COMPARATIVE GUIDE
11 July 2023

Anti Money Laundering Comparative Guide

Anti Money Laundering Comparative Guide for the jurisdiction of Ukraine, check out our comparative guides section to compare across multiple countries
Ukraine Government, Public Sector

1 Legal and enforcement framework

1.1 Which legislative and regulatory provisions constitute the anti-money laundering, counter-terrorist financing and general financial crime prevention (collectively, ‘AML') regime in your jurisdiction, from a regulatory (preventive/sanctions) and enforcement (civil/criminal penalties) perspective? Are there any legislative and regulatory requirements that apply below the national level (ie, at a state or regional level)?

The main statute setting out the AML regime in Ukraine is the Law of Ukraine on Prevention and Counteraction of Laundering of Proceeds of Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction (‘AML Law'). Certain norms regarding this regime are also set out in the Law of Ukraine on Banks and Banking Activities.

Thematic bylaws are also adopted and applied – for example, Order 182 of the State Financial Monitoring Committee of Ukraine dated 25 December 2009 on Approval of the Typology of Laundering of Proceeds Obtained through Criminal Means – Properties and Signs of Operations Related to Money Laundering by Withdrawal of Cash: Tactical Research and Practical Investigation.

In addition, bylaws are in force that specifically regulate issues of financial monitoring and international sanctions, such as the following:

  • the Procedure for Forming a List of Persons Associated with the Conduct of Terrorist Activities or in Respect of Whom International Sanctions Have Been Applied (approved by Resolution 622 of the Cabinet of Ministers of Ukraine dated 22 July 2020);
  • the Procedure for Submission of Information for Registration (Removal from Registration/Renewal) of Subjects of Primary Financial Monitoring, Registration and Submission by Subjects of Primary Financial Monitoring to the State Financial Monitoring Service of Information on Financial Transactions Subject to Financial Monitoring, Other Information that May Be Related to the Laundering of Proceeds Obtained through Crime, the Financing of Terrorism, and the Financing of the Proliferation of Weapons of Mass Destruction (approved by Resolution 850 of the Cabinet of Ministers of Ukraine dated 9 September 2020);
  • the Procedure for Keeping Records of Information on Financial Transactions Subject to Financial Monitoring by the State Service of Financial Monitoring (approved by Resolution 850 of the Cabinet of Ministers of Ukraine dated 9 September 2020); and
  • the Procedure for Keeping Records of Subjects of Primary Financial Monitoring by the State Financial Monitoring Service (approved by Resolution 850 of the Cabinet of Ministers of Ukraine dated 9 September 2020).

Sanctions in the form of criminal liability for the violation of norms related to AML procedures are set out in the Criminal Code of Ukraine.

There is a single legislative system in the territory of Ukraine; therefore, no additional legislative and regulatory requirements apply below the national level (eg, at the regional level).

1.2 Which bilateral and multilateral instruments on AML have effect in your jurisdiction?

Ukraine has ratified two main conventions relating to AML:

In addition, as of 3 March 2023, the State Department of Financial Monitoring – which operates as part of the Ministry of Finance – and the corresponding state bodies of foreign countries have signed 81 memoranda on AML cooperation. A list of these documents is available here (in Ukrainian).

1.3 Which public sector bodies and authorities are responsible for enforcing the AML laws and regulations? What powers do they have?

The state bodies that are responsible for ensuring compliance with the anti-money laundering laws are:

  • the National Bank of Ukraine;
  • the Ministry of Finance, as the central body of executive power that ensures the formation and implementation of state policy in this area;
  • the Ministry of Justice;
  • the National Securities and Stock Market Commission;
  • the Ministry of Digital Transformation; and
  • the State Financial Monitoring Service as a specially authorised body (Part 3, Article 6 of the AML Law).

The National Bank of Ukraine:

  • performs the functions of state regulation and supervision; and
  • conducts inspections of banks to ensure their compliance with the law in this area and the adequacy of measures to prevent and counter money laundering (Article 63 of the Law of Ukraine on Banks and Banking Activities).

Accordingly, the State Financial Monitoring Service organises inspections of business entities and monitors their compliance with the law in this area.

1.4 Are there any self-regulatory organisations or professional associations? What powers do they have?

There are no specialised AML organisations or associations in Ukraine. However, there are several professional organisations whose activities are indirectly related to this field, such as:

  • the Association of Stock Market Lawyers;
  • the Professional Association of Capital and Derivatives Market Participants;
  • the Ukrainian Investment Business Association; and
  • the Finance and Investment Management Association.

These organisations have the status of self-governing professional communities. Their members:

  • participate in the development of relevant bills; and
  • interact with state bodies on thematic issues relating to the clarification of legislation.

In addition, representatives from these organisations fulfil consultative and advisory functions for the state authorities of Ukraine.

1.5 What is the general approach of the financial services regulators in enforcing the AML laws and regulations?

As a general rule, in conducting financial monitoring, the regulators adopt a so-called ‘risk-oriented approach'.

Coordination between system participants on preventing AML and taking countermeasures in this area is also ensured, including with international institutions and similar bodies (Articles 3 and 7 of the AML Law).

