Article 52 and 58.
Anti-Money Laundering

Ukraine has introduced remote identification and verification. There are full models (without setting limits on transaction volumes) and simplified models (with existing limits on transaction volumes).
Full models include:

1. Verification using the NBU's BankID system and a qualified electronic signature (QES).
2. Communication between the client and an authorized employee via video conference.
3. E-passport sharing through integration with Diia («ДІЯ»).

Simplified verification mechanisms include:

1. Receiving customer identification data through the NBU BankID System.
2. Obtaining copies of identification documents certified by the QES of the owner of such documents.
3. Reading identification data from a contactless electronic medium implanted in the ID-card.
4. Verification of data through the Credit Bureau.
5. Performing the first transaction for a symbolic amount to transfer funds from your own account opened in another bank of Ukraine.

Simplified models are used if the risk of a business relationship with a customer (a financial transaction without establishing a business relationship) is low, and subject to applicable limits. The total limit for expense financial transactions on all accounts and e-wallets opened for the customer in the bank should not exceed ≈ EUR 1 000 per month (approximately) and ≈ EUR 10 000 per year (equivalent), and the total balance should not exceed ≈ EUR 1 000. At the same time, the bank may use any of the of the two models mentioned above of simplified customer identification and verification.

At the same time, in 2023, the National Bank of Ukraine (the NBU) strengthened its supervision of the banking market, which led to the imposition of fines on banks. The total amount of fines in the first quarter of 2023 amounted to about EUR 6 million. This is 1.3 times more than in the whole of 2022. The vast majority of fines relate to financial monitoring. In addition, Ukraine is working to ensure the functioning of a unified register of accounts of individuals and legal entities and individual bank safes to prevent the use of the financial system for money laundering or terrorist financing. Currently, the register has not been created. Further work on the register is planned for May-June 2024.

Access to information on UBOs is provided through the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organizations (hereinafter referred to as the USR). The peculiarities and problems of the USR functioning were discussed in the analysis of the implementation of Article 12 of UNCAC. The period for updating the information on UBOs in the USR started on July 11, 2021 and was supposed to end on July 11, 2022, with the need for annual confirmation of information starting in 2023. Due to the introduction of martial law in Ukraine, the Cabinet of Ministers of Ukraine postponed this obligation until the end of martial law. Additionally, the Ministry of Justice of Ukraine has announced that such information may be provided within 3 months from the date of lifting of martial law in Ukraine. Nevertheless, the need to submit information on the UBO when establishing a legal entity or when registering changes in the state register still remains, as well as the legal right and technical possibility to do so during the martial law.

In order to solve the problem with verification and updating the information on UBO, in June 2023, the state enterprise NAIS updated the software of the USR. In particular, a new registration action ‘State registration of confirmation of the accuracy of information on the UBO and/or ownership structure’ was introduced. Also in this regard, in 2021, the Ministry of Finance of Ukraine approved the Regulation on the Form and Content of the Ownership Structure, and in September 2023, the CMU and the NBU approved the Methodology for Determining the Legal Entity's UBO.

In June 2022, Ukraine became a candidate for accession to the European Union and received 7 recommendations, one of which was the introduction of European approaches to combating money laundering, namely the harmonization of domestic legislation with international standards of the Financial Action Task Force (FATF). To implement this, the CMU has already approved the Asset Recovery Strategy for 2023-2025 and is working to improve the regulation of the status of PEPs. The FATF indicates that the status of a PEP is lifelong, and cannot be limited to three years after leaving a significant position. Taking this into account, Ukraine received and implemented a recommendation from the Committee of the Council of Europe to eliminate this technical inconsistency. However, in November 2022, the Verkhovna Rada brought back the three-year term for the status of a PEP, indicating a negative trend in the development of legislation.

In response to the concerns expressed by international partners, in September 2023, the Ukrainian parliament introduced a draft law that would eliminate the three-year limitation period for the status of a PEP. The draft law has now been adopted as a basis and is being prepared for consideration in the second reading. The National Bank of Ukraine also adopted Resolution No. 107 ‘On Approval of the Regulation on Financial Monitoring by Entities’. This act clarifies the concept of ‘in-depth monitoring’ of PEPs. Such actions include prompt detection by the institution of financial transactions containing indicators of suspicious financial transactions, financial transactions that do not meet the client's risk profile and/or the institution's expectations regarding the volume of financial transactions that can be rationally explained given the information available to the institution about the client, new material circumstances and events regarding the PEP that may significantly affect the level of risk of business relations with it.

However, in June 2023, the NBU Board relaxed some of the requirements for enhanced monitoring of the PEPs. From now on, banks should move away from a formal approach to determining the level of risk of a PEP. In each individual case, the assignment of any risk level must be properly justified. In addition, the limits on the volume of financial transactions on all accounts of PEPs opened with the bank have been increased from ≈ EUR 5 000 per quarter to ≈ EUR 10 000 per month, which is one of the conditions for not taking measures to establish the sources of PEPs' wealth.

As part of the analysis of the status of PEPs, it is worth noting that in Ukraine, if a PEP or a member of their family opens a foreign currency account in a non-resident bank, the relevant entity is obliged to notify the National Agency on Corruption Prevention (hereinafter NACP) in writing within ten days. Failure to notify or untimely notification will result in administrative liability in the form of a fine of UAH 1700 to 3400 (from 42 euros to 83 euros). Starting from 2021, the NACP shall be notified only by filling in the relevant electronic notification form after authentication in the personal electronic account of the Unified State Register of Declarations of Persons Authorized to Perform State or Local Government Functions. It should be noted that the notifications are submitted regardless of whether the reporting entity is located in Ukraine or abroad.

PFME, which are financial institutions, are prohibited from opening and maintaining anonymous (numbered) accounts and establishing correspondent relations with shell banks, as well as with banks and other non-resident financial institutions known to maintain correspondent relations with shell banks. Such prohibitions are defined at the level of internal documents of banks. For example, in JSC CB PrivatBank, the prohibition is set out as follows: ‘the bank refuses to establish (maintain) business relations/refuses to open an account (service) to a person (client) if the correspondent financial institution is a shell bank and/or maintains correspondent relations with a shell bank’. In JSC Kredobank: ‘the bank does not cooperate with shell companies and shell banks’.

The activities of the SFMSU in performing its main functions and cooperating with the PFMS and the SFMS were also described in detail in the analysis of the implementation of Article 14 of UNCAC. The exchange of information on financial monitoring in Ukraine is facilitated by the introduction of an electronic secure information and telecommunication system (the ‘Electronic Cabinet of the Financial Monitoring System’, hereinafter - the E-Cabinet). The SFMSU cooperates with foreign financial intelligence units (FIUs), international and intergovernmental organizations. In 2022, the SFMSU carried out interaction and information exchange with 147 FIUs. Thus, 1,242 inquiries were sent to the competent authorities of foreign countries and 965 responses to inquiries were received from 104 foreign FIUs. In addition, the State Financial Monitoring Service received 245 requests from 46 foreign FIUs and provided 395 responses to 67 FIUs of foreign countries. As of 2023, the State Financial Monitoring Service has already concluded 80 Memorandums of Understanding with foreign FIUs.