On 6 December 2019, the Parliament of Ukraine adopted the new Law of Ukraine “On Prevention and Counteraction to Legalisation (Laundering) of the Proceeds of Crime, Financing of Terrorism and Proliferation of Weapons of Mass Destruction” (the “New AML Law”) entirely replacing the existing anti-money laundering law. The New AML Law will take effect on 28 April 2020.

The New AML Law amends certain legislative acts of Ukraine, including the Law of Ukraine “On State Registration of Legal Entities, Individual Entrepreneurs and Public Organisations” (the “State Registration Law”) and the Code of Administrative Offences of Ukraine, and introduces the following updates regarding the disclosure and verification of UBOs in Ukraine.

Changes to UBO definition

The term ultimate beneficial owner (controller) will be replaced with ultimate beneficial owner with the following definition:

“The ultimate beneficial owner is any individual exerting decisive influence (control) over the client’s activities and/or over an individual on whose behalf the financial transaction is conducted.

The ultimate beneficial owner is:

• for legal entities – any individual exerting decisive influence over the activities of the legal entity (including through the chain of control / ownership);
• for trusts established under the legislation of countries of their creation – founder, trustee, protector (if any), beneficiary or group of beneficiaries, and any other individual exerting decisive influence on the activities of the trust (including through the chain of control/ownership);
• for other similar legal formations – an individual with status equivalent or analogic to status of individuals indicated for trusts.

The criterion of direct decisive influence over activities is defined as an individual’s direct ownership of at least 25 per cent of the legal entity’s charter (share) capital or voting rights.

The criterion of indirect decisive influence over activities is defined as:

• at least, an individual’s ownership of at least 25 per cent of the legal entity’s charter (share) capital or voting rights through related persons (both individuals and legal entities), trusts or other similar legal formations, or
• exerting decisive influence through exercising the right of control, ownership, usage or disposal of all assets or a share thereof; right to receive income from the activities of a legal entity, trust or other similar legal formation; the right of decisive influence on formation and voting results of governing bodies, and entering into agreements which enable to determine economic activity conditions of a legal entity, trust or other similar legal formation; the right to issue mandatory instructions having decisive influence on the activities of a legal entity, trust or other similar legal formation, irrespective of formal ownership.

In this respect, a person who has formal ownership to 25 or more per cent of charter capital of or voting rights but who is merely a commercial agent, a nominal owner, or a nominal holder, or an intermediary in respect of such rights is not considered an ultimate beneficial owner.”

New UBO disclosure requirements

• On-going update. All companies will be obliged to keep information on their UBOs and ownership structure updated, and to submit documents evidencing any changes to this information to the state registrar within 30 business days from the date of such changes;
  inaccurate information on UBOs and ownership structure disclosed with the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organisations (the “Companies Register”) may be corrected within 3 business days from the date when the inaccuracy was revealed;
• Annual confirmation. Each company will have to annually submit updated information on its UBOs or absence of a UBO along with the ownership structure, extracts from the foreign companies/trade registers in respect of the company’s participants which are foreign legal entities and notarised identification documents in respect of foreign UBOs;
  the same documents will have to be submitted to the Companies Register in case of any changes to the information about the company recorded in the Companies Register;
• Transitional provisions. Legal entities registered before 28 April 2020 will be obliged to submit information to a state registrar on their UBOs according to requirements of the New AML Law and their ownership structure within 3 months from the date on which a subordinate legal act establishing the form and content of the ownership structure takes effect (such subordinate legal act has not been adopted by the competent authorities yet).

Information to be disclosed

•  according to the State Registration Law, the following information on the UBO is to be disclosed to the Companies Register:
  – surname, name, patronymic (if applicable);
  – date of birth;
  – nationality;
  – number of the passport of a citizen of Ukraine or similar foreign document;
  – place of residence;
  – Ukrainian tax identification number (if applicable); and
  – nature and measure (level, ratio, share) of beneficial ownership (benefit, interest, influence).
• if a company does not have a UBO, this fact and the reason of absence of the UBO should be disclosed to the Companies Register (e.g. the ultimate owner is a public listed company having no shareholders owning more than 25 per cent of shares or other persons falling under the definition of a UBO).

Verification of UBOs

• state registrars will be obliged to verify the information on UBOs based on information from other state registers and available documents;
• financial monitoring agents will have to notify the State Financial Monitoring Service of any discrepancies between the information on UBOs disclosed in the Companies Register and information received from clients in the process of verification;
• the New AML Law broadens the list of information which may be requested by financial monitoring agents for the purpose of identifying and verifying UBOs of trusts, including details of founders, trustees, protectors (if any), beneficiaries and other individuals having decisive influence on the activities of the trust.

Liability

• the New AML Law introduces amendments to article 166-11 of the Code of Administrative Offences of Ukraine stating that failure to disclose or untimely disclosure of information in the Companies Register on the UBO of a legal entity or on the absence of a UBO, or non-provision of documents evidencing such information, will be an administrative offence punishable by a fine of UAH 17,000 to UAH 51,000 personally against the director of the company or the person entitled to act on behalf of the company (its executive body).

Please note that practical implementation of the New AML Law depends on adoption of relevant subordinate legal acts. We will keep you updated on adoption of the respective regulations or other notable developments in this area.

LINK: https://sk.ua/news/new-requirements-to-ubo-disclosure-in-ukraine/