On 14 October 2014, the Ukrainian Parliament adopted the Law “On prevention and counteraction to legalization (money laundering) of the proceeds from crime or terrorism financing, as well as financing of the proliferation of weapons of mass destruction” (the “AML Law”), which fully replaces the current anti-money laundering law (the “Current AML Law”). The AML Law comes into effect on 7 February 2015.
What the Law says?
The AML Law does not change the concept of the anti-money laundering controls provided for under the Current AML Law, but rather elaborates on the existing general framework and introduces certain novelties in comparison with the Current AML Law. In particular, the AML Law establishes the following novelties:
- the list of subjects of an initial financial monitoring was amended, particularly, (i) insurance brokers and advocates' offices were added to the list, and (ii) entrepreneurs and legal entities carrying out financial operations amounting to UAH150,000 with goods for cash were removed from the list;
- draws a distinction between the identification and verification of the clients by a subject of the initial financial monitoring whereby the former refers to collection of the identification data and the latter – to determining in client’s presence whether the identity of the client is in line with such identification data obtained from the client;
- envisages outsourcing of client identification/verification to a third party;
- clarifies the legal basis for analyzing clients and authorizes a subject of the initial financial monitoring to require a client (legal entity) to provide its ownership structure to enable it to determine beneficial owners of the client;
- provides for a list of clients (including local and foreign public figures) which must be regarded as high risk clients of the initial financial monitoring and sets out additional measures which must be applied towards such clients;
- clarifies the legal basis for a subject of the initial financial monitoring to terminate relationships with a client in case identification/verification of a client is not possible;
- the financial groups which consist of subjects of the initial financial monitoring are required to develop and implement unified rules on financial monitoring for the participants of such financial group;
- introduces a system of national assessment of risks of financial monitoring;
- clarifies the legal basis for identification/verification of the clients, e.g., (i) excludes clients carrying out certain financial operations which amount does not exceed UAH5,000 from identification/verification requirement but (ii) requires identification and verification of a client in the event of a money transfer (including international money transfers) carried out by an individual and individual entrepreneur without opening an account the amount of which equals or exceeds UAH15,000;
- clarifies and expands criteria for a financial operation to be subject to mandatory financial monitoring and amends criteria for a financial operation to be subject to internal financial monitoring; e.g., the list of criteria for a financial transaction to be subject to mandatory financial monitoring is expanded by, inter alia, including such criteria as (i) money transfers to or receipt of funds by a non-profit entity, and (ii) financial operations by a person regarded as a high risk client;
- clarifies identification requirements applicable to non-residents, including trusts and provides for additional identification measures to be applied by insurance companies, money transfer institutions, lottery houses; e.g., subject of an initial financial monitoring must ensure that all money transfer transactions in an amount which equals or exceeds UAH15,000 are accompanied by specific information about a sender and a recipient.
Why is the Law significant?
The AML Law was developed to adjust the Ukrainian anti-money laundering legislation to (i) recently updated FATF Standards as well as (ii) to meet certain agreements reached in the course of negotiating a new Stand-By Agreement with the International Monetary Fund.