September 2016 - In August 2016, the National Bank of Ukraine (NBU) adopted a package of regulations, which from 1 September 2016 introduce significant changes to the scope and procedure for local banks to monitor the cross-border financial transactions of Ukrainian residents. Among the new measures is the Regulation on Analysis and Verification by Banks of Documents and Information on Financial Transactions and Their Parties, No. 369, dated 15 August 2016. This and other new regulations supplement existing domestic anti-money-laundering rules and focus primarily on outflows of capital from Ukraine.
Regulation No. 369 applies to a transaction of a Ukrainian resident, unless the payment thereunder (other than distribution of dividends) falls under any exception, including among others:
(a) is made in favour of a state or has the benefit of a state guarantee;
(b) relates to a loan extended under an international treaty of Ukraine, ratified by the Ukrainian Parliament;
(c) is made under an agreement (including a loan agreement) between a Ukrainian resident and an international financial organization of which Ukraine is a member or has similar status;
(d) is made under an agreement between a Ukrainian resident and an international company (including its subsidiary and affiliate) which is listed among the Forbes World’s Biggest Public Companies (Forbes Global 2000);
(e) is made between a Ukrainian resident and a foreign company in connection with an international treaty of Ukraine; and
(f) does not exceed UAH 150,000 (currently, approx. USD 6,000) or its equivalent in foreign currency.
If the payment does not benefit from any of the above exemptions, the Ukrainian bank in charge of the payment is required to analyse whether the payment triggers any “risk indicators”, in particular if:
(1) the volume or nature of the transaction is inconsistent with the ordinary course of business of the client;
(2) the transaction concerns the transfer of funds by an individual in an amount exceeding USD 150,000 or its equivalent in other currency;
(3) the transaction lacks economic sense and/or obvious legitimate purpose;
(4) the value of goods, services or assets indicated in a contract relating to the transaction is incompatible with their fair market price;
(5) an advance payment under a supply agreement is made in circumstances when there are reasons to believe that the non-resident supplier may breach the contract;
(6) the transaction agreement provides for payment to a third party outside of Ukraine;
(7) a payment under a transaction agreement is made (i) by means of a bill of exchange or a promissory note, (ii) by a guarantor under a guarantee agreement, (iii) in favour of the assignee that acquired claims under the transaction agreement or (iv) by means of set-off;
(8) the transaction agreement provides for the delivery of goods to a country other than Ukraine;
(9) the payment concerns penalties and/or damages, including on the basis of a court judgement or a settlement agreement;
(10) the transaction payment terms assume use of companies that have features referred to in the FATF recommendations, in particular non-transparent ownership structure;
(11) the party to the transaction is located/resides in an offshore jurisdiction or jurisdiction that does not implement the recommendations of international organisations that combat money laundering and terrorist financing, as well as financing of proliferation of weapons of mass destruction;
(12) the NBU has placed the bank of the Ukrainian resident’s counterparty to the transaction on the list of foreign banks that may perform risky financial transactions;
(13) the purpose of the payment is distribution of dividends to a foreign investor;
(14) in relation to an import contract for goods, the payment is made in respect of the goods for which customs clearance was carried out more than one calendar year in advance of the payment request;
(15) a party to the transaction is a publicly exposed person or a person related to a publicly exposed person;
(16) the borrower under a loan agreement where the principal amount exceeds USD 500,000 or its equivalent in other currency is a Ukrainian individual;
(17) in relation to a loan agreement, the lender’s rights have been assigned, or the borrower’s obligations have been transferred, to another person;
(18) the initial NBU registration of the loan agreement has been cancelled;
(19) the loan agreement provides for disbursement of the loan by way of direct payment to the non-resident supplier of the Ukrainian borrower; or
(20) a Ukrainian bank as the original lender has assigned its rights under the loan agreement to a non-resident.
If the payment raises a risk concern, the bank must request the documents indicated in Regulation No. 369 as well as any other documents it considers necessary to establish whether the transaction jeopardises the interests of the bank’s depositors or other creditors, or seeks to use the bank as a conduit for the purposes of money laundering, terrorism financing or financing of proliferation of weapons of mass destruction. If the bank is satisfied with its review, it may only proceed to process the payment once the NBU has given its approval, including by means of silent consent.
Where the transaction in question is a borrowing by a Ukrainian resident from a non-resident, Regulation No. 369 will be set in motion at the time of the Ukrainian borrower’s application for registration of the loan agreement (or amendments thereto) by the NBU for the purposes of its effectiveness. Once the borrower’s bank has cleared the filing, the NBU is allowed to delay the registration for a further 30 calendar days in addition to the regular 14 business days, if the principal amount of the loan exceeds USD 500,000 and any of the risk indicators set out in (15) through (20) above are met.
On 18 August 2016, the NBU adopted Resolution No. 372, effective 19 August 2016, which rescinded, among others, the Regulation on Payments in National and Foreign Currency in Favour of Non-residents under Certain Transactions, No. 597, dated 30 December 2003. Subject to some exceptions, Regulation No. 597 allowed Ukrainian banks to process a payment in excess of, most recently, EUR 50,000 under a contract for the import of services, goods and IP rights in Ukraine, only where the Ukrainian payer had obtained a certificate issued by the specialized state body confirming the consistency of the contract price with market prices. With effect from 1 September 2016, Ukrainian banks will perform a similar function, based on Regulation No. 369.