• Adoption of a Number of Anticorruption and Anti-Money Laundering Laws in Ukraine
  • November 5, 2014
  • Law Firm: Dentons Canada LLP - Toronto Office
  • On October 14, 2014 the Verkhovna Rada of Ukraine adopted a set of laws designed to create a legislative framework to fight corruption and money laundering effectively in Ukraine. Thus, the following laws were passed in the second reading and in their entirety:

    The Law on the System of Specially Authorized Entities in the Field of Counteracting Corruption

    In particular, the above law provides for the establishment of a system of specially authorized entities for counteracting corruption, which will be composed of bodies of the Public Prosecutor’s Office, the National Anti-Corruption Bureau of Ukraine and special departments of the Ministry of Internal Affairs of Ukraine for combating organized crime.

    This law determines the status and the powers of the National Anti-Corruption Bureau of Ukraine as a state law-enforcement agency charged with the task of counteracting criminal corruption offences committed by senior government officials authorized to fulfil functions of the State or local governments and threatening national security. The law enters into force as of the day of its publication and will be implemented three months from the day of its entry into force.

    The Law on the Principles of State Anti-Corruption Policy in Ukraine (Anti-Corruption Strategy) for 2014 - 2017

    The goal of the Anti-Corruption Strategy in Ukraine is to create a system for making decisions with respect to anti-corruption policy based on the results of the analysis of reliable data on corruption and the factors that lead to it; to establish transparent principles for funding elections and the activities of political parties; and to tighten public control over their activities. In order to achieve the above purposes, the Law provides for a number of measures to be taken, specifically ensuring the implementation of international standards of cooperation between the civil society and state authorities in making decisions related to the anti-corruption policy; carrying out anti-corruption expert examination of the electoral legislation; adopting laws to fulfil recommendations of the Group of States against Corruption (GRECO) as to imposing restrictions and ensuring transparency and accountability of funding of political parties and election campaigns; introducing direct government funding of political parties, etc. This Law enters into force on the day following the day of its publication.

    The Law on Preventing Corruption

    The Law defines the legal and organizational principles for the anti-corruption system in Ukraine to function, as well as the content and procedure for applying preventive anti-corruption mechanisms and the rules for eliminating the consequences of corruption offences.

    The Law provides for the establishment of the National Agency for the Prevention of Corruption as a central executive authority with a special status which implements and ensures the development of the national anti-corruption policy; determines its powers, including the power to deliver mandatory orders to eliminate violations of the law; and carries out official investigations and brings the offender to the statutory liability.

    The Law obliges the persons authorized to perform the functions of the State or local governments to submit declarations annually by way of completing the respective form on the official website of the National Agency, which will be included in the Unified State Register of declarations of persons authorized to perform the functions of the State or local government.

    This Law defines the general principles for preventing corruption in the activities of legal entities, obliges managers of private legal entities not to commit or be engaged in the commission of corruption offences, to refrain from conduct which may be considered as being willing to commit a corruption offence, to notify immediately the official responsible for preventing corruption in the activities of a legal entity, the director of the legal entity or the founders (members) of the legal entity of any incitement to commit a corruption offence, any corruption or corruption-related offences committed by other employees of the legal entity or other persons and of the occurrence of any actual, potential or supposed conflict of interest.

    State, public, communal enterprises and business entities with the government or communal interest exceeding 50 percent and having an average number of employees for the reporting (financial) year exceeding 50 persons and gross income from sales of products (works, services) for this period exceeding 70 million hryvnias, as well as the participants of the previous qualification process, the participants of the procurement procedure under the Law of Ukraine “On State Procurement” must approve and provide constant open access to the anti-corruption program, which complies with the requirements set by this Law, and their directors or members (founders) must, in the manner prescribed by their statutes and the adopted anti-corruption program, appoint the Authorized Officer responsible for the anti-corruption program.

    This Law enters into force on the day following the day of its publication.

    The Law on Public Prosecutor’s Office

    The Law sets forth the legal framework for the organization of the Public Prosecutor’s Office of Ukraine, the status of prosecutors and establishes the system and general procedure for ensuring the operation of the Public Prosecutor’s Office.

    The Law vests the Public Prosecutor’s Office with the functions to support prosecution in court on behalf of the State, to represent the interests of individuals or the State in court in the cases specified therein, to supervise observance of laws in the enforcement of judgments delivered in criminal cases, as well as in application of other coercive measures related to restraint of personal liberty of individuals, and expressly stipulates that the Public Prosecutor’s Office shall not be charged with the functions not provided for in the Constitution of Ukraine.

