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LAW OF UKRAINE


on Introduction of Amendments into Certain Laws of Ukraine Regarding Prevention of Use of Banks

and Other Financial Institutions for Legalization (Laundering) of Proceeds from Crime


In order to bring certain laws of Ukraine into compliance with the Law of Ukraine on Prevention and

Counteraction to Legalization (Laundering) of Proceeds from Crime, as well as to ensure counteraction

to use of banks and other financial institutions for legalization (laundering) of proceeds from crime and

for funding of terrorism, the Verkhovna Rada of Ukraine has resolved:

I. To introduce amendments into the following Laws of Ukraine:


1. In the Law of Ukraine on Banks and Banking Activities:

1) Term "identification" shall be excluded from Article 2.

2) Article 63 shall have the following wording:

"Article 63. Prevention of legalization (laundering) of proceeds from crime

In conduct of overview of banks' activities, the National Bank of Ukraine shall, at least once a

year, check compliance of banks with the laws regulating relations in the field of prevention of

legalization (laundering) of proceeds from crime.

The banks shall develop and implement regulations on internal financial monitoring and programs

of its implementation in order to counteract to legalization (laundering) of proceeds from crime."

3) Article 64 shall have the following wording:

"Article 64. Obligation to identify clients

The banks shall be forbidden to open and maintain anonymous accounts.

The banks shall be forbidden to conclude agreements with individuals that use obviously fictions

name; or open or maintain accounts or conduct business with legal entities that are in fact used

by individuals as a method of ensuring anonymity.

A bank shall identify all clients who open accounts in the bank and all clients performing

transactions subject to financial monitoring, all clients performing cash transactions without

opening an account with regard to the sum exceeding equivalent of 50000 UAH, and individuals

authorized to act on behalf of the said clients, according to the laws of Ukraine; it shall open a

client's account only after his/her identification and application of sufficient, in bank's view,

measures to verify his/her identity according to this Law and other laws on banking activities, as

well as to the laws regulating relations in the field of prevention of legalization (laundering) of

proceeds from crime.

The bank shall be entitled to request, and the client shall be obliged to provide documents

(information) necessary for establishment of his/her identity, type of activity and financial status.

In case of client's failure to provide the necessary documents (information) or deliberate

submission of false information about him/herself, the bank shall refuse to serve the client. In case

of suspicion that the client provided false information or deliberately provided false information

to defraud during identification, the bank shall provide information about client's financial

transactions to the specially authorized executive agency for financial monitoring.

In order to identify a client that is a legal entity, the bank shall identify individuals who own such

legal entity, have direct or indirect influence on it and obtain economic benefits from its activities.

If the legal entity is an economical association, the bank shall identify individuals who

considerably take part in such legal entity. The client shall provide information requested by the

bank in order to comply with the requirements of this Law. In case of client's failure to provide

such information, the account shall not be opened, and if there are earlier opened accounts, the

bank shall refuse to serve them. The bank shall be entitled to request information related to

identification of such entity and its managers from public authorities supervising and/or controlling

activities of such legal entity, from banks and other legal entities, as well as take steps to collect

such information from other sources, according to the laws, in order to identify and take

measures, which are sufficient, in bank's view, to verify the identity of the client that is a legal

entity and to enable the bank to implement the regulations on internal financial monitoring and

programs of its implementation, as well as to detect suspicious financial operations. The said

public authorities, banks and other legal entities shall provide such information to the bank free of

charge and within ten working days from the date of receipt of request.

In order to identify a client who is an individual, and take measures that are sufficient, in bank's

view, to verify his/her identity, the bank shall be entitled to request information related to

identification of such individual from public authorities, banks and other legal entities, as well as

take steps to collect such information about the individual as may be necessary to implement the

regulations on internal financial monitoring and programs of its implementation, including those

related to detection of suspicious financial operations. The said public authorities, banks and

other legal entities shall provide such information to the bank free of charge and within ten

working days from the date of receipt of request.

Identification by the bank shall not be mandatory for every transaction if the client has been

identified earlier according to this Law.

If there is a decision of a state authority to cancel the state registration of a legal entity or of an

individual who is a subject of business activity, or if a legal entity is recognized fictitious, or if an

individual is recognized dead or missing, the bank shall close the account of such entity or

individual and immediately send the information regarding such account to the specially

authorized executive agency for financial monitoring; the bank shall not transfer or otherwise

manage the money at such account until orders from the said authority. If during seven working

days no said orders have been received, or if there is a court decision regarding application or

non-application of measures regarding such money, the bank shall settle the issues related to it,

according to the laws of Ukraine."

4) Article 65 shall have the following wording:

"Article 65. Storage of documents

All documents on financial transactions subject to financial monitoring and the results of

identification of individuals performing such operations shall be stored by the bank for five years

from the date of such transaction.

