Changes to Legislation Concerning Politically Exposed Persons in Ukraine

On October 17, 2023, the Verkhovna Rada of Ukraine has adopted the bill No. 9269-d concerning Politically Exposed Persons (“PEP”) (“Bill”) amending the Law of Ukraine "On Prevention and Counteraction to Legalisation (Laundering) of Criminal Proceeds, Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction" (hereinafter - the Law) to comply with the requirements of the IMF and align with the provisions of the Financial Action Task Force (FATF). These changes relate to the monitoring conducted by primary financial monitoring subjects (hereinafter - PFMS), including law firms and bar associations.

Among the major changes, the following are the most significant

• High-ranking officials [1] (local as well as foreign) will now have lifelong PEP status (previously - three years).
• The Law now expressly prescribes the PFMS to implementat a risk-based approach in respect of the clients who have the PEP status (or who are related persons of PEPs – the details criteria can be found in the Law) in order to prevent unjustified refusal of financial transactions and/or of establishment (extension) of business relationships.
• For unjustified refusal to carry out financial transactions and/or establish (extend) business relationships with clients who have PEP status or are related to PEPs, PFMS will be held responsible for up to UAH 1.7 million.
• In the event of rejecting a PEP client PFMS will be obligated to provide such a client with a reasoned explanation for such rejection in writing.
• The Law establishes a new state register of national public officials which is to be maintained by the State Financial Monitoring Service of Ukraine.
• After 12 months from the date when a person ceases to qualify as a PEP, and in the absence of signs during this time that such a person poses a risk typical for PEPs, PFMS should not take constant measures for enhanced financial monitoring (for example, identifying the sources of funds related to business relationships or transactions with such individuals).

The Bill is yet to obtain internal endorsements according to the legislative procedures in the Parliament and to be signed by the President.

Impact

To ensure compliance with the updated regulations, PFMS should consider taking the following steps:

• Review and update internal AML policies and procedures.
• Provide training to staff to ensure they are aware of the changes.
• Maintain meticulous records of customer interactions and transactions.

Non-compliance with the updated regulations can result in penalties and reputational damage.

For more information or legal advice regarding these regulatory changes, please consult with your legal counsel or compliance department.

More on this topic

Changes to Financial Monitoring of Operations with Politically Exposed Persons in Ukraine - as at September 2023

[1] In accordance with paragraph 20, the first paragraph of clause 28, and the first paragraph of clause 37 of the first part of Article 1 of the Law.

This legal alert is for informational purposes only and does not constitute legal advice.