Crimean clients versus PrivatBank. Research into the legality of the bank’s actions
In February 2014, Russia invaded and subsequently occupied the Autonomous Republic of Crimea. In March 2014, as could be expected, all Ukrainian commercial banks and other financial institutions there stopped working. As a result, their Crimean clients – individuals as well as legal entities – were faced with the challenge of getting their deposits back. Different Ukrainian banks had different approaches to this issue, but most of them did agree to return the funds in full, as long as their clients would turn to one of their offices in the GCA.
PrivatBank, which had the largest network in Crimea and the largest number of clients there, decided to tackle this problem by refusing to return funds for bank accounts that were opened in the ARC before February 2014.
It should be noted that this bank, founded in 1992 as a private commercial bank, is currently the leading bank in the country: it ranks #1 in terms of market share and is considered a strategically important company, according to a study by GFK Ukraine in Q3 2019:
- 2% users of banking services among natural persons work with this bank; 46.6% consider it their main bank,
- 4% of legal entities work with it; 37.8% consider it their main bank,
- 9% sole proprietors (natural person entrepreneurs) work with it; 66.1% consider it their main bank.
As of December 2016, PrivatBank is owned by the Ukrainian state. Thus, its actions are essentially the actions of the state, and any failure to make good on its obligations before its clients is also the state’s failure.
Through legal work done in 2014-2019, the Ukrainian Helsinki Human Rights Union has accumulated a large amount of data on PrivatBank’s systematic actions that violate current legislation in regards to a particular category of its clients – the people who opened their accounts in the ARC prior to the peninsula’s occupation by Russia.
UHHRU lawyers alone provided over 200 primary consultations in this regard; over 50 people were provided with secondary legal assistance and over 20 cases were supported in courts of all instances. UHHRU also has grounds to claim that PB violated property rights of several thousand individuals and legal entities as a result of intentional and systematic actions by the bank’s employees.
This analytical report throws light on the situation with systematic violations of depositors’ rights and PrivatBank’s refusal to return money to their Crimean clients, as well as offers a number of recommendations on how to address this issue and help Crimeans uphold their property rights, such as:
- Unfreezing by the bank of all accounts opened in the Autonomous Republic of Crimea and Sevastopol before February 2014, as well as providing all Crimean customers with access to the Privat24 online banking system.
- Not obstructing lawsuits on the return of Crimean deposits on the grounds that the documents provided by plaintiffs to confirm the opening of their bank accounts are invalid.
- For the Depositors’ Protection Fund, to clarify its position on the payment on compensations and ensure full compliance with the current legislation of Ukraine.
- Formulating, without statements that are discriminatory and contrary to the current legislation, the bank’s official position on the return of Crimean deposits.
Full report in Ukrainian is available here.
This analytical product was made possible by the generous support of the American people through the United States Agency for International Development (USAID) in the framework of the Human Rights in Action Program implemented by the Ukrainian Helsinki Human Rights Union.
USAID is the world’s premier international development agency and a catalytic actor driving development results. USAID’s work demonstrates American generosity, and promotes a path to recipient self-reliance and resilience, and advances U.S. national security and economic prosperity. USAID has partnered with Ukraine since 1992, providing more than $3 billion in assistance. USAID’s current strategic priorities include strengthening democracy and good governance, promoting economic development and energy security, improving health care systems, and mitigating the effects of the conflict in the east. For additional information about USAID in Ukraine, please call USAID’s Development Outreach and Communications Office at: +38 (044) 521-5753. You may also visit our website: http://www.usaid.gov/ukraine or our Facebook page at https://www.facebook.com/USAIDUkraine.
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