The state should not punish for service: why Ukraine needs a fair and reasonable control system rather than a lifetime status of a Politically Exposed Person (PEP)
Ukraine today lives in several realities simultaneously. It is at war. It is reforming. It is rebuilding. And at the same time, it is trying to become not just formally closer to Europe, but a full-fledged part of the European economic and institutional space. At this difficult point in history, it is crucial for us not only to pass the right laws, but also to have people who can implement them. People with experience, strategic thinking, international vision, and the ability to withstand pressure and take responsibility.
That is why Ukraine needs strong professionals in the public sector today more than ever: in ministries, regulators, supervisory boards of state-owned companies, strategic planning, financial control, reconstruction, and international coordination bodies. We need people who know how to change the quality of the system, not just maintain it. However, these people often make a different choice. They stay in business, move to international organizations, consulting, private practice, investment projects, or global corporations. And the reason is not only the level of salary or the stress of public service.
There is one more factor that is not publicly discussed enough, although it is the one that is increasingly affecting the state’s human resources capacity. It is the status of a politically exposed person, or PEP. This institution itself is a necessary element of the modern financial monitoring system. No one denies that persons who have or have had significant political influence, access to public resources, or the ability to influence key decisions should be subject to increased scrutiny by financial institutions. This is a normal anti-corruption safeguard. The problem starts when the safeguard becomes a lifetime label.
When the status of a PEP becomes virtually indefinite, it means that a person can work for the state for several years, and the consequences of this decision will accompany him or her much longer than the position itself. They can go to the private sector, engage in science, management, entrepreneurship, international projects, live in another country, have no access to the budget or government levers, but they will remain a person of increased attention for banks, compliance services, financial partners, and some counterparties. Although formally it is only about enhanced scrutiny, in practice this often means more difficult access to banking services, additional requests for documents, delayed inspections, cautious counterparties, and a general reluctance of the market to work with a “complex profile.”
For a person who builds a career strategically, this reads very simply: a few years of public service can turn into a long financial and reputational tail. And this is where the most important thing begins. The problem of PEP is not a problem of comfort for former officials. It is a problem of the quality of public administration. Because strong professionals always evaluate not only the mission but also the rules of the game. They think not only about what they can do for the country today, but also about what will happen to their reputation, career and opportunities tomorrow.
Let’s imagine a professional aged 35-45. He or she has a good education, practical experience, international contacts, team management skills, market understanding and compliance. The state tells him: come, take responsibility, work in the most difficult period, make unpopular decisions, take the hit, work under public pressure, be responsible for every signature, every mistake, every risk. But at the same time, the system cannot honestly answer another question: what will a person get after completing this service, besides exhaustion, political experience, and a long trail of heightened financial suspicion?
This is where the main bias lies. The Ukrainian state wants the best people, but too often offers them a model in which serving the country is seen not as a prestigious and responsible career stage, but as a long-term toxic asset on a resume. For business, the international market, and the current generation of managers, this is a very strong deterrent. And this signal works harder than any patriotic rhetoric.
It is important to call a spade a spade. The lifelong or virtually indefinite status of the PEP does not automatically strengthen the state. At some point, it starts working against it. Because the system, which is supposed to help identify real risks, actually begins to punish for the very fact of service. And this is no longer about control. This is about the wrong design of incentives.
A strong state is not a state that suspects everyone for the same amount of time. A strong state is a state that can reasonably assess risks over time. Corruption risk is not a constant. It does not remain the same one year, three years, or ten years after a person leaves office. After losing formal influence, access to government flows, decision-making mechanisms and political leverage, the risk objectively decreases. That is why the approach to former politically exposed persons should be risk-oriented rather than status-based.
The risk-based model means a very simple and professional thing: the state, the regulator and the financial sector assess not only who a person used to be, but also who they are now. Whether they retain real influence. Whether they have access to decisions. Whether they are involved in investigations. Whether there are signs of non-transparent origin of assets. Whether there are circumstances that justify the continuation of enhanced monitoring. If so, the control should be maintained. If not, there is no point in keeping a person in the conditional “red zone” just because of an old entry in his or her biography.
