Financial Crime World

Ukraine’s Financial Monitoring Entities Brace for Action Against Terrorist Financing

In the complex geopolitical landscape of Ukraine, primary financial monitoring entities are taking measures to address the risks of funding separatist and terrorist activities. In accordance with Article 6 of the Ukrainian Law “On Prevention and Counteraction to Legalization (Laundering) of the Proceeds of Crime or Terrorist Financing and Financing Proliferation of Weapons of Mass Destruction,” entities have a duty to report any suspicious transactions or clients to the Ministry of Infrastructure and the State Service for Financial Monitoring of Ukraine (SCFM).

Guidance for Financial Monitoring Entities (PFEs)

Given the current conflict in eastern Ukraine, with the escalating threat of hostage-taking, damage to civilian and military facilities, and the deteriorating socio-political climate, it is crucial to deprive those involved in terrorist and separatist activities of financial resources. According to Article 6 of the Law, a PFE is required to:

  1. Identify and report transactions suspected of terrorism financing: PFEs must report any transactions suspected of terrorism financing to the SCFM and relevant enforcement bodies by the end of the business day they were identified or attempted.
  2. Evaluate clients based on risk criteria: PFEs must assess clients against risk criteria defined by the SCFM and financial regulatory bodies during transactions that may involve the laundering of criminal proceeds or terrorism financing.
  3. Implement precautionary measures: PFEs should impose precautionary measures for clients with increased risk indicators.

Risk Assessment Criteria

When establishing business relationships, PFEs consider various risk assessment criteria:

  1. Client Type:
    • High-risk clients: Those on the list of persons related to terrorist activity or subjected to international sanctions
    • Non-profit/charitable organizations (excluding those under international organizations)
    • Public officials
    • Residents of countries supporting terrorism
    • Leaders or founders of public or religious organizations
  2. Geographical Location:
    • Countries supporting international terrorism pose increased risk
  3. Type of goods and services:
    • Cash-heavy transactions
    • Transactions conducted solely through representatives
    • Transactions involving Internet technology, electronic payment systems, or alternative payment systems
  4. Incomplete or inauthentic information:
    • Clients who do not provide full documentation or whose identity information raises doubts

Additional Measures

To further minimize the risk of serving as a conduit for terrorist financing, PFEs must consider the following criteria for suspicious payments:

  1. Payment origin:
    • Transactions coming from or passing through countries supporting international terrorism
  2. Payment method:
    • Transactions processed using the payment systems of terrorism supporting countries or payments in their currencies
    • Non-profit radical organizations or other transactions carried out by individuals or entities from terrorism supporting countries

Countering the Threat

To effectively counter the threat of terrorist financing, PFEs must:

  • Refuse financial transactions that raise suspicion and report the matter to the SCFM within one working day
  • Cut off financial transactions for individuals and entities listed in Ukrainian and international terrorist sanctions lists

Resources for Identifying Individuals and Entities Subjected to International Sanctions

PFEs seeking more information on individuals and entities subjected to international sanctions can refer to the following web resources: