MER, Ukraine, Mutual Evaluation, MONEYVAL

1. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL 1
Anti-money laundering and counter-
terrorist financing (AML/CFT)
measures in Ukraine
Fourth Round Mutual Evaluation
Ratings
December 2017
http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-ukraine-2017.html

2. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL
Ratings – Effectiveness (1/3)
2
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Ukraine has
achieved this
objective
1. ML and TF risks are understood and, where appropriate,
actions co-ordinated domestically to combat ML and TF
Substantial
2. International co-operation delivers appropriate information,
financial intelligence, and evidence, and facilitates action
against criminals and their assets
Moderate
3. Supervisors appropriately supervise, monitor and regulate
financial institutions and designated non-financial
businesses and professions (DNFBPs) for compliance with
AML/CFT requirements commensurate with their risks.
Moderate
4. Financial institutions and DNFBPs adequately apply AML/CFT
preventive measures commensurate with their risks, and
report suspicious transactions.
Moderate

3. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL 3
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Ukraine has
achieved this
objective
5. Legal persons and arrangements are prevented from misuse
for money laundering or terrorist financing, and information
on their beneficial ownership is available to competent
authorities without impediments
Moderate
6. Financial intelligence and all other relevant information are
appropriately used by competent authorities for money
laundering and terrorist financing investigations.
Substantial
7. Money laundering offences and activities are investigated
and offenders are prosecuted and subject to effective,
proportionate and dissuasive sanctions
Low
8. Proceeds and instrumentalities of crime are confiscated. Moderate
Ratings – Effectiveness (2/3)

4. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL 4
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Ukraine has
achieved this
objective
9. Terrorist financing offences and activities are investigated
and persons who finance terrorism are prosecuted and
subject to effective, proportionate and dissuasive sanctions.
Moderate
10. Terrorists, terrorist organisations and terrorist financiers are
prevented from raising, moving and using funds, and from
abusing the non-profit sector.
Moderate
11. Persons and entities involved in the proliferation of weapons
of mass destruction are prevented from raising, moving and
using funds, consistent with the relevant United Nations
Security Council Resolutions.
Moderate
Ratings – Effectiveness (3/3)

5. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL 5
Ratings – Effectiveness
0
2
8
1
High
Substantial
Moderate
Low

6. 6
Ratings – technical compliance
(1/5)
AML/CFT POLICIES AND COORDINATION
1. Assessing risks & applying a risk-based approach LargLarLarLar Largely Compliant
2. National cooperation and coordination ComCoCoCo Compliant
MONEY LAUNDERING AND CONFISCATION
3. Money laundering offence LargLarLarLar Largely Compliant
4. Confiscation and provisional measures LargLarLarLar Largely Compliant
TERRORIST FINANCING AND FINANCING OF PROLIFERATION
5. Terrorist financing offence Par ParPa Par Partially Compliant
6. Targeted financial sanctions related to terrorism & terrorist financiPar ParPa Par Partially Compliant
7. Targeted financial sanctions related to proliferation Par ParPa Par Partially Compliant
8. Non-profit organisations LargLarLarLar Largely Compliant

7. 7
Ratings – technical compliance
(2/5)
PREVENTIVE MEASURES
9. Financial institution secrecy laws ComCoCoCo Compliant
Customer due diligence and record keeping
10. Customer due diligence LargLarLarLar Largely Compliant
11. Record keeping ComCoCoCo Compliant
Additional measures for specific customers and activities
12. Politically exposed persons LargLarLarLar Largely Compliant
13. Correspondent banking ComCoCoCo Compliant
14. Money or value transfer services LargLarLarLar Largely Compliant
15. New technologies LargLarLarLar Largely Compliant
16. Wire transfers ComCoCoCo Compliant

8. 8
Ratings – technical compliance
(3/5)
PREVENTIVE MEASURES (continued)
Reliance, Controls and Financial Groups
17. Reliance on third parties N/A
18. Internal controls and foreign branches and subsidiaries LargLarLarLar Largely Compliant
19. Higher-risk countries ComCoCoCo Compliant
Reporting of suspicious transactions
20. Reporting of suspicious transactions ComCoCoCo Compliant
21. Tipping-off and confidentiality ComCoCoCo Compliant
Designated non-financial Businesses and Professions (DNFBPs)
22. DNFBPs: Customer due diligence LargLarLarLar Largely Compliant
23. DNFBPs: Other measures LargLarLarLar Largely Compliant
TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS
AND ARRANGEMENTS
24. Transparency and beneficial ownership of legal persons LargLarLarLar Largely Compliant
25. Transparency and beneficial ownership of legal arrangements Par Pa Pa Pa Partially Compliant

