UKRAINE STRENGTHENS MONEY LAUNDERING REGULATIONS

On April 28, 2020, the new Law of Ukraine “On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Terrorism Financing and Financing of Proliferation of Weapons of Mass Destruction” No. 361-IX (“Law No. 361-IX”) entered into force. This law is aimed at implementing the European Union Directive 2015/849 “On the prevention of the use of the financial system for the purposes of money laundering or terrorist financing” and European Union Regulation 2015/847 “On information accompanying transfers of funds”, as well as the standards of the Financial Action Task Force (on Money Laundering) (FATF) and recommendations, set forth in the MONEYVAL 5th Round Mutual Evaluation Report in the area of prevention money laundering and terrorist financing.

Law No. 361-IX replaces the current law on financial monitoring and tightens the procedures for disclosure of ultimate beneficial owners of Ukrainian legal entities. Please find below an overview of key novelties of Law No. 361-IX and how it affects businesses:

Amendment of state registration rules

Identification of ultimate beneficial owners

During the state registration of a new legal entity or registration of any (even minor) changes on an existing legal entity, such entity shall submit a notarized copy of its’ ultimate beneficial owner’s ( “UBO”) passport to the state registrar. Such requirement does not apply if the UBO is a Ukrainian citizen holding a so-called biometric passport.

Submission of a corporate structure chart

Legal entities are obliged to keep the information on their corporate structure and UBO up to date and amend it when necessary. In case of any changes, the entity shall update the information at the state register by submission of an updated corporate structure chart and/or UBO documents within 30 business days from the day of such changes. Also, all legal entities need to provide the corporate structure chart in case of any registration action or to confirm that there are no changes and the information in the state register is accurate.

Annual confirmation of the corporate structure.

All Ukrainian legal entities are now obliged to confirm annually, within 14 calendar days from the day of incorporation, their corporate structure chart by submitting a separate standard confirmation form to the state registrar. As of now, this form still needs to be approved by the authorities with a separate regulation. All legal entities that were incorporated before April 28, 2020, will need to submit such a confirmation for the first time within three months since the respective form is approved by the authorities.

Failure to timely update the information and/or submit necessary documents on the corporate structure shall be punishable by a fine to the company or its’ director in the amount of UAH 17,000 (approx. USD 630) to UAH 51,000 (approx. USD 1,891).

The threshold for mandatory financial monitoring is increased while the list of the monitored financial transactions is reduced

The amount of financial transactions subject to mandatory financial monitoring (by commercial banks and National Bank Of Ukraine) increases from UAH 150,000 to UAH 400,000 (approx. USD 5,562 to USD 14,832) and the list of 17 types of risky financial transactions has been reduced to 4:

  • participant of the transaction is registered or located in a country that does not comply with international anti-money laundering rules;

  • a transaction is carried out by a politician, his family members or individuals, who are UBOs of legal entities, operating for the benefit of such a politician;

  • cross-border transfer of funds;

  • cash operations.

Application of a risk-based approach

The list of subjects of initial financial monitoring (“SIFM”) has been supplemented with businesses providing advisory services, in particular, notaries, law firms, tax advisors, real estate brokers. SIFM are now obliged to apply a risk-oriented approach to identify and assess risks of legalization (laundering) of criminal assets. SIFM should verify grounds and purposes of financial transactions, complying with at least one of the following indications: complex, unusually large, conducted in an unusual way, no obvious economic or legitimate purpose. SIFM can freeze a client’s assets without any prior notice in case it finds any transaction that may be related to financing of terrorism of global weapon distribution.

Differentiated know-your-client approach has been introduced

Law No. 361-IX introduced a simplified procedure for the know-your-client checks with reduced scope of monitoring and data collection. At the same time, the risk criteria to identify suspicious operations are not expressly stipulated in the Law No. 361-IX and are expected to be specified by separate regulation.

Remote KYC procedure for bank account opening

Law No. 361-IX amends the banking identification procedure and introduces the possibility of remote bank account opening. Clients will be able to pass all KYC formalities, including personal identification, by using digital solutions, including e-signatures or video-calls. However, the detailed description and limitations of such remote identification, as well as list of “trusted” software are still to be stipulated by a separate decree from the National Bank of Ukraine.

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This publication is for informational purposes only. If you would like to learn more or seek legal advice, please contact one of the following or your usual Nobles contact: Alexander Weigelt (Partner), Volodymyr Yakubovskyy (Partner), Vasyl Fedorenko (Managing Associate).


#law #moneylaundering #Ukraine

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