Finance Ministry presents for a public discussion a bill on the prevention of and fight against the legalization of illegally received incomes, funding of terrorism and funding of the WMD dissemination

The Ministry of Finance presents for a public discussion the corrected draft Law of Ukraine “On amendments to some of the laws of Ukraine regarding the prevention of and fight against the legalization (laundering) of illegally received incomes, funding of terrorism and funding of the dissemination of mass-destruction weapons”.

What’s it about?

To adjust the Ukrainian legislation to the EU regulations (Fourth Directive (EU) 2015/849 and Regulation (EU) 2015/847) and to fulfill the obligations of Ukraine towards the International Monetary Fund, the Ministry of Finance prepared the above draft law jointly with the State Agency for Financial Monitoring, the National Bank of Ukraine and international experts (as part of the technical assistance provided by the USAID project “Transformation of the financial sector in Ukraine”). The draft law is aimed to improve and to clarify some of the regulations related to the prevention of and fights against the legalization (laundering) of illegal incomes as well as to align and to improve the regulations of the laws which are subject to amendments as well as to ensure the implementation of the new international standards for the fight against money laundering and the funding of terrorism.

What’s the benefit?

The draft law is aimed to comprehensively improve the Ukrainian legislation in the area of financial monitoring, especially in regard to the following issues:

- significant reduction of the number of features of financial transactions which shall be reported to the State Agency for Financial Monitoring by the entities of the primary financial monitoring (hereafter referred to as “SPFM”) (banks, insurance companies, loan associations, pawn offices, exchanges, payment-processing organizations and other financial institutions). This regulation concerns, among others, financial transactions exceeding 300,000 hryvnas (currently: 150,000 hryvnas) and related to cash funds, transfer of funds abroad by customers from Iran or North Korea as well as by public persons;

- increase of the number of the SPFMs which shall report suspicious financial transactions to the State Agency for Financial Monitoring (to include persons providing information and advisory services related to taxation issues);

- improvement of the mechanism for the verification of the end beneficiary owners of companies aimed to examine, if a person stated in the register as the end beneficiary is the real owner of the respective company or merely a nominal owner; to do this, it is proposed to incorporate the mandatory identification of end beneficiaries as the element of financial monitoring for most financial institutions and representatives of regulated professions (notaries, auditors, accountants, lawyers, attorneys, real estate agents, tax advisors and others);

- implementation of new regulations for the financial transactions of high-ranking state officials and public servants as well as judges, state prosecutors and Parliament members and their family members which require documentary proofs for their financial and property status;

- incremental transition to the risk-oriented approach in reporting suspicious financial transactions by SPFMs;

- implementation of appropriate impact measures imposed for the violation of the anti-laundering regulations (ranging from written warnings and fines not exceeding 10% of the revenue to the license cancellation);

- simplification of the procedure for the identification of politically significant persons based on declarations submitted to the NAZK and creation of the state register of national public persons and their family members;

- improvement of the legislative aspects which impact the quality of investigations regarding the legalization (laundering) of illegally received incomes;

- improvement of the regulations which ensure confidentiality for SPFMs which receive and execute requests, decisions and instructions from the State Agency for Financial Monitoring as well as, accordingly, the protection of SPFMs against threats, discrimination and other negative factors resulting from the measures related to the primary financial monitoring;

- mandatory tracing of fund transfers as a tool for preventing, detecting and investigating money laundering and funding of terrorism as well as for the implementation of restrictive actions;

- obliging payment-processing systems to provide the data of the payer and the receiver while processing payment transactions;

- obliging payment-processing systems to ensure the availability of the full data of payers and receivers;

- implementation of preventive actions aimed to counteract manipulations with funds received through crimes and the collection of money or assets for acts of terror.

What comes next?

After the public discussion the Ministry of Finance will submit the draft law to the Cabinet of Ministers and, after that, to the Parliament.