New law on financial monitoring. What bank clients need to know.

As of 28 April 2020, new payment requirements have come into force. This is envisaged by the Law on Prevention and Counteraction of Legalisation (Laundering) of Criminal Proceeds, Terrorism Financing and Financing of Proliferation of Weapons of Mass Destruction.

The new law aims to modernise requirements to counteract the legalisation of money laundering, achieve harmonisation with EU standards and reduce requirements for the average client of a financial institution.

Here are answers to basic questions about the law.

Identification of clients involved in transactions without opening an account

Banks, in accordance with the requirements of the new law, should focus on the highest risk areas – risky and large-scale transactions which exceed UAH 400,000.

Until 28 April, private clients who were involved in transactions of at least UAH 15,000 without opening a bank account had to undergo partial identification during the settlement transaction and full identification if the amount exceeded UAH 150,000.

As of 28 April, the limits have been raised. Now partial identification will be carried out for private clients involved in transactions without opening an account for amounts of at least UAH 30,000, and clients who use settlement transactions without opening an account for amounts over UAH 400,000 will be subject to full identification.

Partial identification means that the client needs to have a passport on hand. Full identification requires the client to submit a passport and ITN to the bank's cash desk as well as complete and sign a questionnaire in which he/she provides more detailed information about himself/herself. This is the same information needed to open a bank account, but without signing any documents to establish a client relationship with the bank.

Concerning foreign currency transactions

The threshold amount on foreign exchange transactions for which simplified currency supervision requirements are set has been increased from UAH 150,000 to UAH 400,000 (equivalent).

Money transfers of at least UAH 5,000

As of 28 April, private clients who do not open a bank account must undergo partial identification during money transfers to a card or replenishment of an account in amounts of at least UAH 5,000.

Clients who replenish an account or provide financial assistance with a value of more than UAH 5,000 in cash will be asked to present a passport at the bank's cash desk. Clients do not need to have an income certificate or other documentation for each payment. Only a passport is required.

Card identification will be required during use of cash deposit machines. If the client replenishes the account after being identified, there is no limit of UAH 5,000.

These new policies do not apply to budgetary payments, payments for housing services, payments for goods or services, or loan repayment.

Wire transfers from card to card

Wire payments from card to card or from account to account can still be made without restrictions and payments do not need to be split into instalments. Why? Because the bank account owners to which the payment cards are linked are already identified. The bank possesses information about each account owner and cardholder. The bank knows their usual transactions based on the payment history and has information that the client himself/herself provided to the bank when opening an account.

In addition, ordinary small-scale transactions are not subject to financial monitoring. Because these are low-risk transactions, they will not be scrutinised.