Financial Intelligence in a New Way

published: 28.04.2020

Tomorrow, April 28, a new law on financial monitoring comes into force under the long and already familiarly frightening title “On Preventing and Counteracting the Legalization (Laundering) of Criminally Obtained Incomes, the Financing of Terrorism and the Proliferation of Weapons of Mass Destruction”

For an ordinary citizen, such a name does not refer to his own affairs, unless he hides a super-villainous suit and remote control from a time bomb under the bed. However, the provisions of the law apply to the financial activities of a significantly larger number of citizens than it might seem at first glance. For example, postal service providers are also included in the list of subjects of primary financial monitoring, and thus, if you are an active user of New Mail services, under certain conditions, New Mail, as a financial monitoring subject, will be required to collect information from it subsequent analysis, and in specified cases – the transfer of this information “where necessary.” So, let’s take a closer look at who, in what cases, and how will track your financial activity and what actions may follow.

Initial financial monitoring is required to:

Banks, insurance companies, pawnshops, and other financial institutions;

Payment organizations, participants and members of payment systems;

Commodity and other exchanges that conduct financial transactions with goods;

Professional participants in the securities market (except for persons trading in the stock market)

Postal service providers, institutions providing funds transfer and foreign exchange services (for example, Western Union)

Branches and representative offices of foreign companies providing financial services in Ukraine;

Virtual Asset Service Providers

Legal entities providing certain financial services (not being financial institutions)

Auditors, accountants, tax consultants, lawyers, notaries, law firms, companies that provide services for the creation and management of legal entities, realtors, business entities that sell precious metals and stones and their products for cash (jewelers). It is important to note that such a requirement does not apply to persons who carry out such activities on the basis of labor relations, that is, an inhouse lawyer or an accountant in the state is not required to transmit information about the financial transactions of the employer to domestic financial intelligence.

When are these entities required to conduct customer due diligence?

– In the case of establishing business relations. However, the check is not necessary if it is about participation in the lottery, if the player’s bet does not exceed the amount of 5 thousand UAH or the conclusion of an insurance contract, according to which the insurance payment is not provided if the insured person lives to the age specified by the contract, where the general insurance payment does not exceed 27 thousand UAH

– The presence of suspicion (regardless of the amount of the financial transaction, in this case, the entity must urgently notify the specially authorized body and submit documents, on the basis of which such suspicions arose)

– Making transfers (including international) without opening an account in the amount of 30 thousand UAH. and more

– Conducting financial transactions with virtual assets in the amount of 30 000 UAH. and more

– There are doubts about the reliability and completeness of the customer identification data

– Conducting a one-time operation without establishing business relations in the amount of 400 thousand UAH or more (30 thousand UAH or more, if it is a lottery). The bank, or other financial monitoring entity, is obligated to report to state authorities about such operations within 5 days.

Moreover, if this amount is divided into several transactions, such operations can be recognized as related and will not cost without verification.

In addition, entities are required to retain documents for 5 years after the termination of business relations with a client, in particular with regard to conducting due diligence of customers and even persons who were denied business relations and financial transactions – all documentation, including correspondence.

t should also be noted that one of the principles of this law is the exemption from liability for harm caused in connection with financial monitoring by persons who are required to carry out it. From which it follows that if your financial transaction is frozen due to suspicions that arose during an audit, for example, by a bank, and this would damage your business, it is highly unlikely that it will be compensated by initiating a lawsuit against the bank, so the main the recommendation is to initially critically evaluate the planned financial transactions, look at the declared amounts for compliance with threshold indicators and prepare a package of documents in defense of their legal nature and be prepared to prove the transparency of the origin of the funds.

In particular, one of the main principles of preventing and counteracting money laundering is the principle of priority of preventive measures over countermeasures – which encourages monitoring entities to carefully monitor the financial activity of clients and carefully analyze information about them.

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