When the legislation requires a Ukrainian company to provide information about a foreign counterparty, including its ownership structure (beneficiaries).
This obligation is established by the Board of the National Bank of Ukraine and enshrined in Resolution No. 8 dated January 2, 2019. When opening and using a bank account of a Ukrainian company, banks require to get and update information about the owners of such a company. In some cases, banks began to require information about foreign counterparties from Ukrainian companies. Our attorney Anastasia Soloviova will tell us below about when such a requirement is justified and what list of issues should be discussed in advance with a foreign counterparty.
Thus, according to paragraph 3 of Resolution No. 8, a banking institution is obliged to provide a comprehensive analysis and verification of documents (information) on currency transactions in order to prevent and counteract the legalization (laundering) of proceeds from crime, terrorist financing and financing the proliferation of weapons of mass destruction.
The list of currency transactions, in respect of which such an obligation is set, includes:
- purchase of foreign currency for settlements/transfers of funds outside Ukraine to investment accounts, current accounts of non-residents -- legal entities established in Ukraine;
- settlements/transfers in UAH and foreign currency outside Ukraine to investment accounts, current accounts of non-residents -- legal entities established in Ukraine;
- settlements/transfers of funds in favor of non-residents through branches of banks opened in the territory of other states;
- crediting funds in UAH and foreign currency received from accounts opened in Ukraine to investment accounts, and current accounts of non-residents -- legal entities established in Ukraine.
In addition, the right to verify information on non-residents is established by Part 2 of Art. 10 of the Law of Ukraine «On Currency and Currency Transactions», which states that subjects of foreign exchange transactions -- residents and non-residents are obliged to provide information on their currency transactions to authorized institutions through which such currency transactions are carried out, within the limits relating to the activities of such subjects of foreign exchange transactions in Ukraine.
The procedure for verifying information on participants in foreign exchange transactions includes two stages, namely:
the first stage is the initial analysis of documents (information) on currency transactions subject to the requirements of Regulation No. 8 before conducting a currency transaction in order to identify a suspicious currency transaction;
the second stage is the identification of a suspicious currency transaction, which can be carried out by establishing the availability of an indicator, specified in the annex to this Regulation (including an indicator established at the sole discretion of the authorized institution (bank)). Several indicators can be set for one currency transaction.
Thus, the requirement to provide information/documents on the ownership structure, ultimate beneficial owners (controllers) of participants in a currency transaction is established, in particular, by indicator No. 13 (implementation by a legal entity or individual entrepreneur of a currency transaction within the limits imposed by the National Bank of Ukraine on certain currency transactions, which should be reflected in the automated information system of the National Bank of Ukraine «Limits of foreign exchange transactions»), as well as indicator number 23, etc.
A detailed list of indicators and measures on banks analyzing and verifying the documents (information) on currency transactions you can find at the following link.
Therefore, according to Annex No. 4 to the Regulation on the implementation of financial monitoring by banks, approved by the Resolution of the National Bank of Ukraine No. 65 dated 19.05.2020, the main requirements for drawing up a package of additional documents for conducting certain currency transactions are documents confirming the ownership structure and allowing to establish the ultimate beneficial owner.
Such documents may include:
- an extract from the commercial/commercial/court register;
- Memorandum or Articles of association/By-Laws;
- Share certificates.
- copies of trust declarations from the nominee shareholder (Deed of Trust), declarations of trust ownership, power of attorney, affidavit, etc.
- link to the official website of the non-resident company, which contains information on the ownership structure, ultimate beneficial owners and activities of the non-resident.
Documents on ownership structure and ultimate beneficial owners should contain up-to-date information with the date of execution of the document, certified by the signature and seal (if any) of the non-resident company. The document should indicate:
- If the founders are individuals:
- the full name of ultimate beneficial owners individuals, their citizenship, and date of birth;
- the country of permanent residence;
- share in the authorized capital/ voting rights in a legal entity.
- If the founders are legal entities:
- the Name of the legal entities founders;
- the country of registration;
- share in the authorized capital.
- information about ultimate beneficial owners: the full name of ultimate beneficial owners individuals, their citizenship, and date of birth.
There is a separate procedure for joint-stock companies.
In addition, it should be noted that verification of information provided to the bank by non-resident persons must fully comply with the information specified in the country of registration of such a business entity.
This is because, in 2017 Ukraine joined the Global Register of Beneficial Owners within the framework of the international project OpenOwnership, which is confirmed by the Resolution of the Cabinet of Ministers of Ukraine No. 339 of May 18, 2017, and therefore all financial monitoring entities in Ukraine have access to the Global Register of Beneficial Owners.
In addition, it should be noted that in case of revealing inaccurate information, provided by participants in foreign exchange transactions, the bank is obliged to apply a set of appropriate measures to such participants by the Law of Ukraine «On Prevention and Counteraction to Legalization (Laundering) of the Proceeds from Crime, Terrorist Financing and Financing the Proliferation of Weapons of Mass Destruction».
Thus, when concluding an agreement with a non-resident, it is desirable to warn him about the possible need to provide the above-mentioned documents to a Ukrainian bank, moreover, it is better to take them in advance, as such requirements of the bank may arise later and the impossibility of settlements in foreign currency will create a risk for the Ukrainian company to suspend operations on such a counterparty.