Ukraine's parliament adopted a new AML law “On Prevention and Counteraction to Legalization (Laundering) of Criminal Proceeds, Terrorist Financing, Financing of Proliferation of Weapons of Mass Destruction” (hereinafter, the “Law”), which came into force on April 28, 2020. This Law harmonizes financial monitoring standards in accordance with current global and European standards (adaptation of FATF recommendations, the 4th EU Directive, EU Regulation 2015/847 on transfers).
The new law provides the strengthening of measures to disclose information on the structure of business to the subjects of primary financial monitoring. What awaits Ukrainian business in the future in connection with such changes? The Law assigns the function of financial monitoring to a fairly large list of entities, namely banks, insurance companies, pawnshops, any financial institutions (including representative offices of foreign financial institutions), securities market participants, notaries, lawyers, auditors, accountants, lawyers and others.
The main task of the subjects is the identification and verification of their clients (KYC - know your client). The verification is based on international AML (anti-money laundering) standards. All data about suspicious transactions are transferred by subjects of primary financial monitoring to the SCFM for further consideration. KYC must be conducted before establishing a relationship with the client, in particular opening an account or conducting a financial transaction. The purpose of the KYC procedure is to collect data on the ultimate beneficiary. For this purpose, data provided by the client or collected from state registers and other open sources are used.
What are the main changes?
1. Increasing the threshold amount of the financial transaction subject to financial monitoring - from UAH 150 thousand to UAH 400 thousand. Therefore, the subjects of primary monitoring (banks, insurers, credit unions, stock exchanges, payment institutions and other financial institutions) must report to the SCFM when the appropriate monetary threshold of operations is reached.
At the same time, the maximum amount of anonymous money transfer was reduced (from UAH 15,000 to UAH 5,000). All transactions in excess of 5,000 are only possible if both the sender and the recipient are verified.
Note! If funds are transferred from card to card, verification is automatic.
2. Significant reduction in the number of criteria that oblige the subjects of primary monitoring to notify the SCFM of such transactions (Part 1 of Article 20 of the Law № 361). These include: - crediting or transferring funds, granting or obtaining a loan, carrying out other financial transactions if at least one of the parties - participants in the financial transaction has the appropriate registration, residence or location in the state (jurisdiction), which does not perform or improperly performs recommendations of international, intergovernmental organizations involved in the fight against legalization (laundering) of proceeds from crime, terrorist financing or financing the proliferation of weapons of mass destruction (including diplomatic represantative, embassy, consulate such foreign state) or one of the parties - participants is a person who has a bank account registered in that state (jurisdiction); - financial transactions of politically significant persons, their family members and / or persons related to politically significant persons; - financial operations for the transfer of funds abroad (including offshore); - financial transactions with cash (deposit, transfer, receipt of funds).
3. Introduction of a risk-oriented approach during financial monitoring (Article 7 of the Law).
By default, a high risk business relationship is established for customers who: -registered in "forbidden" jurisdictions (Cabinet of ministers blacklist); -refer to public figures (PEPs), members of their families and related persons; -Beneficiaries included in the sanctions lists of Ukraine; -clients registered in offshore zones.
4. Introduction of a new and more strict system of penalties for the subject of primary monitoring (Part 5 of Article 32 of the Law).
The penalties depend on the types of obliged entities and breaches and may vary from UAH 51,000 to UAH 27,000,000 (for nonfinancial institutions) or UAH 135,000,000 (for financial institutions).
5. New requirements for the procedure of money transfer (Article 14 of the Law).
All money transfers must be accompanied by detailed information about the payer and the recipient of the money transfer. The financial monitoring entity that provides funds transfer services verifies the payer's verification operation in terms of these data, on the basis of official documents or information obtained from official sources. The entity is prohibited from transferring funds in the absence of information that must accompany the financial transaction.
From now on working with financial monitoring entities involves full disclosure of the business and total control over its beneficiaries. The most anonymous or doubtful structures will not be serviced by banks and other financial institutions.
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