Changes to Financial Monitoring of Operations with Politically Exposed Persons in Ukraine

The National Bank of Ukraine has recently issued regulatory updates pertaining to financial monitoring by financial institutions. The changes concern clients who (or whose UBOs) are politically exposed persons, members of their families and persons associated with politically exposed persons (hereinafter - PEP). Particularly:

1. Clarification of sources of funds:

The NBU has increased the threshold for operations which require verification of sources of PEP’s funds from UAH 200,000 per quarter to UAH 400,000 per calendar month. At that, the level of risk of a business relationship with such client / one-time financial transaction for a significant amount has to be low, and the institution must have no suspicion of AML violations in respect of such client.

2. Strengthening the Risk-Based Approach:

The updated framework promotes a risk-based approach to AML efforts. Financial institutions are encouraged to assess their risks and allocate resources accordingly, focusing on areas of higher risk, and will be held responsible for improper application of a risk-based approach to clients who are PEPs. This includes establishment of unreasonable level of risk or taking disproportionate measures against them according to the risk category.

Impact:

To ensure compliance with the updated regulations, financial institutions 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 regulatory changes, please reach out to our Banking and Finance team

Source: Resolution of the Board of the National Bank of Ukraine No.108 dated 5 September 2023
(effective as of 7 September 2023)

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