Published 5 October 2021. Some rules have changed since; ask us for the current position.
According to 2019 research, Ukraine ranked 126th out of 180 countries in the global corruption index. Corruption shows up mainly as unregistered (illegal) business, money laundering and tax evasion.
To fight this more effectively, Ukraine decided to adopt a new anti-money laundering law. It was passed at the end of 2019, and one of its key features is financial monitoring.
Financial monitoring is a procedure for controlling financial transactions carried out in various sectors. Previously only banks performed this kind of control. Under the new law, financial monitoring is also carried out by:
- accountants;
- estate agents;
- notaries;
- lawyers (advocates);
- auditors and a number of other entities listed in the law.
When monitoring is mandatory
The law sets out a clear list of transactions subject to financial monitoring. They include:
- Threshold transactions carried out by businesses (the threshold starts at UAH 400,000; for gambling and lottery operators the minimum amount is UAH 55,000).
- Transfers to or from an anonymous account (mostly accounts registered abroad, including in offshore jurisdictions, or transfers from Ukrainian accounts to anonymous foreign ones).
- Any transactions involving movement of funds, loans or credit where a party is an individual or legal entity registered in a foreign jurisdiction that does not apply the international financial monitoring rules, or where there are grounds to believe that money laundering to finance terrorism is growing in that jurisdiction.
- Funds credited to the account of an individual or legal entity and then transferred to another current account within a very short time (the same or the next banking day).
- Transactions on the current accounts of sole traders (individual entrepreneurs) or legal entities of any legal form that have been registered for no more than three months, provided that no transactions have taken place since state registration and account opening.
- Exchange of banknotes, including foreign currency.
- Transfers of funds to a foreign account.
- Transactions in securities and promissory notes.
- Any transactions settled in cash.
- Insurance indemnities and payouts.
- Foreign trade transactions.
What internal financial monitoring is and when it applies
Internal financial monitoring is carried out by banks and other entities defined by law. Its purpose is to identify transactions that are subject to mandatory financial monitoring.
Internal monitoring may cover:
- transactions and actions that are complex or unusual and raise doubts about their legality and transparency;
- transactions that clearly do not fit the legitimate activity of the business, sole trader or ordinary customer;
- transactions made to avoid mandatory financial monitoring (most often a series of transactions between the same parties over a short period).
Entities performing internal control may suspend transactions on an account for up to 2 working days. During this period they must report to the competent state authority. That authority may decide to suspend transactions for up to 5 working days, during which it must notify law enforcement if there are grounds to believe the transaction shows signs of a criminal offence.
Transactions can be suspended for a maximum of 14 days. These time limits are set by law and cannot be extended. Within this time the competent state authorities must either take a decision or allow the transaction to proceed.
Many people ask whether their personal accounts and everyday payments, such as utility bills, household purchases or money sent to relatives, fall under financial monitoring. Such transactions are outside the mandatory monitoring list. Monitoring may become necessary only if the supervisory authorities have doubts about the transaction’s legitimacy.
Our specialists can give you detailed advice on inspections and financial monitoring.
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