9. 9
Ratings – technical compliance
(4/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES
Regulation and Supervision
26. Regulation and supervision of financial institutions LargLarLarLar Largely Compliant
27. Powers of supervisors LargLarLarLar Largely Compliant
28. Regulation and supervision of DNFBPs Par ParPa Par Partially Compliant
Operational and Law Enforcement
29. Financial intelligence units ComCoCoCo Compliant
30. Responsibilities of law enforcement and investigative authoritiesComCoCoCo Compliant
31. Powers of law enforcement and investigative authorities ComCoCoCo Compliant
32. Cash couriers LargLarLarLar Largely Compliant

10. 10
Ratings – technical compliance
(5/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES (continued)
General Requirements
33. Statistics ComCoCoCo Compliant
34. Guidance and feedback Par ParPa Par Partially Compliant
Sanctions
35. Sanctions Par ParPa Par Partially Compliant
INTERNATIONAL COOPERATION
36. International instruments LargLarLarLar Largely Compliant
37. Mutual legal assistance LargLarLarLar Largely Compliant
38. Mutual legal assistance: freezing and confiscation LargLarLarLar Largely Compliant
39. Extradition LargLarLarLar Largely Compliant
40. Other forms of international cooperation LargLarLarLar Largely Compliant

11. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL 11
Ratings – technical compliance
12
20
7
0
Compliant
Largely compliant
Partially compliant
Non compliant

12. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL
Key findings
 Corruption poses an overarching money laundering (ML) risk in Ukraine. It
generates substantial amounts of criminal proceeds and seriously
undermines the effective functioning of certain state institutions and the
criminal justice system. The authorities are aware of the risks emanating
from corruption and significant state-wide measures to mitigate the risk
are currently being implemented. However, law enforcement focus to
target corruption-related ML is only at its inception.
 Ukraine has a reasonably good understanding of its ML and terrorism
financing (FT) risks although there are areas (e.g. cross-border risks, risks
posed by the non-profit sector and legal persons) where understanding
could be enhanced. Ukraine has comprehensive national coordination
and policy-making mechanisms to address identified risks, which include
political commitment and have a positive effect. These mechanisms
include proliferation financing (PF). Further efforts are needed to address
the risks posed by fictitious entrepreneurship, the shadow economy and
the use of cash, all of which are considered to pose a major ML risk.
12

13. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL
Key findings
 The Financial intelligence Unit (FIU) generates financial intelligence of a high
order. Spontaneous case referrals regularly trigger investigations into ML,
associated predicate offences or FT. Law enforcement agencies (LEAs) also seek
intelligence from the FIU on a regular basis to support their investigative efforts.
However, the FIU finds itself at a critical juncture as its IT system is out-dated
and staffing levels are no longer adequate to cope with an ever increasing work-
load. Reporting appears to be in line with Ukraine’s risk profile and has resulted
in a significant number of case referrals to LEAs. Ukraine has nevertheless
started to take steps to further improve the quality of suspicion-based
reporting.
 ML is still essentially seen as an adjunct to a predicate offence. While pre-trial
investigations may be opened for ML in certain circumstances without a
conviction for the predicate offence, it was widely assumed that a conviction for
the predicate offence is essential before a ML case can be taken to court. The
sentences for ML are almost always less than for the predicate offences and
generally need to be more dissuasive in practice. The authorities have recently
started aggressively restraining funds in cases of top level corruption and theft
of state assets with a view to confiscation. Nonetheless, the confiscation regime
does not appear to be applied consistently in all proceeds-generating cases.
13

14. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL
Key findings
 Since 2014, the Security Services have concentrated on the consequences
of international terrorism involving the fight against Islamic State of Iraq
and the Levant (ISIL), which has led to indictments, though no convictions
as yet for FT. Financial investigations are undertaken in parallel with all
terrorism-related investigations. Although Ukraine demonstrates aspects of
an effective system in implementing FT targeted financial sanctions (TFS),
the legal framework is still not entirely in line with international standards.
No funds or other assets have been frozen under FT TFS in Ukraine.
 The National Bank of Ukraine (NBU) has a good understanding of risk and
applies an adequate risk-based approach to the supervision of banks. Major
efforts have been made by the NBU in ensuring transparency of beneficial
ownership of banks and in removing criminals from control of banks. The
NBU has applied a range of sanctions to banks, including fines and
revocation of licences. As a result, the application of preventive measures
by the banking sector has been found to be broadly effective. Significant
improvements are required by most other supervisory authorities in
discharging their functions and by non-bank institutions and designated
non-financial businesses and professions (DNFBPs) in applying preventive
measures. 14

15. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL
Key findings
 Although the Unified State Register (USR) records all basic information
and makes this available to the public online, the Registrar does not
ensure that the basic or beneficial ownership information provided to it
by legal persons is accurate or current. While this would not normally
be considered a material issue, the vast majority of the private sector
explained that they do rely on the USR to verify the beneficial owner
(BO) of their client.
 Ukraine has been generally proactive in providing and seeking mutual
legal assistance (MLA). However, a number of issues have an impact on
the effectiveness of MLA rendered, particularly issues related to tipping
off. Limitations noted in relation to the transparency of legal persons at
the national level negatively impact Ukraine’s capacity to provide
comprehensive assistance.
15

16. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL
Priority Actions for Ukraine to
strengthen its AML/CFT System
 The analysis and written articulation of ML and FT risk should be enhanced,
whether by way of revising the NRA or otherwise, by:
(a) utilising more statistics and ensuring that the statistics used are robust;
(b) further analysing the external threats and the threats of organised crime
and beneficial ownership; (c) communication of relevant information held
by the SSU on FT risks to other authorities and further analysing the threats
of NPOs.
 Introduce a provision under Art. 209 of the CC which clearly states that a
person may be convicted of ML in the absence of a judicial finding of guilt in
respect of the underlying criminal activity and providing that the existence
of the predicate offence may be established on the basis of circumstantial or
other evidence without it being incumbent on the prosecution to prove a
conviction in respect of the underlying criminal activity.
 More ML prosecutions and convictions in line with national ML risks are
required in cases involving high level corruption, theft and embezzlement of
State assets by current top officials and their associates (as well as those
connected with the former regime).
16

17. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL
Priority Actions for Ukraine to
strengthen its AML/CFT System
 Financial investigations into the sources of alleged proceeds should
be routinely undertaken in proceeds-generating cases using trained
financial investigators working in parallel with the investigators of
the predicate offences.
 The authorities should ensure that early restraints are routinely
made in all proceeds-generating cases. In this context it should be
considered whether investigators should have the power of early
restraint, subject to fast tracked reviews of such restraints by the
prosecutors.
 Bring the FT offence and TFS framework for FT and PF in line with
international standards.
 Consider options to limit staff turnover at the FIU. This could include
such proposals as career development programmes; and evaluating
the remuneration packages on offer.
17

18. Anti-money laundering and counter-terrorist financing measures in Ukraine – Mutual Evaluation Report – December 2017
Mutual evaluation
report by the
Committee of
Experts on the
Evaluation of Anti-
Money Laundering
Measures and the
Financing of
Terrorism
MONEYVAL
Priority Actions for Ukraine to
strengthen its AML/CFT System
 All supervisory authorities should add to their existing supervisory
approach by undertaking systematic offsite supervision and
analysing material received so as to inform their understanding of
the ML/FT risk profile of individual licensees (and of sectors) and
approaches to onsite inspections, so that on-site and off-site
supervision is fully based on ML/FT risk.
 Those responsible for the maintenance of the USR should take
reasonable steps to verify the information submitted is correct,
accurate and up to date.
 The MoJ should establish a clear system for the prioritisation of
incoming MLA requests. The authorities should apply measures to
ensure that the effectiveness of incoming MLA requests is not
hindered by tipping off and other practices concerning provisional
access to information. Improve the quality of outgoing MLA requests
seeking assistance for confiscation purposes.
18