1.6 What are the statistics regarding past and ongoing AML procedures in your jurisdiction?

According to official information, the State Financial Monitoring Service, as a specially authorised body, received more than 1 million reports about financial transactions subject to financial monitoring in 2022. Of these, more than 52,000 related to suspicious financial transactions.

In 2022:

  • 934 reports were sent to law enforcement agencies – in particular, to:
    • the Security Service of Ukraine (339);
    • national police bodies (191);
    • the Bureau of Economic Security of Ukraine (125);
    • prosecutor's offices (109);
    • the National Anti-corruption Bureau of Ukraine (96);
    • the State Bureau of Investigation (73); and
    • intelligence agencies (one generalised report);
  • the value of all financial transactions potentially relating to the laundering of funds or the commission of a criminal offence amounted to UAH 75.7 billion; and
  • the total amount of financial transactions stopped by the State Financial Monitoring Service and blocked funds was equivalent to UAH 7.7 billion.

That same year, in the Unified State Register of Court Decisions – in which all court decisions issued by courts of general jurisdiction in Ukraine are published – only eight verdicts concerned the prosecution of persons for the commission of a criminal offence under Article 209 of the Criminal Code of Ukraine (these decisions do not relate to financial transactions).

1.7 What reporting activities exist for reporting suspicious activities and/or transactions (SARs)? Are there any specific powers to identify the proceeds of crime or to require an explanation as to the source of funds?

In Ukraine, the financial monitoring system exists at the state and primary levels.

The subjects of state monitoring are:

  • the National Bank of Ukraine;
  • the State Financial Monitoring Service;
  • the Ministry of Justice;
  • the National Securities and Stock Market Commission; and
  • the Ministry of Digital Transformation.

The subjects of primary monitoring are as follows:

  • banks, insurers, insurance brokers, credit unions, pawnshops and other financial institutions;
  • operators of payment systems;
  • commodity and other exchanges conducting financial transactions with goods;
  • professional participants in the securities markets, except for persons engaged in the organisation of trading on the securities markets;
  • postal operators that provide financial payment services, postal transfer services and/or currency transaction services;
  • branches or representative offices of foreign business entities that provide financial services in the territory of Ukraine;
  • the subjects of audit activity;
  • accountants and business entities providing accounting services;
  • business entities providing tax consultancy;
  • law firms, law associations and lawyers who practise law individually;
  • notaries;
  • business entities providing legal services;
  • persons that provide services relating to the creation, operation or management of legal entities;
  • business entities providing intermediary services and/or consulting services for real estate transactions;
  • business entities that trade in precious metals and precious stones and their products for cash;
  • business entities that conduct lotteries and/or gambling;
  • business entities that carry out trade activities involving cultural values and/or provide intermediary services relating to such activities;
  • providers of services relating to the circulation of virtual assets; and
  • other legal entities which are not financial institutions, but which provide separate financial services.

The subjects of primary financial monitoring develop, implement and update financial monitoring rules, primary financial monitoring programmes and other internal documents on financial monitoring issues, aimed at:

  • ensuring effective risk management; and
  • preventing the use of services and products that are subject to primary financial monitoring for the laundering of proceeds obtained through crime, the financing of terrorism or the financing of the proliferation of weapons of mass destruction.

The subjects of primary monitoring must report on:

  • financial transactions in the amount of at least UAH 400,000 relating to Russia and other countries on the EU blacklist;
  • financial transactions of politically exposed persons and their relatives in the amount of at least UAH 400,000;
  • payment transactions for the transfer of funds of at least UAH 400,000 to states classified by the Cabinet of Ministers as offshore zones;
  • cash financial transactions with a value of at least UAH 400,000;
  • suspicious financial transactions (activities) or attempts to conduct them, regardless of the amount involved; and
  • discrepancies between:
    • the information on the ultimate beneficial owners of a client contained in the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organisations; and
    • the information on the ultimate beneficial owners obtained by a subject of primary financial monitoring as a result of due diligence.

1.8 Is there a central authority for reporting (ie, a Financial Intelligence Unit (FIU) responsible for assessing SARs reported from relevant entities subject to AML requirements)? Does this authority work internationally?

Yes, the State Financial Monitoring Service is responsible for this. Its tasks include cooperating with international intergovernmental organisations which are active in this field, including:

  • the Financial Action Task Force (FATF);
  • the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL);
  • the European Union;
  • the World Bank;
  • the International Monetary Fund;
  • the Egmont Group of Financial Intelligence Units; and
  • the United Nations.

It also cooperates with foreign institutions within the framework of international agreements entered into by Ukraine.

1.9 What relevant public or private corporate or other registers exist to assist with conducting and/or validating AML information, ultimate beneficial owners etc; and what details must be disclosed?

In Ukraine, there are both state and private registries that can assist in finding and confirming such information.

Access to individual state registries is generally public; but certain access restrictions are currently in place which, from the government's point of view, are related to the current regime of martial law due to Russia's armed aggression in Ukraine.

The Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organisations is a public state register which contains the details of the ultimate beneficial owners of a business and similar details. In addition, there are private services that are synchronised with public services – for example, Opendatabot and Youcontrol also allow users to:

  • identify the ultimate beneficial owners of a company;
  • obtain information about court decisions, recoveries or the evaluation of a potential counterparty; and
  • obtain certain analytical information collated these services.

In addition, separate registers maintained by state bodies provide opportunities for public access to information for citizens and companies. For example, the State Financial Monitoring Service maintains a database of the subjects of primary financial monitoring (business entities) and the supervision of relevant financial transactions, which has an internal (official) purpose.

Regarding ultimate beneficial owners, on 11 July 2021 the Regulation on the Form and Content of the Ownership Structure, approved by Order 163 of the Ministry of Finance of 19 March 2021, entered into force.

In accordance with this regulation and the norms of the AML Law, all legal entities in Ukraine that were registered as of 11 July 2021 had to submit information about their ultimate beneficial owners to the state registrar within 90 days. This term was subsequently extended to one year; and on the commencement of full-scale war in Ukraine, the term was extended indefinitely until the date of termination or cancellation of martial law in Ukraine.

Thus, legal entities must submit details of their own ownership structure, indicating the persons that:

  • directly or indirectly own the company independently or jointly with other persons; or
  • regardless of formal ownership, have the possibility to exert significant influence on the management or activity of the legal entity.

The notarised passports of the ultimate beneficial owners must also be submitted to the state registrar.

In addition, the State Financial Monitoring Service maintains a list of persons associated with the conduct of terrorist activities or against whom international sanctions have been applied.

1.10 How do such registers interoperate with one another and do they do so internationally?

The supervision of financial transactions and subjects of primary financial monitoring (business entities) is handled by the State Financial Monitoring Service, which cooperates with international bodies and institutions on an ongoing basis. For example, in February 2023, the service (according to the MONEYVAL Committee of the Council of Europe quota and with the support of the EU Anti-corruption Initiative in Ukraine project) participated in the plenary meeting and meetings of relevant FATF working groups held in Paris.

All of the registers discussed in question 1 contain useful information, including information on international financial transactions. Information – including details of international sources (eg, regarding EU or US sanctions) – is continually added to the list of persons associated with the conduct of terrorist activities or in respect of whom international sanctions have been applied.

2 Scope of application

2.1 Can both individuals and companies be prosecuted under the AML legislation?

The Law of Ukraine on the Prevention and Counteraction of Legalisation (Laundering) of Proceeds Obtained through Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction (‘AML Law') divides the subjects that can be prosecuted into two categories:

  • persons responsible for preventing and countering the laundering of proceeds of crime, the financing of terrorism and the financing of the proliferation of weapons of mass destruction; and
  • those responsible for facilitating the actions of such persons.

The first category of persons may be prosecuted for violating the AML laws, with penalties including:

  • fines;
  • cancellation of licences; and
  • suspension from work.

In case of a deliberate violation of the AML Law, the guilty person may be found criminally liable in accordance with Article 209-1 of the Criminal Code, Penalties include:

  • a fine of between 1,000 and 3,000 minimum incomes; and
  • deprivation of the right to hold certain positions or engage in certain activities for up to three years.

Persons guilty of laundering property obtained by crime are liable in accordance with Article 209 of the Criminal Code of Ukraine. Penalties include:

  • imprisonment for between three and six years;
  • deprivation of the right to hold certain positions or engage in certain activities for up to two years; and
  • confiscation of property.

2.2 Can foreign companies be prosecuted under the AML legislation?

Yes, but only in terms of responsibility for violations of the AML Law, because the subjects of primary financial monitoring are, among other things, branches or representative offices of foreign economic entities that provide financial services in the territory of Ukraine (Clause 6, Part 2, Article 6 of the AML Law).

With regard to criminal responsibility for the laundering of funds, only officials of foreign companies can be held responsible, since legal entities cannot be the subjects of criminal offences according to the norms of the Criminal Code.

2.3 Does the AML legislation have extraterritorial reach?

Yes, it is possible to prosecute foreign persons through the system of international cooperation, including through the application of responsibility.

2.4 Are there restrictions on financial institutions' accounts for foreign shell banks? Which types of firms are subject to such restrictions?

Yes, certain restrictions exist at the regulatory level.

According to Ukrainian law, such institutions may potentially be subject to appropriate supervision. In particular, the AML Law:

  • defines a ‘shell bank' as a non-resident institution (ie, a bank, another financial institution or an institution that carries out activities similar to the activities of financial institutions) which:
    • does not have a physical presence in the country of registration and licensing; and
    • is not part of a regulated financial group; and
  • provides that such institutions are subject to effective consolidated supervision (Article 1 of the AML Law).

At the same time, the subjects of primary financial monitoring – that is, financial institutions – are prohibited from opening and maintaining anonymous (numbered) accounts and establishing correspondent relations with shell banks, as well as with non-resident banks and other financial institutions which are known to support correspondent relations with shell banks (Part 1, Article 11 of the AML Law).

2.5 Are there cross-border transaction reporting requirements? If so, what must be reported under what circumstances and to whom?

The National Bank of Ukraine conducts currency supervision of cross-border operations. The agents of currency supervision in Ukraine are the banking and financial institutions that carry out such cross-border operations.

Ukrainian law requires the subjects of cross-border transactions to report on any transactions with a value of more than UAH 400,000.

In accordance with Clause 21 of National Bank of Ukraine Board Resolution 5 dated 2 January 2019 on the Approval of the Regulation on Protection Measures and Determining the Procedure for Carrying Out Certain Operations in Foreign Currency, the maximum settlement term for transactions involving the export and import of goods is 365 calendar days. Thus, the subjects of cross-border transactions must provide the servicing bank with proof of:

  • the import of goods into the territory of Ukraine within 365 calendar days of the payment being made; or
  • in the case of export operations, the transfer of currency funds to the recipient's account.

In case of a violation of the settlement term for transactions involving the export or import of goods, a fine of 0.3% for each day of violation may be imposed.

Due to Russia's armed aggression in Ukraine, cross-border transactions with Russia and Belarus are currently prohibited in Ukraine.

2.6 Does money laundering of the proceeds of foreign crimes constitute an offence in your jurisdiction?

Yes. Such actions are considered a crime under Article 209 of the Criminal Code, which – depending on the qualification – provides for three types of punishments, including the confiscation of property.

3 AML offences

3.1 What AML offences are recognised in your jurisdiction and what do they involve? Are there any codified or common law defences?

The Criminal Code includes two articles on with money-laundering crimes.

Article 209 defines as crimes actions relating to the laundering of property obtained through criminal means. Such crimes can involve:

  • acquiring, possessing, using or disposing of property in respect of which the factual circumstances testify to its acquisition by criminal means, including by effecting a financial transaction;
  • effecting a transaction involving such property, or moving or changing the form of such property; or
  • committing acts aimed at concealing or disguising the origin of such property or its possession, the rights to such property, the sources of its origin or its location, if these acts are committed by someone that knew or should have known that such property directly or indirectly constituted the proceeds of crime, whether in full or in part.

Article 209-1 of the Criminal Code defines two types of acts as crimes:

  • intentional non-submission, delayed submission or inaccurate submission of information on financial transactions that are subject to financial monitoring in accordance with the law, where such actions cause significant damage; and
  • disclosure in any form of secret financial monitoring or the exchange of information about a financial transaction and its participants between the subjects of primary financial monitoring.

The subjects of the crimes set out in Article 209-1 can include persons responsible for such actions, since the submission of such information or the preservation of such a secret directly implies such an obligation under the relevant law.

The general law which regulates these issues is the Law of Ukraine on the Prevention and Counteraction of Legalisation (Laundering) of Proceeds Obtained through Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction, as well as other laws and related bylaws.

The Criminal Code provides for criminal liability for violations of the law and establishes a system of protection and responsibility together with other laws and related bylaws. Alongside the Code of Ukraine on Administrative Offences, it also provides for administrative liability for such actions.

3.2 How are predicate offences defined in your jurisdiction? Is tax evasion a predicate offence for money laundering?

Tax evasion is not a predicate offence, as this involves the non-payment of taxes on legally received funds.

Criminal liability for tax evasion is provided for in Article 212 of the Criminal Code. Article 212 criminalises the intentional evasion of mandatory taxes and fees under the taxation system, introduced in accordance with the procedure established by law, where this:

  • results in the diversion of significant amounts of funds from budgets or state special purpose funds; and
  • is committed by:
    • an official of an enterprise, institution or organisation – regardless of the form of ownership;
    • anyone who engages in business activities without creating a legal entity; or
    • any other person who is obliged to pay such taxes and fees.

In addition, under Ukrainian law, there is administrative responsibility for violating the stipulated procedures in relation to matters such as:

  • the submission of information;
  • reporting; and
  • deadlines.

However, such matters do not present a significant public danger. At the same time, administrative liability is assumed for actions such as:

  • violation of the requirements on proper verification;
  • failure to submit information;
  • untimely submission of information; and
  • submission of inaccurate information (Article 166-9 of the Code of Administrative Offences).

The prescribed penalty is a fine.

3.3 What reporting offences exist (eg, failure to disclose, tipping-off and prejudicing or obstructing an investigation)?

Both criminal and administrative liability are provided for actions relating to compliance with the financial monitoring procedures.

Article 209-1 of the Criminal Code provides for criminal liability on two grounds:

  • intentional non-submission, untimely submission or submission of unreliable information about financial transactions that are subject to financial monitoring in accordance with the law; or
  • disclosure in any form of secret financial monitoring or the exchange of information about a financial transaction and its participants between the subjects of primary financial monitoring

At the same time, Article 166-9 of the Code of Administrative Offences provides for administrative liability on other grounds relating to non-compliance with regulatory rules on proper verification, failure to submit, untimely submission or submission of inaccurate information (see question 3.2).

3.4 Do any restrictions or thresholds (eg, in terms of parties, asset type or transaction value) serve to limit the types of activities that constitute AML offences?

As outlined in question 1.7, the threshold value set under Ukrainian law is UAH 400,000; transactions exceeding UAH 400,000 are subject to additional analysis.

