Expert: Social benefits verification to allow more efficient funds spending and helping people in need, not fraudsters


Kyiv, March 28, 2016. Social benefits constitute slightly over 40 percent of the state expenditure, which amounts to UAH 368 billion this year. These include pension benefits, various forms of social support and subsidies. Any abusive practice in this sphere, even comparatively insignificant, will result in enormous loss of funds. This is the purpose of the social verification process, i.e. checkup of all the recipients: do these people really exist, who are they and whether they are entitled to receive these funds. This is a major reform for Ukraine, said Pavlo Kukhta, expert of the Reanimation Package of Reforms (RPR) at a press briefing at Ukraine Crisis Media Center. “It will allow more efficient funds spending, providing help to people who really need it, not swindlers stealing money,” explained the expert. Kukhta said the so-called “ghost beneficiaries” is the most primitive fraud scheme, when someone forfeits a beneficiary’s ID and continues receiving pension benefits after the person’s death. In case of fraud, this is about macroeconomic level of embezzlement. As an example, the expert provided foreign experience which says losses may amount to one fourth of the entire state expenditure.

According to Tamara Savoshchenko, CEO of UniCredit Bank, people must not be afraid of the term “verification”. “It is a certain monitoring procedure which is not new,” emphasized Savoshchenko. If there are selection criteria for people entitled to receive social benefits, in a logical way there should also be criteria for monitoring fair distribution and use of these funds. Banks possess information required for the verification procedure, so they are a party to the process, she said.
Issues of disclosure of banking secrecy, procedure for maintaining secrecy and its disclosure arise in this regard. Despite this fact, neither one of these disclosures implies anything new, explained the Unicredit Bank CEO. “These are the proven procedures, and there are certain rules of disclosure of banking secrecy for one or another reason,” said the banker. She said there were recent changes, “simply extending the list of institutions entitled to obtaining information involving banking secrecy, with certain conditions and restrictions applied”. Savoshchenko added that it referred to the Ministry of Finance and disclosure of information regarding individuals who are recipients of social benefits and social aid.
The issue of insufficient understanding relates to the issue of distrust in banks, said Oleksiy Oleksandrov, Deputy Chairman of the Ukrgasbank Board. He assured that the bank customers who honestly and legitimately fall into the category of social beneficiaries must not be afraid of the checkup. Moreover, no customers’ rights are violated in the process of verification. “Information is provided exclusively to one more party, in other words, an operator, the Ministry of Finance. It gains access exclusively to the extent making it possible to understand whether the customer is “clean” or not,” said Oleksandrov. There will be certain advantages both for the state and the society. First of all, citizens committing fraudulent actions against the state will be disclosed. Second, it will result in saving money allocated for categories who really need support, explained the deputy chairman.


“These are tens of billions of hryvnias saved by the budget due to the fact that the benefits are received not by those people who need them the most,” said Anton Tiutiun, Deputy Chairman of the OshchadBank Board. According to him, it is a long-standing problem which used to be neglected. Using banking tools, the state is only trying to understand whether recipients of social benefits are receiving them legitimately, added Tiutiun.
Victor Maziarchuk,  senior expert at Public Finance RPR group, emphasized that taxes paid by Ukrainian citizens through state institutions system are used inefficiently, they are simply embezzled, which poses the major problem. “People involved into the budget process believe 41 percent of the state funds are used inefficiently,” said the expert. This means that pension and social benefits are small, because 40 percent of the sum is stolen. 47 percent of pensions do not exceed UAH 1300,” said Maziarchuk. Pension benefits are small because there are no funds, and there are no funds because they are being embezzled, and this is the main problem, concluded the expert. On the contrary, the verification process will allow finding these fraudsters. The RPR expert provided statistics from the Pension Fund of Ukraine: number of pensioners decreased by 165 thousand people in a year. “There is a remarkable thing – number of pensioners decreases in all the regions except two, […] Donetsk and Luhansk regions where this number is growing. “If we analyze the average pension benefit in all the regions, it is the highest in these two regions,” said Maziarchuk. The process launched by the Ministry of Finance is one of the methods to secure efficient use of public funds. He believes this mechanism will allow increasing pension benefits and reinstate confidence it the state, summarized the expert.