By Resolution No. 133, dated 18 December 2017, the National Bank of Ukraine has adopted the procedures of opening and operation of escrow accounts by the local banks. The relevant procedures should serve as a regulatory basis for implementation of amendments to the Civil Code of Ukraine adopted on 23 March 2017 introducing escrow accounts as a new type of accounts available for the clients of the Ukrainian banks.
Resolution No. 133 specifies the know-your-customer checks to be performed by the local bank opening an escrow account and limits the types of the operations for which an escrow account can be used. In particular, the amounts credited by the account owner or third parties to the escrow account can only be debited from such account:
- to make a transfer/payment to the beneficiary upon satisfaction of certain conditions specified in the relevant escrow account agreement or to be returned to the account owner subject to the requirements of the escrow account agreement;
- to pay the bank fees for its maintenance.
Under the general rule, the foreclosure on the balances standing to the credit of an escrow account is prohibited, except where:
- the relevant amounts are foreclosed under the account bank's own obligations and do not exceed the fees payable to the bank for the maintenance of the account;
- the creditors of the account owner or beneficiary assume its rights to claim the payment/refund of the relevant amounts from the account.
Overall, the aforementioned changes represent a good example of reforms in the Ukrainian banking sector and are intended to encourage local businesses to move from the foreign escrow agents to the local banks while implementing their transactions.