Why bank accounts will freeze

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How the new law on financial surveillance will affect cryptocurrency users and electronic money, as well as lottery lovers – read the article

Photo: Responsinvestment.org

On December 6 last year, Parliament approved a bill to prevent and counter legalization of crime proceedings.No. 2179). This law will come into force today, April 28. We decided to find out who would be affected by the new law and what would change in the field of financial monitoring from the end of April.

Financial surveillance is a state system to combat money laundering and legalize proceeds from crime. For another 30–40 years, such a concept did not exist and each country protected financial information. But the trend of globalization is becoming more urgent, and hence the need to counter fraudsters is increasing.

According to Oksana Markarova, Finance Minister of Ukraine, an updated bill on financial monitoring has been developed for many years. Since Ukraine has chosen the path of European integration, it is necessary to continuously harmonize Ukrainian law and implement international directives. Thus, the FATF’s recommendations in Bill 2179, as well as the EU’s 4th and partly 5th directives against money laundering and terrorism financing, are already implemented in all EU member states. And are mandatory for countries who wish to become members in national law. The European Union.

What will change for Ukrainians, banks and regulatory authorities? Let us consider in more detail.

Signs of new amounts and suspicious transactions

Previously, operations at equivalents from 150 thousand UAH were subject to financial monitoring. And the basis for this may be one of the 17 signs. In the new bill, the maximum amount limit was raised to $ 400 thousand, and the list of signs of suspicious transactions was reduced to four. Now you have to report in such cases:

  • If it is a complex financial transaction
  • Is unusually large
  • Done in an unusual way
  • Operations that do not have a clear economic or legal purpose.

It is also monitored that money transfers are made without opening an account including international transfers in the amount of 30 thousand UAH. The initiator of such a transfer will need to provide complete information about himself and the recipient.

Read: Payment of communal services, money transfer and remote identification: which will be affected by the law on financial surveillance

In fact, primary financial monitoring entities (banks and other financial organizations) gained more flexibility in determining whether a particular financial transaction is suspicious. According to the Finance Minister, banks should put in place a financial monitoring system to determine truly suspicious transactions, not improperly stop customer transactions and not demand the same pieces of paper every time.


Oksana Markarova
Finance Minister of Ukraine

Cryptocurrency operations will now be monitored by financial monitoring

According to the updated law, operations with virtual assets will now come under financial surveillance. And companies providing services for the exchange, storage, sale and transfer of electronic funds were also referred to subjects of primary financial monitoring. It also includes companies whose activities are related to cryptocurrency.

If exchanges, exchangers, banks or other companies pay in cryptocurrency in amounts equal to more than 30 thousand, they should investigate such operation and collect detailed information about the client. In return, the client should provide comprehensive information about the origin and purpose of its virtual property. If any such operation seems suspicious, then you need to inform the state service for financial monitoring.

According to the Finance Minister, Gosfinmonitoring has access to an analytical product that allows to examine the sources of crypto-assets and the directions of their use. That is, the service is investigating operations with crypto, and there are already several successful cases that were presented internationally, including the Oksana Markarova Report.

The minister also notes that the introduction of cryptocurrencies into the law on financial surveillance was the first step towards introducing them into the legal arena according to the recommendations of European law and the FATF.


Oksana Markarova
Finance Minister of Ukraine

What will change in the area of ​​gambling

From now on, primary financial monitoring responsibilities are assigned to the lottery and gambling businesses (bookmakers, casinos and others) when accepting bets and returning winnings to customers. Operations will be monitored from 30 thousand UAH. The threshold is quite low, as this activity itself is a high risk.

It would look like this: When accepting a bet or awarding a sum of 30 thousand or more, a casino or lottery should collect information about the customer (passport, tin, bank accounts, etc.) and the data Should transfer to state financial monitoring service.

In Ukraine, such companies (except state lotteries) are now outlawed. “I hope that soon Verkhovna Rada will adopt a law that will regulate their activities, and they will become full subjects of financial surveillance,” Oksana Markarova said.

How will change the subject of financial monitoring and fines

According to the updated law, individuals advising on payment systems and tax issues will also monitor the correctness of money, except for banks and financial organizations.

In addition, the subject of primary financial monitoring is accountants providing personal services. From now on, they will also have to check the financial transactions of their customers and report suspicious financial services to the state service. By the way, the law does not apply to accountants working in the company.

In general, as indicated in the law, the primary financial monitoring topics are:

  • Banks, insurers, insurance brokers, credit unions, pawn and other financial institutions;
  • Payment organization, participant or member of payment systems providing financial services;
  • Commodities and other exchanges that make financial transactions with goods;
  • Professional stock market participants (securities markets);
  • Postal service providers, money transfer (postal transfer) services and other institutions providing foreign exchange transactions;
  • Branches or representative offices of foreign trade entities that provide financial services in Ukraine;
  • Particularly defined topics of primary financial monitoring: auditors, accountants, tax advisors, lawyers, notaries and other legal entities, which are not financial institutions by their legal status, but provide separate financial services.

Experts are confident that the vigilance of financiers will increase significantly, as the new law establishes new fines for all primary financial monitoring entities. Previously, the maximum penalty for them (except banks) was 34 thousand UAH, but now there will be different fines for different types of violations. The maximum will be 204 thousand UAH. They can be appointed for violations of requirements for the implementation of due diligence, for identifying clients belonging to politically significant individuals or for violating the process of creating and storing documents.

Banks face a maximum fine of 5 million euros, and fines for non-banking entities can be double the amount of profit caused by the breach. But at the same time, the law provides for the possibility of the conclusion of an agreement with the subject of primary financial monitoring, according to which, instead of a fine, he undertakes to eliminate and continue the breach. He may also appeal the verdict.

How will the property freeze

Will banks get reinsurance? The experts are sure yes. And any operation that creates suspicion in the financial institution will be stopped. And the expansion of the rights of the State Financial Monitoring Service will allow financial intelligence to freeze assets only on the basis of the suspicion that they are related to the financing of terrorism, and also does not require a court ruling.

Photo: people-and-banks.net

For the topics of financial monitoring, special lists will become their guide to action. If a customer of the bank is on such list or works with the persons involved, the bank must freeze the property of this customer and inform the SBU about it. If the bank receives a message in response that the owner of the frozen assets has not been included in the “black list”, the bank is obliged to remove the freeze after the next business day. Are mistakes possible, for example, due to similar surnames? Theoretically, yes. At the same time, a customer whose property was accidentally frozen may rely on compensation for the loss.

As long as the customer’s account is blocked, he cannot, of course, use the money for the entire duration of the check. Without informing the customer, the bank can block the account for 2 days. In addition, that state is obliged to transfer information to financial monitoring, which, in turn, may extend the restrictions for another 7 days.

Decisions to freeze property and impose other restrictions may be administratively appealed. But, given the workload of the courts, such cases are likely to be considered for a very long time.

What effect is the new law expected to have?

According to the Finance Minister, the changes adopted in the law do not mean that regulatory authorities are now “waiting for the penalty to be imposed”. In the future, interpretive work will be done among business representatives, and training and educational programs will be organized. Oksana Markarova said, “The main thing that everyone should understand is that there is nothing to fear about a dutiful client and primary financial monitoring.”

Also inquiries: Ukraine switched to IBAN: what kind of standard is it and what changes will affect banks


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