The National Bank of Ukraine passed a Regulation determining the procedures for opening and closing bank and correspondent bank accounts for both resident and non-resident customers as approved by the Board's Resolution No. 56 of the National Bank of Ukraine, dated 1 April 2019. The Regulation came into effect on 4 April 2019 and significantly expanded options for opening non-resident bank accounts with Ukrainian banks. On the other hand, the Board's Resolution No. 58 of the National Bank of Ukraine, dated 2 April 2019 and amending the Regulation on Bank Financial Monitoring ('Resolution No. 58'), implemented additional instruments designed to avoid risks that shell companies, which are often involved in money-laundering schemes, abuse the Ukrainian banking system.
Resolution No. 58 provides a definition of such shell companies and the procedures for their identification, and actions that banks should take in respect of such companies. From now onwards, the term 'shell company' should apply to any non-resident legal entity that does not conduct any actual business in the country of its registration (has no sufficient assets and/or employees to conduct a certain business) and/or has a structure of ownership that prevents the identification of its ultimate beneficial owners (controllers). As a reporting entity, a bank should carry out an assessment and prepare its own opinion on whether a foreign legal entity shows signs of a shell company.
It is reasonable to suppose that the lack of any information about a company, as provided by Resolution No. 58, would highly likely result in the company being classified as a shell company and the bank refusing to execute a financial transaction and reporting the situation to the State Financial Monitoring Service.
Resolution No. 58 provides for an exception to the requirement for mandatory analysis of whether a non-resident legal entity, which is a holding company or a corporate enterprise, shows signs of a shell company. Such exception applies where the structure of ownership of that holding company is transparent and allows for the identification of its ultimate beneficial owners, and its business allows for the understanding of its nature. However, applicable Ukrainian law sets out quite formal and ambiguous requirements for declaring a company to be a holding one, which may result in a significant number of entities being classified as such. Even those companies that neither hold nor manage equity interests of other legal entities may, by definition, be recognised as holding companies.
Banks may have to conduct complete checks of foreign corporate customers for possible signs of a shell company because of such ambiguous statutory definitions.
Private investors, who make wide use of non-resident companies for investment purposes, should consider the abovementioned regulatory novelties when investing.