    Special attention should be paid to the fact that the Public Prosecutor’s Office may no longer exercise functions related to supervision over the observance and application of laws (general supervision), which were a priori contrary to the Constitution of Ukraine and allowed prosecutors to carry out inspections and to institute proceedings in relation to non-state companies.

    The Law on Prevention and Counteraction to Legalization (Laundering) of the Proceeds of Crime, Terrorism Financing and Financing of Proliferation of Weapons of Mass Destruction

    This Law is aimed at ensuring the implementation of new international standards to combat money laundering and terrorist financing. The Law comprehensively improves the national legislation in the field of financial monitoring.

    In particular, the Law:

    • Introduces national assessment of risks of the financial monitoring system, namely the system of measures to be taken by State financial monitoring agencies (competent government authorities) with the involvement of other financial monitoring entities (if necessary) to determine (identify) the risks (threats) of legalization (laundering) of proceeds of crime
    • Obliges financial monitoring entities to manage and assess risks for their clients subject to the risk criteria
    • Improves the legislative aspects influencing the quality of investigation of crimes related to legalization (laundering) of proceeds of crime
    • Introduces financial monitoring with respect to national public figures and officials of international organizations, establishes a high level risk for operations involving (or carried out in the interests of) national public figures and officials of international organizations and provides for additional measures of financial monitoring for clients with a high level of risk
    • Sets the threshold for international money transfers
    • Removes threshold amounts for financial monitoring performed by realtors and notaries, as well as business entities trading in precious metals and precious stones and products thereof for cash
    • Excludes persons who carry out cash transactions in an amount exceeding UAH 150,000 from those subject to primary financial monitoring due to the introduction of mandatory monitoring of such transaction by banking institutions
    • Improves the procedure for termination of financial transactions, etc.

    The Law also provides for the formation of the national analytical database, which may be used by the law enforcement agencies of Ukraine and other countries for the purposes of identification, examination and investigation of crimes related to money laundering and other illegal financial transactions.

    In addition, the Law obligates the financial monitoring entities to identify the ultimate beneficial owners (controllers), as well as stipulates additional measures to identify the ultimate beneficial owner (controller).

    At present, the Law has been submitted to the President of Ukraine for signature. The Law takes effect 90 days from the day of its publication (provided it is signed by the President of Ukraine).

    The Law on Introduction of Amendments to Some Legislative Acts of Ukraine Concerning the Identification of Ultimate Beneficial Owners of Legal Entities and Public Figures

    The purpose of this Law is the establishment of a mechanism to solve the problem of identifying individuals who are ultimate beneficial owners of legal entities, and to provide free access to the State Register of Proprietary Rights to Immovable Property.

    In particular, the Law supplements the Commercial Code of Ukraine with Article 64-1, according to which “enterprises, other than state and municipal enterprises, are obliged to identify their ultimate beneficial owners, regularly update and store information about them and submit it to the state registrar in the cases and to the extent provided by the Law.” In addition, the Law introduces the concept of the ultimate “beneficial owner of a legal entity” and expands the concept of “public figures” considerably.

    The Law obliges legal entities to disclose the information about the ownership structure of their founders and members, as well as the information about ultimate beneficial owners of the legal entity. This information shall be entered in the State Register of Legal Entities and must be updated (e.g., in case of change of ultimate beneficial owners and/or owners of substantial interest in the legal entity, including ultimate beneficial owners).

    In addition, this Law establishes that the information on registered rights and encumbrances contained in the State Register of Proprietary Rights shall be open and public. Individuals and legal entities may obtain the information from the State Register of Proprietary Rights exclusively with respect to real estate in electronic form through the official website, or in paper form. The information on registered rights and encumbrances obtained in electronic or paper form by using software tools for maintaining the State Register of Proprietary Rights shall be considered official.

    The Law also imposes administrative liability for a legal entity’s failure to submit the information about the beneficial owner (beneficial owners) of the legal entity as stipulated by the Law to the state registrar.

    At present, the Law has been submitted to the President of Ukraine for signature. The Law enters into force one month from the date of its publication (provided it is signed by the President of Ukraine).

    Transitional and final provisions of the Law stipulate the obligation of legal entities registered before this Law enters into force to provide the State registrar with the information about their ultimate beneficial owner (beneficial owners), including the ultimate beneficial owner (beneficial owners) of their founder, if the founder is a legal entity, within six months from the date this Law enters into force.