News of financial monitoring: will the bank block your account?

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Today we will talk about the new rules of financial monitoring. There are many myths and legends around the new law. We will try to lift the veil and tell you if banks will block clients’ accounts and for what reasons.

At the end of April 2020, the anti-money laundering law will come into force. Let’s scrutinize the potential impact of new financial monitoring rules on businesses.

You may also like: Source Documents For Sole Proprietors

What is the financial monitoring according to the new law

Financial monitoring is the verification of a financial transaction made through a bank account. It can result in blocking the account by the bank. In fact, once your account is blocked, you won’t be able to deposit money on it or accept money from others. 

There is a threshold set for financial monitoring procedures. In other words, there is a certain amount of money within which the bank can block the account under certain conditions. Today, it is UAH 150,000. The new threshold for financial transactions subject to mandatory financial monitoring: from UAH 400,000. 

What kind of transactions will the financial monitoring apply to?

  • Any transfer within the country exceeding UAH 400,000;
  • Any transfer outside the country exceeding UAH 400,000; 
  • Any transfers exceeding UAH 30,000 to individuals that do not have an account in the bank (in this case, a bank will verify a customer’s identity). 

However, it’s worth remembering that the bank may also carry out optional financial monitoring, even for those transactions the amount of which is lower than the abovementioned. The bank may carry out the financial monitoring of any transaction it considers as suspicious. 

In this case, as in the case of any violations of the mandatory financial monitoring, the bank is entitled to delay the transfer for 2 days (i.e. to freeze the money). The procedure is as follows: 

  1. The bank has the right to file the case with the State Financial Monitoring Service of Ukraine (SFMS) within two days and inform it about such transaction. 
  2. Having received the information, the SFMS may freeze the money for another 7 days, but if the suspicion of the transaction is not confirmed, the money will be returned to the bank. 

What to do if the bank doesn’t return your money?

In this case, you need to file paper evidence that the transaction was not suspicious with the court. 

If the banks fail to comply with the rules of collecting the required Customer identifying information, in accordance with the financial monitoring regulation, they will face a fine of 5 million euros. 

How to ensure the security of financial transactions?

  1. The main rule that will protect you from blocking your account is not to withdraw more than 30% of your weekly earnings (the amount of money you received on your account during the week). As this transaction can raise suspicion in the bank.
  2. The speed of cash withdrawals. Do not withdraw money as soon as you receive it - let them stay in your account for at least 5 days. 
  3. In case of service payment, write down the purpose of payment crearly and in detail, specifying the bank account details and date. This makes it clear to the bank that you are really engaged in the activities specified in your Unified State Register. 
  4. Work exclusively according to your KVEDs (types of economic activity). If you are adding a new type of activity, it must be changed by submitting an application to the registrar. 
  5. Check your counterparties. You can check the address (if it is not the address of mass registration), the director (if it is not the director of another 10 companies), enforcement proceedings, claims from counterparties for outstanding obligations.  
  6. Notify the bank that you will make a transaction for a large amount of money.

You can also read about the changes in the LLC registration procedure in our previous publication.

If your bank account is blocked, don’t hesitate to contact us and our experts will competently help you solve this problem.

Publication date: 20/03/2020

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