That is why a reasonable time limit on the status of politically exposed persons is not a favor or a gift for the elites. It is a tool to restore the balance between the anti-corruption goal and the state’s capacity. For example, a three-year period of increased scrutiny after the end of a public function is a sufficient period to see potential tails of influence, unnatural financial structures, attempts to use old connections or other risky models. This is a reasonable horizon for control. But it is not a sentence for life.
And here it is important not to substitute the content with political clichés. Because every time the idea of a time-bound approach to CEP is mentioned in the public space, one is tempted to describe it as “weakening the fight against corruption.” In fact, the opposite is true. Corruption should be punished by criminal law, investigation, confiscation, sanctions, effective courts and real accountability tools. And financial monitoring should be accurate, modern and risk-oriented. Where there is a real risk, there should be strict control. Where the risk is no longer relevant, there should be no automatic lifetime stigma.
For Ukraine, this issue is much bigger than it seems at first glance. This is not just a discussion about compliance. It is not just a question of banking procedures. This is a question of the competitiveness of the Ukrainian state as an employer and as an institution. We will not be able to win the competition for talent if people of the level required for reforms, reconstruction, negotiations with international partners, launching new economic models and managing complex state processes perceive civil service as a lifelong risk to the future.
Ukraine needs a new state contract with strong professionals. And part of this contract is an honest, clear and fair model of public service. One in which service to the state is neither an indulgence nor a life sentence. One in which the system is able to separate real danger from formal status. One in which the state shows that we value those who come to work for the country and do not turn this choice into an indefinite sanction.
Today, Ukraine is fighting not only for territory. It is fighting for the quality of its own statehood. And the quality of statehood is determined not only by laws or declarations, but primarily by the people who implement these laws, build institutions, and shape the country’s reputation. That is why the time-limited, risk-oriented status of a politically significant person is not about comfort for the past elite. It is a chance for the future state elite to be strong, professional and motivated.
Because in the end, Ukraine will not win when it learns to suspect everyone who has ever been in power for life. Ukraine will win when it learns to simultaneously control risks, protect integrity, and not scare away those who can make its country stronger. It is the quality of governance today that determines whether Ukraine will become a success story tomorrow – for its own citizens, for the European market and for the world.
Action plan: how to turn the discussion on CES into a reform that strengthens the state
1. Formulate the main goal of the reform correctly
The first and key step is to get out of the false framework in which the issue of the status of politically exposed persons is presented as a dispute between “toughness” and “leniency.” In fact, the subject of this reform is quite different. It is about whether Ukraine can simultaneously maintain high standards of anti-corruption control and not lose the chance to attract strong professionals to public administration.
All public communications should be built around a simple and clear thesis: reforming the approach to OEP is not about weakening control, but about modernizing it. It is not about protecting the political class, but about protecting the quality of governance. It is not about comfort for former officials, but about the state’s ability to compete for people who can build strong institutions.
2. Introduce a term model with the possibility of extension by risk
The basic design should be a time-limited status of a politically exposed person after the termination of public functions. The best approach would be to maintain the elevated status for a certain period of time, for example, three years, and then terminate it automatically if there are no reasonable grounds for its extension.
This is the fundamental change in philosophy. It is not up to the individual to prove that they no longer pose a risk. It is the financial institution or authorized entity that must have specific, documented and verifiable reasons if it believes that enhanced controls should be maintained beyond the basic period.
3. Clearly define the criteria for continuing enhanced monitoring
To avoid chaos, selectivity, and reinsurance, the government should provide the market with a clear list of criteria that may indicate that the increased risk will persist after the end of the basic term. We are not talking about general phrases, but about specific indicators.
Such indicators may include the retention of effective political or administrative influence, informal control over decision-making, participation in corporate or political structures directly linked to state resources, involvement in criminal proceedings or anti-corruption investigations, a significant discrepancy between lifestyle and official income, opaque assets, suspicious cross-border transactions, and the use of close associates or related entities to circumvent controls.
The key rule here should be very simple: the status is not automatically extended just because a person once held an important position. It can only be extended if there are real signs of ongoing risk.
4. Unify practices for banks and the financial sector
One of the main problems with the current system is that even with a formal risk-based approach, banks often choose to be overly cautious. It is easier for them to put a client in the category of maximum attention than to take responsibility for an individual assessment. This results in a distorted practice where the financial sector protects itself from regulatory risk by making the client’s legal status uncertain.
