Ukraine – Know Your Customer (KYC) Rules

 

 

In Ukraine, high risks of money laundering have been identified in foreign economic activities, credit and finance, the fuel and energy industry, and the metal and mineral resources market. Illicit proceeds are primarily generated through corruption; fictitious entrepreneurship and fraud; trafficking in drugs, arms or persons; organized crime; prostitution; and tax evasion. Various laundering methodologies are used, including the use of real estate, insurance, bulk cash smuggling, and financial institutions. There are a significant market for smuggled goods and a large informal financial sector in the country. These activities are linked to evasion of taxes and customs duties.

In October 2011, the Financial Action Task Force (FATF) removed Ukraine from its list of countries with ―strategic deficiencies‖ following Ukraine‘s enactment of amendments to its anti-money laundering/counter-terrorist financing (AML/CFT) legislation. Ukraine continues to work to further strengthen its AML/CFT regime.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: NO

Ukraine – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Ukrainian Law:

    • Banks and non-banking institutions
    • Insurance companies
    • Gambling institutions
    • Credit unions
    • Depositories
    • Securities traders
    • Registers
    • Pawn shops
    • Mail service operators and other operators conducting money transfers
    • Real estate traders
    • Certain traders of precious metals and stones
    • Notaries, auditors, independent lawyers
    • Leasing providers

Ukraine – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 778,907 January – September 2011

Number of CTRs received and time frame: Not available

Ukraine combines STRs and CTRs in its reporting.

The following is a list of STR covered entities covered by Ukrainian Law:

    • Banks and non-banking institutions
    • Insurance companies
    • Gambling institutions
    • Credit unions
    • Depositories
    • Securities traders
    • Registers
    • Pawn shops
    • Mail service operators and other operators conducting money transfers
    • Real estate traders
    • Certain traders of precious metals and stones
    • Notaries, auditors, independent lawyers
    • Leasing providers

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: 13 in the first half of 2011
Convictions: One in the first half of 2011

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

While it does not appear that significant narcotics proceeds are laundered through Ukraine‘s financial institutions, the rise of cybercrime and related transnational organized crime would suggest that significant amounts of U.S. currency are diverted to this region outside financial institutions.

In April 2011, Ukraine adopted amendments to its AML/CFT legislation, making insider trading and stock market manipulation predicate crimes for money laundering and improving the procedures for administrative seizure related to terrorist assets. There is no corporate criminal liability because the Law on Corporate Liability has not taken effect yet. Most importantly, while Ukraine‘s legislation has been significantly modernized, Ukraine lacks examples of successful prosecutions of money laundering. This is due to the lack of specialized expertise among prosecutors in handling complex financial cases and corruption within law enforcement and the courts. In order to correct these problems, Ukraine needs to reform its Prosecutor General‘s Office to allow for greater specialization of prosecutors and improved coordination among prosecutors, investigators, and the FIU. Additionally, although the current legislation provides for autonomous prosecution of money laundering, in practice a link is often sought between a specific predicate offense and money laundering. Ukrainian authorities are unable to break out prosecutions for autonomous money laundering, or cases where the money laundering offense is added to another predicate offense, as well as to differentiate between self- or third-party laundering.

Amendments to the AML law in 2010 require enhanced due diligence procedures for PEPs. However, the procedure of informing primary financial monitoring agencies about the list of PEPs of foreign countries is yet to be developed.

While Ukraine has the necessary treaties signed and ratified, in many instances they are not applied or applied poorly. This is particularly true in the area of international law enforcement cooperation, mutual legal assistance and asset forfeiture. Furthermore, while Ukraine is a party to UNCAC and UNTOC, the provisions of these conventions are not implemented or are not working properly in Ukraine.