Zelensky signed a law important for negotiations with the EU: what will change in the rules of financial monitoring

Kseniya KapustynskaNews
The National Bank has tightened monitoring rules for card transactions of Ukrainians
The National Bank has tightened monitoring rules for card transactions of Ukrainians

On October 26, President of Ukraine Volodymyr Zelensky signed a bill on lifelong financial monitoring of politically exposed persons (PEPs): officials, MPs, employees of state institutions, and state and local authorities. This status will now become lifelong again, a change that was a condition for the start of negotiations on Ukraine's membership in the EU and at the same time a structural beacon for the IMF.

Members of the Verkhovna Rada approved the relevant draft law No. 9269 in the second reading on October 17. It was supported by 276 MPs. "In general, this is probably the most complex law that we have at this session of the parliament," Danylo Hetmantsev, chairman of the Verkhovna Rada's Tax Committee, commented on the importance of the document's adoption.

He explained that Ukraine has fulfilled the requirement to start negotiations on EU membership and at the same time implemented a "very important structural beacon" of the memorandum with the IMF. "By adopting this law, we are limiting ourselves in certain financial transactions and burdening ourselves with additional financial monitoring for virtually a lifetime. But despite this and by neglecting their own interests, the deputies supported this law, which is important for the country as a whole. In fact, this is a very positive characterization of the responsible state position of the Verkhovna Rada of Ukraine," Hetmantsev said.

Thus, with the lifetime status of a permanent resident, even those Ukrainians who worked in government, for example, in the 90s, should fall into this category. Banks should check their transactions with special care, but not all in a row.

"The status of a politically exposed person is established for life, but mechanisms to prevent a formal approach of primary financial monitoring entities to servicing clients with this status have also been developed. This approach previously led to the categorization of PEPs as high-risk clients without a real analysis of the feasibility and numerous cases of unjustified denial of financial services to politically exposed persons, their relatives and persons related to them. The law adopted by the parliament stipulates that when establishing business relations with PEPs and servicing them, primary financial monitoring entities are obliged to apply a risk-based approach and will be liable for its improper application," the NBU explained.

What preceded it

Earlier, on October 16, the decision to restore the lifetime status of the PEP was made by the relevant committee of the Verkhovna Rada, Hetmantsev reported. This was the second decision of the committee. Before that, the document was recommended to be adopted in a different version, which provided for the return of the lifetime status of the PEP only after Ukraine joined the EU. This could have disrupted negotiations on Ukraine's full membership in the EU.

In addition, the previous version of the draft law contradicted Ukraine's agreements with the IMF, said IMF Resident Representative in Ukraine Vahram Stepanian. According to him, the adoption of the law on financial monitoring of the CES is one of the most important structural beacons for the second review of the Extended Fund Facility program and Ukraine's cooperation with the Fund in general.

Stepanian reminded that the Ukrainian side was supposed to fulfill this structural milestone by the end of September. The deadline was not met, so the IMF expects the reform to be adopted immediately.

As reported by OBOZ.UA, Ukrainian banks conduct financial monitoring and have to control the transactions of all their clients. Large transfers, transactions involving politically exposed persons, and cash transactions are subject to mandatory verification. However, any "suspicious" transaction can be checked.

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