As for the threshold indicators of the crime, criminal responsibility for the crimes set out in Article 209 of the Criminal Code begins with the amount of UAH 8.052 million.

4 Compliance

4.1 Is implementing an AML compliance programme a regulatory requirement in your jurisdiction? If so, what aspects must this cover? Are there any criteria and/or conditions that a money laundering reporting officer or any other person responsible for AML must observe?

Yes. The existence of compliance programmes is mentioned in:

  • Article 18 of the Law of Ukraine on the Prevention and Counteraction of Legalisation (Laundering) of Proceeds Obtained through Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction (‘AML Law') on the powers and duties of the subjects of state financial monitoring; and
  • separate specific provisions of law on various subjects relating to financial monitoring.

For example, Clause 4 of the Regulation on the Implementation of Financial Monitoring by the Subjects of Primary Financial Monitoring – which is enforced by the Ministry of Justice – includes provisions on, among other things:

  • rules and programmes for conducting financial monitoring; and
  • the activities of employees responsible for conducting financial monitoring.

Clause 7, Section 4 of the regulation provides that internal documents must contain 22 criteria, including:

  • a description of the subject's internal financial monitoring system;
  • the procedure for implementing client due diligence measures;
  • the procedure for monitoring the financial transactions of clients;
  • the procedure for ensuring the confidentiality of financial monitoring; and
  • the procedure for conducting internal audits of the entity's activities for compliance with the AML regime.

It also sets out the actions that employees must follow in conducting and reporting on financial monitoring. The recommended minimum list of information which such reports should contain is set out in Clause 6, Section 5.

The State Financial Monitoring Service is authorised to provide information to the Ukrainian law enforcement agencies if there are facts confirming money laundering. The main condition is the completeness of the information (Article 25 of the AML Law).

4.2 What customer and business partner due diligence (know your customer/client due diligence) requirements apply in this regard? Do any look-through requirements apply? Are there any simplified or enhanced due diligence requirements for certain types of persons and activities?

As a general rule, customer due diligence should be conducted as soon as possible after first contact with the customer. Article 11 of the AML Law provides grounds for conducting a proper inspection (eg, the establishment of business relations; the presence of suspicions).

The subject of primary financial monitoring (Part 5, Article 11 of the AML Law) has the right to request information about the counterparty from the state body/state registrar. The deadline for providing such information is 10 working days from receipt of this request. At the same time, it is possible to request official documents for verification directly from the client (Part 6, Article 11 of the AML Law).

An exemption is also available in relation to the provision of specialised consulting services, including legal services (Part 3, Article 10 of the AML Law). Thus, notaries, law offices, law associations, lawyers who practise law individually and other persons who provide legal services need not fulfil their obligations to conduct due diligence of a client and to notify a specially authorised body of their suspicions where they are:

  • providing services relating to the protection of the client;
  • representing the client's interests before judicial bodies;
  • seeking to facilitate the pre-trial settlement of a disputes; or
  • advising on the protection and representation of the client.

4.3 What due diligence requirements apply in relation to ultimate beneficial owners?

In order to identify the ultimate beneficial owner, a subject of primary financial monitoring:

  • requests and receives from a legal entity client details of its ownership structure;
  • verifies the information on the founders, trust owners, defenders (if any) and so on of a trust or other similar legal entity;
  • can utilise data contained in official documents, official and/or other sources; and
  • must take appropriate measures to verify the authenticity of the information regarding the ultimate beneficial owner and ensure that it knows who the ultimate beneficial owner is by taking reasonable steps to understand the ownership (control) and ownership structure.

At the same time, it is expressly provided that a subject of primary financial monitoring, in identifying the final beneficial owner of a client, should not rely exclusively on the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organisations.

The requirements for identifying the final beneficial owner are fulfilled by the subject of primary financial monitoring using a risk-oriented approach.

4.4 Which books and records requirements have relevance in the AML context? What privacy laws apply?

The State Financial Monitoring Service ensures the protection and confidentiality of financial monitoring (Article 16 of the AML Law). The State Financial Monitoring Service must retain information about a financial transaction for five years from receipt of such information (Part 4, Article 25 of the AML Law).

The State Financial Monitoring Service is prohibited from:

  • disclosing and/or transferring to anyone information on secret financial monitoring; or
  • informing anyone about the receipt of information regarding a financial transaction and its participants.

An employee of such a specially authorised body will be held responsible in accordance with the law or court order if he or she discloses in any way details of:

  • secret financial monitoring;
  • the receipt of information about a financial transaction and its participants; and/or
  • the provision of a request, decision or mandate and/or receipt of a response thereto.

Also, the intelligence agencies must maintain confidentiality in accordance with the relevant laws and the criminal procedural principle of investigative secrecy. The illegal disclosure by an authorised employee of information relating to financial monitoring is a criminal offence (Article 209-1 of the Criminal Code).

4.5 What other compliance best practices should a company implement to mitigate the risk of AML violations?

As a general rule, the subject of primary financial monitoring is obliged to carry out enhanced due diligence measures in relation to clients with which the risk of business relations (the risk of a financial transaction without establishing business relations) is high (Part 1, Article 12 of the AML Law).