The results of identification of account owner and of individual authorized to act on his/her behalf

shall be stored by the bank for five years from the date of closure of such account."


2. Article 18 of the Law of Ukraine on Financial Services and State Regulation of Markets of Financial

Services shall have the following wording:


"Article 18. Prevention of legalization (laundering) of proceeds from crime

Financial institutions shall be forbidden to conduct business with anonymous individuals, open

and maintain anonymous accounts.

Financial institutions shall be forbidden to conclude agreements with individuals that use

obviously fictions name; or open or maintain accounts or conduct business with legal entities that

are in fact used by individuals as a method of ensuring anonymity.

A financial institution shall identify, according to the laws of Ukraine, all clients who open

accounts in the financial institution and/or conclude agreements on provision of financial services,

and all clients performing transactions subject to financial monitoring, as well as individuals

authorized to act on behalf of the said clients. The financial institution shall provide relevant

financial services to a client only after his/her identification and application of sufficient, in

financial institution's view, measures to verify his/her identity according to this Law and other

laws on markets of financial services, as well as to the laws regulating relations in the field of

prevention of legalization (laundering) of proceeds from crime.

The financial institution shall be entitled to request, and the client shall be obliged to provide

documents (information) necessary for establishment of his/her identity. In case of client's failure

to provide the necessary documents (information) or deliberate submission of false information

about him/herself, the financial institution shall refuse to serve the client and/or provide financial

services and/or shall not open an account; if there are earlier opened accounts, the financial

institution shall refuse to serve them and/or shall not conclude agreement on provision of financial

services.

In case of suspicion regarding the beneficiary of economic benefit from the financial transaction

performed by the client, the financial institution shall take measures to establish such person. To

this end, the financial institution shall be entitled to request, and the client shall be obliged to

provide information about the beneficiary of economic benefit from the financial transaction

performed.

In case of suspicion that the client provided false information or deliberately provided false

information to defraud during identification, the financial institution shall provide information

about client's financial transactions to the specially authorized executive agency for financial

monitoring.

In order to identify a client that is a legal entity, the financial institution shall identify individuals

who own such legal entity, have direct or indirect influence on it and obtain economic benefits

from its activities. If the legal entity is an economical association, the financial institution shall

identify individuals who considerably take part in such legal entity. The client shall provide

information requested by the financial institution in order to comply with the requirements of this

Law. In case of client's failure to provide such information, the financial institution shall refuse to

serve the client and/or provide financial services and/or open an account, and if there are earlier

opened accounts, the financial institution shall refuse to serve them and/or shall not conclude

agreement on provision of financial services.

The financial institution shall be entitled to request information related to identification of such

entity and its managers from public authorities supervising and/or controlling activities of such

legal entity, from banks and other legal entities, as well as take steps to collect such information

from other sources, according to the laws of Ukraine, in order to identify and take measures,

which are sufficient, in the financial institution's view, to verify the identity of the client that is a

legal entity and to enable the financial institution to implement the regulations on internal financial

monitoring and programs of its implementation, as well as to detect suspicious financial

operations. The said public authorities, banks and other legal entities shall provide such

information to the bank free of charge and within ten working days from the date of receipt of

request, according to the procedure established by the laws of Ukraine.

In order to identify a client who is an individual, and take measures that are sufficient, in the

financial institution's view, to verify his/her identity, the financial institution shall be entitled to

request information related to such individual from public authorities, banks and other legal

entities, as well as take steps to collect such information about the individual as may be

necessary to implement the regulations on internal financial monitoring and programs of its

implementation, including those related to detection of suspicious financial operations. The said

public authorities, banks and other legal entities shall provide such information to the bank free of

charge and within ten working days from the date of receipt of request, according to the

procedure established by the laws of Ukraine.

Identification by shall not be mandatory for every transaction if the client has been identified

earlier according to this Law.

If there is a decision of a state authority to cancel the state registration of a legal entity or of an

individual who is a subject of business activity, or if a legal entity is recognized fictitious, or if an

individual is recognized dead or missing, the financial institution shall close the account of such

entity or individual and immediately send the information regarding financial assets of such entity

or individual to the specially authorized executive agency for financial monitoring; the financial

institution shall not transfer or otherwise manage the financial assets until orders from the said

authority. If during seven working days no said orders have been received, or if there is a court

decision regarding application or non-application of measures regarding such financial assets, the

financial institution shall settle the issues related to it, according to the laws of Ukraine."


II. Final provisions.

1. This Law shall come into force simultaneously with the Law of Ukraine on Prevention and

Counteraction to the Legalization (Laundering) of the Proceeds from Crime.

2. The Cabinet of Ministers of Ukraine and the National Bank of Ukraine shall ensure adoption of acts

required for implementation of this Law.

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