Financial transactions subject to financial monitoring

The vast majority of people who in one way or another use non-cash money transfers in their activities have encountered financial monitoring.

• What is financial monitoring?
• What transactions are subject to verification?
• How to proceed during the inspection?

The profile regulatory legal act that regulates social relations that arise in society regarding the confirmation of the origin of funds is the Law of Ukraine "On Prevention and Counteraction of Legalization (Laundering) of Criminal Proceeds, Financing of Terrorism and Financing of the Distribution of Weapons of Mass Destruction" (further - Law).

The official definition of the procedure is determined by the provisions of Clause 66 Part 1 of the Law and includes two components, namely: state and primary financial monitoring.

De facto financial monitoring is the control and verification of transactions with the aim of preventing illegal transactions that are related to the receipt, transfer or use of funds or any other property assets obtained in the course of illegal or criminal activities.

Under the financial operations, in the sense of the Law, certain actions with respect to assets, committed with the help of primary monitoring entities or about which they became aware within the framework of business relations with their client, within the framework of the implementation of this Law, fall.

For example, a banking institution understands by financial operations all transactions of its client performed using accounts opened in this bank.

At the same time, we draw your attention to the fact that, as of now, the Law defines cases in which transactions are necessarily subject to verification, the so-called threshold and suspicious transactions.

With the first, everything is more or less transparent and clear.

The provisions of the Law clearly establish that a transaction is threshold if its amount exceeds the threshold of 400,000 hryvnias. The specified amount is also applied to foreign currencies and bank metals in the equivalent at the official exchange rate effective at the time of such transaction.

Important: the threshold amount of UAH 400,000 does not apply to the operations of enterprises engaged in lotteries or the organization of gambling. A reduced threshold of 55 thousand hryvnias has been established for these types of activities

The list of threshold transactions is comprehensive and clear, which cannot be said about the so-called suspicious transactions.

The legislator established that any volume of operations can be considered suspicious if the authorized subject has "suspicion or sufficient grounds for suspicion that the funds are the result of criminal activity." At the same time, to establish and substantiate such suspicion, authorized persons may use "typological studies" published on their website, which are not regulated by the provisions of current legislation.

The problem of the regulatory fixation of suspicious transactions is the lack of a formal definition of requirements for suspicion that funds are the result of illegal activity.

This issue is reflected in the unjustified (sometimes overestimated) granting of powers to banks and other authorized persons to carry out primary financial monitoring activities, which has a negative impact on the circulation of "legal" funds.

Law office "Prikhodko&Partners" is ready to ensure compliance with the rights and interests of clients when conducting financial monitoring activities. To receive advice from a tax lawyer on financial monitoring, fill out the form on our website and our lawyer will contact you shortly.