The subjects of primary financial monitoring may determine:

  • the circumstances under which enhanced due diligence measures are to be implemented; and
  • the actions that they should take under such circumstances.

In addition, the right to refuse cooperation with the counterparty in case of a suspicion of AML violations is provided under Article 15 of the AML Law.

4.6 Are companies obliged to report financial irregularities or actual or potential AML violations?

No, as they are not subjects of financial monitoring in accordance with the law.

4.7 Does failure to implement an adequate AML programme constitute a regulatory and/or criminal violation in your jurisdiction?

Yes, liability in the form of a fine is imposed in case of:

  • failure to ensure the proper organisation and conduct of primary financial monitoring;
  • failure to implement a proper risk management system; or
  • repeated failure to comply with the requirements for subjects of state financial monitoring to eliminate detected violations and/or to take measures to eliminate the causes that contributed to their commission.

The fine can range up to 10% of total annual turnover, but is capped at 7.95 million tax-free minimum incomes, according to Article 32 of the AML Law.

5 Enforcement

5.1 Can companies that voluntarily report AML violations or cooperate with investigations benefit from leniency in your jurisdiction?

No, an automatic disclaimer is not guaranteed.

5.2 Can the existence of an AML compliance programme constitute a defence to charges of AML violations?

No, as this concerns compliance with the regulatory requirements of the Law of Ukraine on the Prevention and Counteraction of Legalisation (Laundering) of Proceeds Obtained through Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction (‘AML Law').

Also, while the existence of an anti-money laundering compliance programme prevents a significant number of violations, it does not guarantee automatic immunity from liability for other AML violations (eg, avoiding audits).

5.3 What other defences are available to companies charged with AML violations?

In case of an AML violation, it is possible to conclude a settlement agreement with the authorities under Chapter 7 of the Regulation on the Application of Measures of influence by the National Bank of Ukraine to Institutions for Violation of Legislation on Financial Monitoring.

5.4 Can companies negotiate a pre-trial settlement through plea bargaining, settlement agreements or similar?

Yes. It is possible for a subject of primary financial monitoring to enter into a written agreement under which it undertakes to pay a specified monetary obligation and take measures, for example:

  • to eliminate and/or prevent further AML violations; and
  • to enhance the effectiveness of the functioning and/or adequacy of its risk management system (Clause 5, Part 3, Article 32 of the AML Law).

5.5 What penalties can be imposed for violations of the AML legislation? How are these determined? Can non-exhaustive penalties be imposed for such violations (eg, exclusion from public procurement, exclusion from entitlement to public benefits or aid, disqualification from the practice of certain commercial activities, judicial winding up)?

According to Part 5, Article 32 of the AML Law, fines can be imposed on a subject of primary financial monitoring under 15 grounds. The amount of the fine varies depending on the type of violation.

For example, a fine of up to 12,000 tax-free minimum incomes can be imposed for violations of requirements such as:

  • the requirement to conduct due diligence; and
  • the requirements to identify affiliations of clients and other persons to politically significant persons, members of their families and persons related to them (Part 1 of the AML Law).

Meanwhile, failure to comply with the terms of a settlement agreement (see questions 5.3 and 5.4) will result in a fine not exceeding the amount of the monetary obligation under that agreement (Part 8 of the AML Law).

If the violation involves a crime as defined in Article 209 or 209-1 of the Criminal Code, deprivation of liberty and the right to hold certain positions, as well as confiscation of property, is also possible.

5.6 Can funds, property and/or proceeds of AML and/or financial crime be subject to asset freezing/confiscation/forfeiture or victim compensation laws? If so, under what circumstances and what types of funds or property may be confiscated/forfeited? Can such actions be taken if there is no criminal conviction?

In accordance with the AML Law, a subject of primary financial monitoring must:

  • immediately, without prior notification of the client, freeze assets relating to terrorism and its financing or the proliferation of weapons of mass destruction and its financing; and
  • notify the State Financial Monitoring Service and the Security Service accordingly.

In addition, the law sets out the rules on when financial transactions should be stopped. A subject of primary financial monitoring:

  • has the right to stop a transaction if it is suspicious; and
  • is obliged to stop a transaction if there are suspicions of the commission of a criminal offence as defined by the Criminal Code of Ukraine.

On the day a financial transaction is stopped, in accordance with the procedure established by law, notification of the following is required:

  • the financial transaction;
  • the participants in the transaction; and
  • the balance of funds in the client's account opened by the subject of primary financial monitoring.

The suspension of financial operations is implemented without prior notice to the client for two working days from the date of suspension, which can be extended for a period of up to seven working days.

In case of suspicions, a specially authorised body can decide to stop expenditure transactions for up to seven working days. During that period, profitable financial operations are not stopped.

During the suspension of the relevant (expenditure) financial transactions, law enforcement bodies will conduct a pre-trial investigation on the grounds provided for by law.

It is possible to seize property during the investigation of a crime, and confiscation of property is possible as a sanction for violations of the law. A criminal record indicates that a crime has been committed and a penalty has been imposed in the form of confiscation.

