27 April 2020
The Law introduces a new risk-oriented financial monitoring approach similar to EU anti-money laundering standards.
Here are the principal elements of the Law relevant to business:
1) The definition of ultimate beneficial owner ("UBO") has been widened. The list of persons who are deemed UBOs of a trust was extended to include a founder, trustee, protector, beneficiary or group of beneficiaries of the trust, as well as any other individual who has a decisive influence on the activities of the trust, including indirectly through other persons. The Law has also introduced the notion of a "trust-like legal establishment". The UBO of such an establishment shall be a person who has with respect to such establishment the status equivalent to that of the UBO of a trust.
2) UBO registration and reporting:
- Ukrainian companies will now be required to update information on their UBOs within 30 business days following any changes of UBOs.
- Ukrainian companies will need to provide information about their UBOs to the registrar each time they register any changes in the Legal Entities Registry (even though such changes may not be related to the change of the UBO).
- Ukrainian companies will be required to annually update information about their UBOs.
- All Ukrainian companies registered with the Legal Entities Registry prior to 28 April 2020 will need to update the information on their UBOs within three months after the issuance by the relevant state body of the regulation establishing the procedure of such update (not prepared as yet).
3) Reporting documents. For the purposes of the above-mentioned reporting, the company will need to provide to the registrar:
- application and ownership structure prepared in accordance with the regulatory requirements;
- if a founder of the company is a foreign company, an extract from the trade register with respect to such foreign company; and
- notarised (and, if notarised abroad, apostilled and translated) copy of the passport of the individual who is a UBO of the company.
4) Other reporting requirements. If any institution which is required to perform initial financial monitoring ("IFMI") (for example, a bank) discovers that the information on the UBOs of a company provided to such IFMI differs from that of such company recorded in the Legal Entities Registry, the IFMI will be required to report this to the relevant authorities.
5) Politically exposed persons definition. Previous law considered a person as a PEP only within three years after such person ceased to be in public office. The new Law does not have such a limitation. A person is considered to be a PEP for an unlimited time after holding a public office. The new Law also provides that enhanced financial monitoring measures should continue to apply to a PEP within 12 months after he/she ceased being in public office. Following this, enhanced measures may be applied at the discretion of the relevant IFMI.
6) The criteria of operations subject to monitoring has been amended. The threshold of operations subject to monitoring was increased from UAH 150,000 to UAH 400,000 (around EUR 13,000), and UAH 5,000 for cash transfers. This rule, however, does not apply to suspicious operations, which would become subject to financial monitoring irrespective of the amount(s) involved. Certain criteria qualifying the operation as subject to financial monitoring have now been removed. For example, a transfer of funds to or from the account of a company within three months following its creation, or payments under cross-border contracts which do not provide for the delivery of goods, will no longer automatically require financial monitoring.
7) Virtual assets operations will need to be monitored if their value exceeds UAH 30,000 (around EUR 1,000). Virtual assets are defined as digital expressions of value which can be used for payment or investment purposes. Most probably, all cryptocurrencies, tokens and electronic money will fall within this definition.
8) Liability for breach of the Law has been substantially increased. The amount of a fine depends on the type of the breach. The maximum fine for institutions which are required to perform financial monitoring is up to 10 per cent of their total annual turnover, but no more than UAH 135 million. For non-compliance with the UBO reporting requirements a director of the company may be fined amounts ranging from UAH 17,000 to UAH 51,000.