary levels, and the excessive use of individual entrepreneurs (FOPs),” shared Yevgen.

The solicitor clarified that while the prosecution’s stance sometimes acts as a deterrent in this process, legal mechanisms already exist to move forward lawfully. However, systemic issues remain that are critical for both the business and professional communities:

• Improving the quality of analytical products, taking into account their regulatory framework, the accountability of analysts, and the possibility of appeal;
• Synchronising the positions of the ESBU and the State Tax Service to avoid the duplication of claims in tax cases;
• The possibility of resolving tax risks prior to the registration of criminal proceedings in the Unified Register of Pre-trial Investigations (ERDR).

If you have any questions for the solicitors at Riyako & Partners, please contact us here.