There is also a mechanism through which the victims of crime can seek the return of their property: a civil lawsuit in criminal proceedings (under Part 1, Article 128 of the Criminal Procedure Code).

Confiscation can also be used as a type of international sanction for an alleged violation of international rules in this area. Given Russia's ongoing armed aggression in Ukraine, this currently applies to Russian beneficiaries, whose assets are transferred to the Agency for Search and Management of Assets.

5.7 What is the statute of limitations for prosecuting AML offences in your jurisdiction?

The general statute of limitations in Ukraine is three years.

The law also provides that in case of non-fulfilment or improper fulfilment by a subject of primary financial monitoring of the requirements of law, a penalty may be imposed on it that is proportionate to the committed violation within six months of the date of detection of the violation, but in any event within no later than three years (Article 32 of the AML Law).

In case of a criminal offence, special statutes of limitations apply as follows:

  • Minor crimes: Five years; and
  • Serious crimes: Seven years.

In the case of an administrative offence, any penalty must be applied within two months of the date of its commission. If the administrative offence relates to corruption, a fine must be imposed within three months of the date of its discovery, but in any event within no later than two years.

6 Alternatives to prosecution

6.1 What alternatives to criminal prosecution are available to enforcement agencies that find evidence of AML violations?

Such alternatives can be determined in court proceedings on the basis of an agreement which is provided for in Article 474 of the Criminal Procedure Code.

If an agreement is reached during the pre-trial investigation, the indictment with the agreement signed by the parties will be sent immediately sent to the court – that is, the court proceedings will still be conducted.

6.2 What procedures are involved in concluding an investigation in this way?

Currently, the following types of agreements can be concluded in criminal proceedings:

  • a reconciliation agreement between the victim and the suspect or accused; and
  • an agreement between the prosecutor and the suspect or the accused on admission of guilt (Article 472 of the Criminal Code).

A plea deal, which is relevant to this type of crime, is an agreement between the prosecution and the defence.

A plea agreement is concluded in the case of criminal proceedings regarding:

  • criminal misdemeanours;
  • minor crimes;
  • serious crimes; and
  • especially serious crimes.

However, there are conditions that must be met regarding the suspect and its actions in order to enter into such an agreement – for example:

  • the suspect must not have been the organiser; and
  • the criminal actions that the suspect has disclosed must be confirmed by evidence.

Both the prosecutor and the suspect can take the initiative to conclude a deal, under which agreement is reached on the conditions for the suspect's responsibility. This agreement will have further consequences: the suspect will be unable to defend its innocence during the trial.

6.3 What factors will determine whether such an alternative to prosecution is to be offered by an enforcement agency to those who have been involved in AML violations?

Several factors are important here – in particular:

  • the violator's attitude towards the violation committed;
  • how the violator has come into contact with law enforcement agencies; and
  • the extent to which it is possible to negotiate with victims on compensation for the damage caused.

At the same time, the circumstances taken into account by the prosecutor when concluding a plea agreement (Article 470 of the Criminal Procedure Code) include:

  • the degree and nature of the suspect or accused's assistance in conducting the criminal proceedings against it or other persons;
  • the nature and gravity of the charge (or suspicion);
  • a public interest in:
    • expediting pre-trial investigation and court proceedings; or
    • exposing a greater number of criminal offences; and
  • a public interest in preventing, detecting or stopping more criminal offences or other more serious criminal offences.

6.4 How common are these alternatives to prosecution?

The use of such alternatives has not been investigated to date. There is no official information on this matter in the public domain.

6.5 What reasons, if any, could lead to an increase in the use of such alternatives?

There are several such reasons, including:

  • the desire to improve measures of financial monitoring/countermeasures against laundering of income obtained through criminal means;
  • voluntary compensation for harm caused to victims;
  • assistance in the investigation;
  • willingness to cooperate with law enforcement agencies (eg, regarding the disclosure of schemes); and
  • voluntary admission of guilt.

7 Private AML enforcement

7.1 Are private enforcement actions for AML offences available in your jurisdiction? If so, where can they be brought and what process do they follow?

We have not personally encountered such lawsuits in Ukraine; but according to the general rules of law, everyone has the right to appeal to the court, so such lawsuits may take place.

7.2 What types of relief may be sought and what types of relief are most commonly awarded? How is the relief awarded determined?

No answer submitted for this question.

7.3 Can the decision in a private enforcement action be appealed? If so, to which reviewing authority?

No answer submitted for this question.

8 AML, cyber and crypto-assets

8.1 How does the AML regime dovetail with other cyber law in your jurisdiction?

The cyber legislation is still in the implementation stage.

The Law of Ukraine on Virtual Assets has been adopted but has not yet entered into force. This instrument stipulates that the law will enter into force on the same date as another law introducing amendments to the Tax Code regarding the peculiarities of taxation of transactions involving virtual assets.

