Repeated financial monitoring. Why do banks conduct it

published: 29.10.2020

The tax amnesty does not release from criminal liability

Competitors have been increasingly complaining about bank financial monitoring since the spring. The banks themselves explain the new strict requirements by the law “On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction”, which came into force in April.

However, banks often arbitrarily exceed the measures provided by this law, which causes dissatisfaction with business. Why this happens, which of the banks is better to emulate, as well as the nuances of the tax amnesty told UBR.ua senior partner K.A.C. Group Tetiana Kuzmych during a business forum on tax reform in Ukraine.

There is a lot of talk now about a tax amnesty. Who will it affect in the first place?

We are talking about medium and large businesses that have exceeded the thresholds that force them to legalize the CFC (controlling foreign companies – ed.). If property allows you to do it on very favorable terms, it is this category of people.

What advice would you give to those who decide to file a “zero declaration”?

What would I advise? Always think before you do! Despite the opportunities provided by the legislation, despite the way it is fashionable to say, the “hype” that exists in society, about KIKs, about the planned tax amnesty, we must probably remember that no tax the amnesty did not pass, was not even announced.

Unfortunately, this amnesty bill is also being delayed. Everyone was waiting for him this year in a package with the laws that have now entered into force. This is financial monitoring, which has made life easier for our clients, probably by raising the thresholds to UAH 400 thousand plus left 4 signs out of 17. This is a controlled foreign company, the law №466 law, which amended the Tax Code and which provides a very good opportunity to legalize the income of the final beneficiary at reasonable rates. This is Article 170.13.

And in the package with these laws, of course, they were waiting for the amnesty law, which even if it happens, there is no certainty that it is necessary to go to the terms of this law, at least in the wording of those projects that exist today. Therefore, probably the best way now is to look at your farm, many already know it thoroughly, and listen to the advice of consultants, weigh it for yourself, make the final choice: which is better?

Strict financial monitoring rules are usually criticized by small businesses. Did this law make it easier or more complicated for big business?

This is a threshold increase to 400 thousand UAH is generally unprincipled. Financial monitoring became more complicated two years ago after the entry into force of FATCA. This is the American system, which says that those who felt financial monitoring had to bring to the bank and show documents, transactions that take place on counterparties, when it came to working with the dollar or American and British companies.

With the entry into force of the law on financial monitoring in April, businesses received new “letters of happiness.” Why? Because the subjects of primary financial monitoring were given three months to think, to restructure their domestic policies, to withdraw them in such a way that they meet the requirements of the new law.

And what did the banks do? First of all, they sent letters to customers just in case, saying that, let’s say, let’s re-monitor you. There is an obligation, and in the old law it was observed that the subject should carry out financial monitoring and updating of the information on the client who works with it, at least once a year if it is a question of publicly important persons, or once in two years or once in five years in other cases. Just in case, the banks have now made such warning letters to everyone.

Monitoring is a complicated thing. Our business is a little used to living like this: today I run forward, I earn money, and I am not very worried about supporting documents. If earlier in our practice, as a law firm, the main share fell on complex projects and their implementation, now we are engaged in such “boring” work: preparing for a contract, writing complex contracts – all that the business lacked.

How to explain to financial monitoring what kind of transaction it will be, notify the bank in advance so that its transaction goes well, show the bank that its client is not a risk area, that this is its normal activity. Unfortunately, we need to deal with these unpleasant formalities now. Therefore, answering your question, it clearly complicates the work of the business.

This is an additional administrative burden. Unfortunately, not all employees in regular companies’ cope. This is such an intelligent product that it is probably necessary to educate the staff who will be able to give this result for such an employee to work in the company for 10 years. Therefore complicates, of course, financial monitoring, complicates.

There is a view that banks very often, so to speak, take a tougher stance on risk than required by law – and simply because they believe it is better to be tougher. Why?

I’ll tell you what it has to do with. There are a number of banks in Ukraine, these are international banks – now customers choose mainly international to service their cash flows, because the system of Ukrainian national banks has not paid off. You know how many unpleasant moments were connected with it. But international banks are players, including at the international level. And at the international level, there is still the same tradition of imposing fines for non-compliance with the law to combat money laundering and the financing of terrorism and weapons of mass destruction.

For violations of the law, one of the banks, for example, received a fine of about 2 billion euros, the other – 8.9 billion euros. What does this mean? That banks, realizing what financial sanctions will follow for their carelessness, will be tough. They cannot behave differently. They train their employees, tighten compliance departments, they also have problems in this direction, people do not cope with such tasks. Otherwise, pay fines out of your own pocket.

Will our citizens believe in a tax amnesty? Or do they need to do something to make them believe it?

If we are talking about the category of our citizens, who, let’s be honest, will not be affected by the issue of tax amnesty, who are not worried about the origin of wealth, its preservation, probably these citizens will be satisfied with some showy public flogging of those who came zero declaration. There will be criminal proceedings, look, it will all be indicative. Because the electorate, which is unfortunately being targeted, is unlikely to be concerned about the tax amnesty.

There has been talk for many years about a tax amnesty, will it be possible to hold it this time?

I’m not an oracle. But in Russia the amnesty has passed. There are certain difficulties, corruption is everywhere, in any state. The first attempts were to attack those who went and surrendered voluntarily, law enforcement agencies also quickly earned. But the one who is “older” at the northern neighbor said: no, we have announced, let’s not act so harshly. It was most likely some kind of strong-willed decision.

In Ukraine, of which I am a patriot, there is a slightly different historical truth. There have always been many hetmans here, hetmans fought among themselves and so that there was someone will, which would at the level of execution of this law – and the laws themselves are often written good – gave the command “fas”, and then selectively pull, I do not I have illusions.

That is, we still have the possibility of fines against those who file a zero declaration?

Not even just fines. There are many types of criminal offenses that can be prosecuted. The draft laws on amnesty work as follows: you came and voluntarily submitted information about yourself that you did not want to submit, and you are released from criminal liability. And criminal liability is a stretchable concept. We have a lot of crimes in the direction of economic activity in the Criminal Code, which can, with such an interpretation of the law, punish these people.

Article 209 – the responsibility for the evasion and legalization of these funds obtained by criminal means is not long ago. It has several predicate compositions, which together with this article make it possible – in my opinion – not to let people go free, not to give them peace of mind if they sign these zero declarations.

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