On 3 April 2019 the National Bank of Ukraine (NBU) unveiled the details for operation of current accounts by foreign companies in Ukrainian banks.1 The operation of such offshore accounts by foreign companies became possible under the new foreign currency rules that came into effect in February 2019 as reported earlier.
To ensure compliance of new current accounts of foreign companies with anti-money laundering rules, the NBU has amended the rules for financing monitoring applied by banks.2 Such current accounts cannot be operated by a "shell company" and the commercial bank must ensure that the account holder is not regarded as such.
The term "shell company" applies to any non-resident legal entity that:
- does not conduct any actual business in the country of its registration (e.g., has no sufficient assets and/or employees to conduct a certain business); and/or
- has a structure of ownership that prevents identification of its ultimate beneficial owners (controllers).
The bank must assess the account holder and form its own opinion regarding the treatment of a foreign legal entity as a "shell company."
Exemptions to the "shell company" rules extend to a holding company and other corporate entities, provided that the following criteria are met:
(i) The ownership structure is transparent.
(ii) The ownership structure allows ultimate beneficial owners to be identified.
(iii) The nature of the company's business is clear.
The bank is ultimately responsible for conducting a thorough check of foreign companies holding accounts with such bank and to detect any indicators of them being "shell companies." It is uncertain if these exemptions would catch private investment companies used by private investors.
The new definition of a "shell company" provides Ukrainian banks with a new instrument to detect money laundering and other suspicious activities of foreign customers.