To change this, the NBU, the State Financial Monitoring Service, and other responsible institutions should develop uniform practical rules for applying the updated approach. Banks should receive not an abstract call to “assess risks” but a specific methodological framework: how to record a risk, how to review it, how to decide whether to lift or continue enhanced monitoring, what documents are sufficient, how to prevent discrimination against a client just because of a past position.
5. Create a transparent procedure for reviewing the status
The system will not be legitimate if a person does not understand the rules by which a decision is made and how this decision can be checked or appealed. That is why a clear procedure for reviewing the status after the end of the basic period of increased attention is needed.
A person should be able to receive a reasoned explanation of why they are being monitored more closely, what factors have been taken into account, and how they can submit additional information or initiate a second review. This is not just a matter of fairness. It is a matter of quality of law enforcement and trust in the anti-corruption architecture itself.
6. Link the PES reform to a broader human resources package for the civil service
Adjusting the status of the FEP by itself will not solve the problem of the shortage of strong people in the state unless it is part of a broader personnel solution. The state must honestly answer the question: what exactly does it offer a strong professional in exchange for several years of service in conditions of war, pressure, increased responsibility and high reputational stakes.
It is necessary to work in parallel on competitive salaries, clear career paths, programs for the return of specialists from the private sector, mechanisms for legal protection against politicized persecution, and a modern culture of public management. The reform of the VEP should be embedded in a broader social contract with those whom the state wants to invite to join it.
7. Rebuild public communication of the reform
The weakest point of any sensitive reform is when it is poorly explained. If the topic is presented as “relief for former officials,” it loses before a meaningful discussion even begins. That is why a precise communication strategy is needed.
The reform should be explained through the categories of state capacity, personnel competition, international trust, investment reputation, and modern risk management. The public needs to be told honestly: corruption does not disappear because of a lifetime label, but strong professionals may not come to the state because the system makes service too expensive a personal choice. Businesses need to be explained that a clear and proportionate PEP regime reduces regulatory uncertainty. International partners should be told that Ukraine is not weakening control, but making it more accurate, modern, and more in line with the logic of managing real risks.
8. Form a coalition to support the reform
Such changes rarely happen through the efforts of one body or one group alone. It takes a coalition that brings together several sectors. It should include representatives of government institutions, the banking sector, financial monitoring experts, lawyers, business associations, representatives of international technical assistance programs, corporate governance experts, and people with first-hand experience in and out of the state.
Such an alliance is needed to move the discussion out of the realm of emotions and political suspicion and into the realm of constructive state design. As soon as there is multi-sectoral professional support, the topic ceases to look like a private interest of a single group and begins to be perceived as a systemic solution to strengthen the country.
9. Prepare a phased implementation format
To ensure that the reform is not only proclaimed, but actually works, it is advisable to lay down several stages of its implementation. The first step is to amend legislation and basic regulations. The second stage is the development of banking and regulatory methods. The third step is to train compliance departments, internal control services, and employees who make decisions on client profiles. The fourth step is monitoring of application practices, collecting feedback and correcting problem areas.
This approach avoids the classic Ukrainian mistake when the right idea is proclaimed loudly, but at the bottom, it starts to live by the old rules due to fear, misunderstanding or system inertia.
10. Capture the key result for which all this is being done
The ultimate goal of this reform is not to make it easier for anyone to pass a bank check. And it is not about removing former officials from the spotlight. The real goal is much bigger. It is to make the state stronger.
Ukraine cannot afford a human resources model in which the most competent people avoid public service because it is too expensive in a personal and professional sense. If we want to have strong ministries, effective regulators, professional state-owned companies and institutions that can speak to investors, Europe and the world on an equal footing, we must build a system that can not only control but also engage.
That is why a reformed approach to the status of politically exposed persons should be part of a broader state strategy. This is the strategy of a mature country that understands that the best people do not come to a system that offers them lifelong suspicion as a payment for service. The best people come to a place where there are demands, accountability, transparent rules, and a fair balance between control and trust.
And if Ukraine really wants to be not only a state that has survived, but a state that has won and become successful, it must learn to build such rules.
Author: Pavlo Hez – Chairman of the regional branch of the Ukrainian National Lobbyists Association in Dnipro region, attorney, Doctor of Philosophy in Law, specialist with a systemic vision of the development of the legal environment and the institution of lobbying in Ukraine.