At the same time, the law states that a provider of services relating to trade in virtual assets cannot have among its participants (founders or shareholders) legal entities which are registered in jurisdictions that do not fulfil or that improperly fulfil the recommendations of international intergovernmental organisations involved in the fight against the laundering of proceeds obtained through crime, the financing of terrorism or the financing of the proliferation of weapons of mass destruction (Item 8, Part 4, Article 9 of the Law of Ukraine on the Prevention and Counteraction of Legalisation (Laundering) of Proceeds Obtained through Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction).

8.2 What specific considerations, concerns and best practices should companies be aware of with regard to AML prevention in the cyber sphere?

The recommendation is currently to take enhanced measures to check the identity the counterparty, including during financial monitoring activities – for example, check whether a cryptocurrency really exists, how it was obtained and so on.

If necessary, requests should be made to the state authorities to provide relevant information; and appropriate verification should be carried out.

8.3 Does the AML regime extend to crypto-asset activity and if so, how?

Mechanisms to combat money laundering in cryptocurrency are still being implemented in Ukraine.

Today, it is assumed that the National Securities and Stock Market Commission, within its competence:

  • takes into account:
    • the international experience of the development of the virtual assets market; and
    • the recommendations of international and intergovernmental organisations; and
  • ensures the implementation of relevant international standards – in particular, those of the Financial Action Task Force (Part 3 of Article 24 of the Law of Ukraine on Virtual Assets).

9 Trends and predictions

9.1 How would you describe the current AML enforcement landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

For more than 20 years now, Ukraine has had normative acts that relate to regulation and law enforcement in the field of money laundering, including international rules and so on. These normative acts have gradually been updated in accordance with international standards, which is a positive sign of the development of industry legislation.

However, some elements of law enforcement – including regarding responsibility for AML violations – are at the implementation stage in practice.

In future, it will also be necessary to implement international standards – in particular the standards of the Financial Action Task Force.

Norms on the prevention of laundering of income through cryptocurrency will also come into force soon, once the relevant legislation takes effect.|

9.2 Has your jurisdiction's AML regime been evaluated by an international organisation, such as the Financial Action Task Force (FATF), the Council of Europe (Moneyval) or the International Monetary Fund; and if so, when?

Yes. In August 2020, the Committee of Experts of the Council of Europe on the Evaluation of Measures to Combat Money Laundering and Terrorist Financing (MONEYVAL) published its second report on Ukraine's progress within the framework of the fifth round of its AML/combating the financing of terrorism (CFT) review.

The report demonstrates that Ukraine has taken major steps towards aligning its national AML/CFT legislation more closely with international standards.

9.3 Does your jurisdiction meet the recommendations of the Financial Action Task Force; and if not, what are the barriers to meeting these?

In general, yes.

Two FATF recommendations were previously upgraded from negative ("Partially Compliant") to positive ("Mostly Compliant"):

  • Recommendation 5, "Crime of financing terrorism", as a result of changes to the AML Law; and
  • Recommendation 35, "Sanctions", due to a significant increase in liability for accountable institutions for violations in the AML field.

At the same time, MONEYVAL is focusing attention on the measures that will be taken to improve ratings in five further areas:

  • the latest technologies (Recommendation 15);
  • financial sanctions relating to terrorism (Recommendation 6);
  • financial sanctions relating to the financing of the proliferation of weapons of mass destruction (Recommendation 7);
  • regulation and supervision of representatives of non-financial professions and occupations (Recommendation 28); and
  • maintaining national statistics on combating money laundering and terrorist financing (Recommendation 33).

9.4 What noteworthy technology developments have you observed in your jurisdiction over the past 12 months in the growth of regtech and suptech solutions, as well areas where blockchain and digital assets or online-based communities are used as an enabler (eg, money laundering using video games or online forums)?

The National Bank of Ukraine's Fintech Development Strategy in Ukraine is in effect until 2025. In addition, the state regulator of the financial market has a concept for the development of innovative supervisory and regulatory technologies, which would promote the introduction of suptech and regtech.

The Law on Virtual Assets has also been adopted, although it has not yet entered into force; this legislation should also help to promote a proactive approach to the financial market in this area.

10 Tips and traps

10.1 What are your top tips for the smooth implementation of a robust AML compliance programme and what potential sticking points would you highlight?

The main advice is to follow the recommendations of the Financial Action Task Force which have a cross-border nature, including with regard to Ukraine.

It is also important to encourage the subjects of financial monitoring to submit information regarding possible offences.

Potential problems include those relating to:

  • the implementation provisions of international acts;
  • insufficient legal regulation of money laundering involving cryptocurrency, which is especially prevalent today; and
  • the activities of foreign online banks.

To date, there are no measures in place to combat money laundering involving cryptocurrency; the Law on Currency and Currency Operations contains only general regulations.

10.2 What are the key threats and trends that you have seen in your jurisdiction with respect to money-laundering techniques during the COVID-19 pandemic?

The main risks related to cybercrime, given that all (or mostly all) services moved online during the pandemic.

10.3 Are your jurisdiction's relevant AML legislative and rulemaking instruments available in online; and if so, are they publicly available and in English?

Yes. Legislative norms can be found on the website of the Parliament, under "Legislation".

This provides official translations of individual legal acts in English – for example, the Criminal Code of Ukraine is in translation. Some separate unofficial translations are also available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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