The National Bank of Ukraine has recommended that banks apply a risk-based approach to clients who are politically exposed persons (PEPs) and their family members. This was reported by the NBU press service. It is noted that banks should not formally approach servicing politically exposed persons and classify all of them as clients with a high level of business risk and unreasonably restrict their access to financial services. The regulator emphasizes that banks should apply a risk-based approach when working with PEPs.
The NBU also allowed banks not to check the origin of funds in the case of low risk, the absence of suspicious transactions and transactions up to UAH 400,000 per month (including salaries or social benefits). In such cases, PEPs may not provide income documents. Also, individual officials may be checked as ordinary clients – after dismissal or under low risk conditions.
For the rest of the citizens, the rules of financial monitoring remained unchanged
The regulator emphasized that by following these recommendations, banks will be able to improve their internal financial monitoring systems and increase the effectiveness of risk management.
Note that politically exposed persons in Ukraine are considered to be people who hold or have held important state positions (presidents, prime ministers, ministers and their deputies, deputies, judges, top managers of state-owned companies), their family members and related persons (for example, business and business partners).
Law on Financial Monitoring of Politically Exposed Persons
Recall that the law on politically exposed persons adopted on October 17, 2023 is one of the structural beacons according to the memorandum of Ukraine with the International Monetary Fund. The adopted amendments will ensure compliance of the norms of the updated law on financial monitoring with international FATF standards and European legislation in this area and will contribute to Ukraine’s progress towards EU membership. The updated version of the law on combating money laundering returns the PEP status to an indefinite term in the version that was in force from 2019 to 2022. At the same time, mechanisms are provided to prevent the formal approach of primary financial monitoring entities to servicing clients who have such status.
The law provides that when establishing business relations with PEPs and servicing them, such entities are obliged to apply a risk-based approach and will be liable for its improper application. It is envisaged that 12 months after the public figure has ceased to perform prominent functions and the bank has ascertained that the risks inherent in the PEP (level of influence, scope of powers in the past, connection between past and current powers) are absent and his operations are clear, the usual financial monitoring procedures will be applied, as to any other client.
