Member of the Union of Industrialists and Businessmen of Turkey and Ukraine “TUSIB” – law Firm SDM Partners has prepared some clarifications on new issues:
On April 28, 2020, the Law of Ukraine No. 361-IX entered into force, which implements the European and international financial monitoring standards. In particular, the law provides for such novelties:
(A) the laid foundation for the possibility of the subjects of primary financial monitoring (hereinafter – “SPFM”) to exercise a remote customers verification,
(B) the number of signs of financial transactions that SPFM is required to report to the State Financial Monitoring Department has been reduced from 17 to 4: SPFM is obliged to inform about financial transactions related to cash, transfer of funds abroad, public figures and clients from countries that do not comply with international, intergovernmental recommendations organizations operating in the anti-legalization area,
(C) the threshold for financial transactions, which SPFM is obliged to inform the State Financial Monitoring about, has been increased (from 150 000 ₴ to 400 000 ₴),
(D) along with the transition to a risk-based approach, when reporting by SPFM the information on suspicious financial transactions, adequate measures are introduced for violation of anti-legalization legislation from written warning and significant penalties to the license cancelation,
(E) the range of SPFMs is expanding, which includes business entities that provide tax advice, persons rendering services for the establishment, provision of activities or management of legal entities and service providers related to the circulation of virtual assets,
(F) the procedure for determining the ultimate beneficial owners has been improved,
(G) mechanisms are envisaged to regulate the are of virtual assets circulation, in particular, a regulator is defined for entities in this area,
(H) the mechanism for applying targeted financial sanctions is being improved in accordance with the requirements of FATF Recommendations 6 and 7 and UN Security Council Resolution Nos. 1267 and 1373, in particular, the introduction of an asset freeze procedure and improvement of provisions for international cooperation in this direction,
(I) a third-party assignment mechanism is introduced to conduct due diligence,
(K) new requirements for supporting transfers with information about the initiator and the recipient of funds are established,
(L) amendments are made to the Criminal Code and the Criminal Procedure Code, in particular, Article 209 of the Criminal Code of Ukraine (legalization (laundering) of property obtained by criminal means) has been set out in a new wording.
In addition to the above, the Law provides for the introduction of legal regulation on the issue of cryptocurrency circulation in Ukraine. So,
(A) cryptocurrency is defined by the legislator as a virtual asset, i.e. a digital expression of value that can be traded in a digital format or transfer, and which can be used for payment or investment purposes,
(B) providers of services related to the circulation of virtual assets are defined by the legislator as any individual or legal entities performing one of the following activities: exchange of virtual assets, transfer of virtual assets, storage and / or administration of virtual assets or tools that allow controlling virtual assets, participation and provision of financial services related to the issuer’s offer and / or sale of virtual assets. Thus, according to this definition, the providers of services related to the circulation of virtual assets are not only cryptocurrency exchanges and exchangers, but also companies that conduct ICOs (Initial Coin Offering).
(C) the parties to transactions with virtual assets in the amount of more than 30 000 ₴ are subject to identification, SPFM may request verification of the parties and for a smaller amount of the transaction with virtual assets,
(D) providers of services related to the circulation of virtual assets are required to submit reports on the conduct of operations to the State Financial Monitoring Service, the amount of which exceeds $ 400 000, if there is reason to believe that these operations:
– conducted by politically exposed persons,
– carried out by a party registered in one of the countries subject to sanctions,
– re intended to transfer funds abroad,
– carried out using cash.
(E) The Ministry of Digital Transformation of Ukraine is determined as the regulator for virtual assets.