New Rules of Financial Monitoring in Ukraine

Starting on April 28, 2020, the new version of the Law of Ukraine No. 361-IX on Prevention and Fighting against Legalization (Laundering) of Income Gained Illegally, Financing of Terrorism and Dissemination of Mass Destruction Weapons comes into effect.

Legal Alliance decided to describe the novelties in the Law with regard to money transferring and refute some false information related to the mechanisms of this Law that is actively spread on-line.

Thus, the Law updates requirements for proper screening of money transfers. In particular, during money transfer by a bank the participants of such transaction should be identified and verified. During the identification the bank receives information about name of private or legal entity, account number or unique transaction number, place of residence, passport details and transaction initiator`s tax number. The verification includes confirmation of private person`s identification data, as well as identification of the structure and end beneficiaries of legal entity if the transaction is initiated by a legal entity.

Identification and verification of the payer (initiator) and recipient of the money will be mandatory for all money transfers including electronic, save:

• Funds withdrawal from own account;
• Payment of taxes, fees, charges, fines and surcharges to the state and local budgets;
• Utility payments;
• Money transfer using electronic payment tools or electronic money to pay for goods or services;
• Transactions below 30 000 hryvnia to pay for goods, works, services or paying loans;
• Money transfers within Ukraine in the amount that is below 5 000 hryvnia if there are no signs of connection with other transactions.

Identification and verification is performed by a bank when opening accounts that is why they are not required for each transaction. Therefore, card to card money transfers do not require any additional (noticeable for transfer participants) measures, it will be possible to top up cards for 5 000 hryvnia and above only through bank teller, and the cap for card free terminal transactions will be 4 999 hryvnia.

We underline, that article provision regarding money transfer does not require transfer initiator to confirm legal source of such funds, as stated in many articles published on-line.

If there is lack of information for identification and verification bank will have to deny the money transfer. The bank must to notify the National Bank of Ukraine about the fact that there is lack of information, and the State Service for Financial Monitoring of Ukraine in case there is suspicion about such transfer.

In addition, other amendments introduced by the new Law should be noted, namely:

• The increase of threshold financial transactions from 150 000 hryvnia to 400 000 hryvnia that are subject for audit;
• The decrease of the number of signs for mandatory audit of financial transactions, namely:
  • If one of the participants is associated with a country that does not comply with anti-laundering recommendations;
  • If one of the participants is a politically significant person or is associated with such person;
  • In case of a money transfers abroad;
  • In case of cash transactions.
• Extending the list of entities that perform primary financial monitoring (self-employed accountants, tax and legal consultants, lawyers, etc., are added);
• New responsibilities with regard to information disclosure by legal entities (for more details please refer to our news “How will Legal Entities and their Owners Change in 2020”);
• The fines for violation of the new Law are increased significantly.

Legal Alliance will track legal novelties and will inform you when they come into effect.