On November 4, 2022, during the adoption of draft law No. 8008 in the second reading, the MPs adopted the harmful amendments that limit the time of designating politically exposed persons to three years after end of public service, which derogates from the standard set by the FATF Recommendations. At the same time, the rest of draft law No.8008 is positively assessed for implementation of international standards in the sphere of anti-money laundering.
Amendments 16, 19, 22 (proposed by MP Mamka, OPzZh) were declined by the Financial Committee, but later put to voting during the plenary session and supported by the majority of MPs. Those amendments stipulates the length of stay of a politician or a high-level official in the status of “politically exposed persons” to three years after dismissal. This means that three year after dismissal, financial institutions will not be obliged to exercise increased financial control over them, namely to check the source of wealth and income of such clients, to monitor closely their financial transactions.
According to all international standards the status of PEP should not have definite term of expiration, the financial institutions should use risk-based approach to each individual to assess whether there are still risks of money laundering after end of public service. It is often after dismissal representatives of authorities begin to actively use acquired corruption and other criminal assets and continue to use their political connections to their favor. The only reason for the above legislative initiative is the desire to legalize funds of doubtful origin. If funds are legal, then the person will not have any problems with financial control.
Establishing time limits of the status of the PEP does not correspond to the approach applied by the 12th FATF Recommendation and the 4th EU Anti-money Laundering Directive No. 2015/849. Both documents suggest that their should be a risk-based approach to defining whether person is still a PEP. Until November 4, such principal was also implemented in the Ukrainian legislation.
The draft law also included provisions on compulsory enhanced financial monitoring of the persons designated as oligarchs, but the provisions were excluded during the voting.
Compliance with the FATF Recommendations is an essential step determined by the EU Commission during granting Ukraine the EU candidate status.
We call on the Presidential veto on draft law No. 8008 with further exclusion of the harmful provisions on limitation of PEP status.