Financial Monitoring in Ukraine: New Requirements for Legal Entities

Most of us have already heard about the new financial monitoring rules effective from April 28, 2020. The adopted law somewhat changes the financial monitoring rules and brings them into compliance with current global and European standards. In this article, we would like to draw attention to some of the requirements of the new law and what legal entities need to do to avoid penalties in the future.

New Obligations for Legal Entities

The revised Law of Ukraine "On Preventing and Counteracting Legalization (Laundering) of Criminal Proceeds..." No. 361-IX, obliges all legal entities to keep information about the ultimate beneficial owner and ownership structure up-to-date, update it, and notify the state registrar of changes within 30 business days from the date of their occurrence, as well as submit documents confirming these changes to the state registrar.

This means that now, every year, within 14 calendar days, starting from the date of state registration, legal entities must confirm information about the ultimate beneficial owner and ownership structure.

What information about the ultimate beneficial owner and ownership structure needs to be confirmed?

• surname, first name, patronymic (if any)
• date of birth
• country of citizenship, series and number of the passport of a citizen of Ukraine or a foreigner's passport document
• place of residence, registration number of the taxpayer's accounting card (if any)
• full name and identification code (for a resident) of the founder of the legal entity in which this person is the ultimate beneficial owner
• nature and extent (level, degree, share) of beneficial ownership.

What documents are required?

1. Application for confirmation of information about the ultimate beneficial owner.
2. Ownership structure in the form and content defined in accordance with legislation.
3. Extract, statement, or other document from a trade, banking, court register, etc., confirming the registration of a non-resident legal entity in its country of location – if the founder of the legal entity is a non-resident legal entity.
4. Notarized copy of the identity document of the person who is the ultimate beneficial owner of the legal entity – for a non-resident individual and, if such document is issued without the use of the Unified State Demographic Register, – for a resident individual.

We specifically draw attention to the fact that all legal entities registered before the Law came into force (before April 28, 2020) are obliged to submit information about the ultimate beneficial owner and ownership structure to the state registrar within 3 months from the date of entry into force of the regulatory legal act that will approve the form and content of the ownership structure.

Penalty Amounts

The legislator has provided for quite serious penalties. For violating these requirements (according to Part 6 of Article 166(11) of the Code of Administrative Offenses), the head may be fined from 1 thousand to 3 thousand tax-free minimum incomes of citizens (UAH 17,000 – 51,000). Such an amount is another reason to take the fulfillment of the new financial monitoring requirements for legal entities seriously.

Conclusion

The new financial monitoring requirements raise many questions – do updated extracts or statements need to be obtained for a new date? Or, if no changes have occurred, can existing extracts or statements be submitted? We will say in advance – in our opinion, if there have been no changes in the information about the founders, there is no need to obtain an updated extract or statement, but we will await more detailed explanations.

In addition, the form and content of the ownership structure are currently not approved. The form of the structure can be expected to appear no earlier than July-August 2020, which means we will have some time to prepare and submit the relevant documents, so we are keeping a close watch and awaiting further clarifications from the Ministry of Justice.

We understand how complex the confirmation process can be, so you can contact us at any time for assistance in preparing and submitting information about the ultimate beneficial owner and ownership structure. Send us an inquiry or call us – and we will answer your questions and resolve the issues together.