Bigger Fines, Fewer Checks: What Changes Will Arrive in Financial Monitoring

In April of 2020, new rules of financial monitoring will come into effect in Ukraine. The regulations envisage the audit of cryptocurrency transactions and include gambling business owners into the list of monitoring. What else to expect?

How state financial
monitoring works

Financial monitoring is a governmental system intended to fight against the laundering of funds obtained from illegal sources and via fraud. Ukraine was on the blacklist of the Financial Action Task Force on Money Laundering (FATF) several times – in 2002 and 2010. The obsolete law on financial monitoring required an update and its new version was signed in December of 2019.

According to the new regulations, the threshold of sums that are subject to inspection will increase significantly. The number of reasons for monitoring has decreased significantly, and the list of entities that are subject to initial verification has enlarged. Now it includes private accountants and gambling companies. The updated law aims to reduce the number of checks and stiffen penal measures for violators.

Main changes in the law
on financial monitoring

One of the main updates in the rules of financial monitoring is the increase in the threshold of the transaction sum, which is subject to verification. It has been UAH 150,000 lately and will grow to UAH 400,000 this April. Besides, they simplified the scheme that helped to recognize suspicious transactions and operations that require monitoring. There have been 17 parameters lately and now their number has been reduced to four.

The new law stipulates that the following financial operations fall under monitoring:

• unusually big;
• that lack objective and legal foundations;
• conducted illegally;
• difficult in their structure.

Now banks and other financial institutions will have to develop an efficient monitoring system. In order to do so, they will be allowed to verify the fiscal data of customers and contractors.

Financial checks
in the gambling field

Due to the upcoming adoption of the law on the legalization of gambling, subjects of initial monitoring now include gambling companies: lottery businesses, bookmakers, casinos, and others. They will have to perform control when accepting bets and paying out winnings. The threshold sum is UAH 30,000 because the gambling business is very risky.

It means that when companies accept deposits and payout winnings equal to or exceeding this sum, they have to ask for passport and fiscal details of the customer, and then to forward them to the State Financial Monitoring Service of Ukraine. This practice is common for all countries where gambling activity is legal.

Fines for subjects
of initial monitoring

Subjects that failed to file data to the State Financial Monitoring Service on time or concealed data will be considered accomplices in the probable money-laundering affair. This misdoing envisages a fine, the size of which has been increased by the new law. Sums will differ depending on the situation and type of violation.

The biggest fine for non-bank organizations has been UAH 34,000 lately. Now the law envisages a flexible penalty scheme with the maximum fine of UAH 204,000. For example, sanctions can be imposed for the violation of requirements to the procedure of financial audit or document storage.

The sum will also depend on the circumstances, character of the violation, losses of the third parties, and many other things. Subjects of the initial financial monitoring will have a possibility to appeal against the decision to impose a fine. Besides, they can work out an agreement about the elimination of infringements and their consequences.

Financial monitoring
and cryptocurrency operations

From now on, cryptocurrency transactions will fall under financial monitoring in Ukraine. Companies that exchange, sell, and make digital asset transfers (exchanges, bank organizations, and others) will be subjects of initial monitoring.

In this case, the threshold sum will equal to UAH 30,000 just as in the situation with gambling companies. Operations that involve such or bigger sums will have to be checked, and customer data will have to be sent to the State Financial Monitoring Service. It is necessary in order to fight against money laundering associated with cryptocurrency transactions.

It will suffice for the customer to explain once from what sources funds come and to provide the needed documents in order not to report on every big cryptocurrency transaction in the future.

To conclude

The Minister of Finance Oksana Markarova says that the new draft law is intended to simplify the financial monitoring system in the country, as well as to increase the efficiency of anti-money laundering efforts. Lawmakers had been working on the paper, which was approved in late 2019, for several years: it factors in the interests of the financial market players and the basic requirements of international directives.