On 28 April 2020 the Law of Ukraine “On Prevention and Counteraction to Legalization (Laundering) of Criminal Proceeds, Terrorist Financing, Financing of Proliferation of Weapons of Mass Destruction” (hereinafter, the “Law”) comes into force.
The new Law updates a number of provisions in Ukrainian AML legislation that will affect the activity of primary financial monitoring entities (hereinafter, the “obliged entity”) in the relevant context. Please see below the main novelties of the Law.
- As of now, the National Bank of Ukraine, the Ministry of Finance of Ukraine, the Ministry of Justice of Ukraine, the National Securities and Stock Market Commission, the Ministry of Digital Transformation of Ukraine are regulators for different obliged entities.
- We recommend each obliged entity to verify who is its regulator and to monitor the occurrence of updated by-laws, studies, recommendations.
Operations subject to mandatory financial monitoring:
- Threshold operations. The threshold for financial transactions has been increased from UAH 150,000 to UAH 400,000, and the number of indicators decreased from 17 to 4.
- Suspicious operations. They do not depend on the amount and occur if the obliged entity has suspicions / grounds for suspecting that the funds are the result of criminal activity related to terrorist financing, the proliferation of weapons of mass destruction.
- Taking risk management measures in a manner and scope that mitigates such risks depending on their level.
- The Law provides the basic criteria for high risk, which leads to enhanced verification measures, and unacceptably high risk, which leads to the refusal of the obliged entity to maintain business relations.
Customer due diligence:
- The list of grounds for customer due diligence procedure has been updated (depending on the amounts, the nature of the transactions, the presence of suspicions, doubts, when establishing business relations).
- The content is clearly defined: identification, verification of the client, establishment and implementation of beneficiary verification measures, determining (understanding) the purpose and nature of future business relationships (or financial transaction), constant monitoring, keeping documents, data, client information up-to-date.
- The procedure of assets freezing is introduced. Assets, if they are related to terrorism and its financing, the proliferation of weapons of mass destruction and its financing, shall be frozen.
- The ground for assets freeze is information available to the obliged entity that the assets concerned are directly or indirectly related to a person involved in terrorist activities or subject to international sanctions.
- Obliged entity shall block flow and / or operations with frozen assets and shall report this to the competent authorities.
Ultimate beneficiary owners (hereinafter, the “UBO”):
- The definition was clarified (the indicators of indirect determining influence were actualized).
- The special aspects of the UBO determining were prescribed (no exclusive reliance on USR data, necessity of precise understanding of a person of the UBO, appliance of risk-oriented approach etc.)
Politically exposed persons (hereinafter, the “PEP”):
- The definition was clarified (performing of political functions during last 3 years is no longer the obligatory PEP indicator, actualization of the list of PEP).
- Specification of supplementary revision actions regarding the PEP (analysis of several reliable sources, approval of the CEO for establishment (continuation) of business relations and/or threshold transacting, determining the sources of funds/assets etc.).Please consider that the Law increases the liability of obliged entities for its breaching. 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). Additionally, article 209 of Criminal Code of Ukraine (money laundering) was rephrased. We will be delighted to provide you with advisory support on matters related to compliance with the labor legislation. We also invite you to watch our AML webinar recording, where we have discussed the main amendments of the Law more precisely, by the link.