Financial monitoring requirements loosen as martial law is imposed

On 17 March 2022, the Ukrainian Law amending the Tax Code of Ukraine and other legislative instruments of Ukraine on the application of statutory provisions during the martial law period (the "Law") has come into effect.

The Law removes, among other things, certain administrative, financial monitoring-related barriers for the duration of the martial law. 

The Law supplements Title X (Final and Transitional Provisions) of the Ukrainian Law on Anti-Money Laundering, Terrorist Financing, and Weapons of Mass Destruction Proliferation Financing and sets special rules of operation of the financial monitoring system during a war.

In particular, the banks are not required to establish the source of funds (in the amount of UAH 400,000 or more) that a resident of Ukraine deposits into their own account even if such customer has failed to produce necessary information. However, such funds may only be used to support the Armed Forces of Ukraine and to provide humanitarian aid to Ukrainians (the banks must make their customers aware of that restriction).

If a bank suspects that such funds are related to terrorist activities or weapons of mass destruction proliferation, it is required to block the account without notice to the customer and to report this to the Security Service of Ukraine. If the Security Service of Ukraine comes to the conclusion that the bank's suspicion is unjustified, the funds will be released immediately.    

Once the martial law ends or is lifted, the bank will have to identify the origin of the funds pursuant to the requirements of the Financial Monitoring Law and, if the money is, consequently, frozen, notify the State Financial Monitoring Service of Ukraine accordingly.   

For more detail, please contact Partner Oleksandr Onufrienko or Senior Associate Mykola Melnychuk.

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