Countries/Jurisdictions of Primary Concern - Ukraine
Although Ukraine is not a regional banking or financial center, and despite several international banks pulling out of the country, it does have close ties with European banking networks. Illicit proceeds are primarily generated through corruption; fraud; trafficking in drugs, arms, and persons; organized crime; prostitution; cybercrime; and tax evasion. Money launderers use various methodologies, including real estate, insurance, bulk cash smuggling, financial institutions, and shell companies. Few Ukrainian businesses are owned transparently. The British Virgin Islands, Cyprus, and other offshore tax havens are often used to obscure ownership, evade taxes, or mask illicit profits.
Ukraine’s large shadow economy represents a significant money laundering vulnerability. Conducted in cash with little records or oversight, transactions in the grey economy make it relatively easy to launder money in Ukraine and deprive the government of tax revenue. The use of the informal economy is linked to evasion of taxes and customs duties. Many Ukrainians work abroad and send remittances back to Ukraine via transfers or international payment systems; these remittances amounted to approximately $2.2 billion in the first six months of 2015. Of this total, $311 million arrived via informal channels. Additionally, there is a significant market for smuggled goods in Ukraine.
Endemic corruption in Ukraine is an additional factor that worsens the problem of money laundering. Furthermore, transnational organized crime syndicates utilize Ukraine as a transit country to lauder their illicit profits to a third country. In the course of investigations conducted between March 2014 and September 2015, the State Financial Monitoring Service (FMS), Ukraine’s financial intelligence unit, froze the equivalent of $1.52 billion of funds reportedly related to large-scale corruption activities of the former government.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, insurance companies, gaming institutions, credit unions, depositories, securities traders, registers, pawn shops, mail service operators and other operators conducting money transfers or foreign exchange, real estate traders, certain traders of precious metals and stones, notaries, auditors, independent lawyers, leasing providers, and private entrepreneurs
Number of STRs received and time frame: Not available
Number of CTRs received and time frame: Not available
STR covered entities: Banks, insurance companies, gaming institutions, credit unions, depositories, securities traders, registers, pawn shops, mail service operators and other operators conducting money transfers or foreign exchange, real estate traders, certain traders of precious metals and stones, notaries, auditors, independent lawyers, leasing providers, and private entrepreneurs
money laundering criminal Prosecutions/convictions:
Prosecutions: 241 in 2014
Convictions: 156 in 2014
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Ukraine is a member of the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Ukraine_en.asp
Enforcement and implementation issues and comments:
In 2015, the Government of Ukraine took positive measures to reduce corruption. The country recently created the National Anti-Corruption Bureau and the Inspector General’s Office and is working to reform the judiciary. Amendments to the Law on Banking enacted in February 2015 allow expedited liquidation of banks involved in money laundering and terrorist financing. The National Bank of Ukraine has shuttered seven banks since then under these measures.
Ukraine combines currency transaction reports (CTRs) and suspicious transaction reports (STRs) for statistical purposes. From January to September 2015, 2,873,485 reports were received, representing more than a three-fold increase over the same period last year. The reporting upsurge is attributed to increased focus on destabilizing threats in eastern of Ukraine.
While Ukraine has signed and ratified international treaties, implementation is often weak. This is particularly true in the area of international law enforcement cooperation, mutual legal assistance, and asset forfeiture. The Rada voted on a draft law in November 2015 to establish a National Agency on Detection of Corruption Proceeds. The Rada still needs to give final approval to the draft and the President must then sign it. The Agency, when established, will be entrusted with drafting and signing international asset sharing agreements.
Cybercrime is an on-going problem in Ukraine. In 2015, a European joint investigative team working with Ukrainian counterparts uncovered a major cybercriminal group operating in the country. The enforcement action targeted high-level cybercriminals and their accomplices who are suspected of developing, exploiting, and distributing banking Trojan malware as well as channeling and cashing-out the proceeds of their crimes. The cybercriminals used malware to attack online banking systems in Europe and beyond, adapting their sophisticated banking Trojans over time to defeat the security measures implemented by the banks. On digital underground forums, they actively traded stolen credentials, compromised bank account information, and malware, and sold their hacking ‘services.’ Tens of thousands of users’ computers were infected with banking Trojans with total damages estimated at over $2 million.
Ukraine must address the rise of cybercrime and related transnational organized crime activities by better examining the significant amounts of money flowing into its banking system. Ukraine needs to increase prosecution of large-scale financial crimes, corruption, and money laundering schemes. It also should improve implementation of its provisions for asset freezing, confiscation, and forfeiture. Ukraine should enhance regulatory oversight of its gaming industry and examine how gaming is used to launder money and its possible relationship with regional organized crime. The government should investigate how informal money and value transfer networks are used not only for remittances, but for the transfer of illicit proceeds. Ukraine should enact its draft bill on international law enforcement cooperation in order to fully implement its treaty obligations.