The NBU welcomes the approval of the Law of Ukraine On 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’ Regarding Politically Exposed Persons.
“We are grateful to the parliament of Ukraine for adopting the amendments to 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. We are moving toward meeting a structural benchmark under the IMF Memorandum. This will ensure that the updated law complies with FATF global standards and EU legislation in this area, and help Ukraine come closer to EU accession,” said NBU Governor Andriy Pyshnyy.
The updated version of the law establishes the status of a politically exposed person (PEP) for life, but at the same time, it introduces mechanisms to prevent a formal approach by reporting institutions to servicing clients with this status.
This approach previously led to the categorization of PEPs as high-risk clients without an actual feasibility study and with numerous cases of unjustified denial of financial services to politicians, their relatives, and related parties.
The law adopted by the parliament stipulates that when establishing business relations with PEPs and servicing them, reporting institutions are required to apply the risk-based approach and will be liable for its improper application.
For taking a formal approach by setting an unjustified high level of risk or refusing to provide services without proper grounds, or vice versa, disregarding the client's PEP status, nonbank reporting institutions may be imposed with a corrective measure in the form of a fine of up to UAH 1.7 million. This amount of fine (100 thousand tax-free minimum incomes) is provided for in the adopted law.
A different amount of fine is applied to banks – up to UAH 10 million in accordance with the Regulation on Applying Corrective Measures by the National Bank of Ukraine, which was amended by NBU Board Resolution No. 80 dated 21 June 2023.
The law also stipulates that if more than twelve months pass since a PEP stopped performing significant public functions and the reporting institution makes sure that such a person no longer carries PEP risks, as well as no other risks, the reporting institution does not take certain measures with regard such a person, their family members, and related persons. These measures include obtaining the authorization from the management to establish/continue business relations with the PEP, determining the origin of income (wealth) and the origin of funds, and conducting in-depth monitoring of business relations.
The said law restores assigning the PEP status for life, which was previously limited to the time spent in public office and three years after leaving such office in accordance with the amendments introduced by the Law of Ukraine No. 2736-IX On Amending Certain Laws of Ukraine on Protection of Ukrainian Financial System from Actions of State Committing Military Aggression Against Ukraine, and Adaptation of Ukraine’s Laws to Certain Standards of the Financial Action Task Force (FATF) and Requirements of Directive (EU) 2018/843 dated 4 November 2022. The lifelong PEP status complies with international standards and European norms in the field of financial monitoring.
The law comes into effect on the next day after its publication.