The Rada brought Ukraine closer to fulfilling requirements regarding candidacy to the EU in combating money laundering, but some problems still remain

Today, the Parliament voted in the second reading for the presidential draft law No. 6320, which allows legal entities to submit information about beneficiaries electronically, including through the application Diya. The draft law introduces mechanisms for verifying information about real owners of legal entities, extends the deadline for submitting such information in electronic form, and introduces methodological support for submitting relevant information to the state. However, the Parliament eliminated the already valid norm on the need for annual confirmation of information about beneficiaries in the register and in fact allowed existing enterprises to change information about beneficiaries indefinitely.

We should recall that the President Volodymyr Zelenskyi submitted draft law No. 6320 to the Parliament in fall of 2021. The draft law was intended to simplify as much as possible for Ukrainian legal entities the submission of information about beneficiaries, its further processing, and at the same time preserve the previously implemented norms for fulfillment of Ukraine’s international obligations to combat money laundering. At that time new requirements regarding reporting about beneficiaries caused the number of discussions due to the de facto failure of the government’s campaign to organize the process. The submission of information to the state was accompanied by huge queues, paper bureaucracy and lack of proper methodological support and explanations from the state.

“The draft law adopted today allows legal entities to report on beneficiaries using completely new approaches. This can be done electronically without queues and unnecessary papers. But at the same time, unfortunately, the annual confirmation of information about the beneficiary has been canceled. But this very mechanism was previously adopted by the Parliament to fulfill requirements of international partners and was supposed to become serious lever of control. The annual confirmation would allow better exposure of fictitious structures. This requirement must be refined in future in order to make the verification system complete”, Olena Shcherban member of the board at the AntAC commented.

The law enters into force three months after its publication. At the same time, the Parliament set six-month deadline for legal entities, registered before entry into force of this law, to submit documents from the date of entry into force of the relevant by-laws. Such norm is introduced for those who have already submitted information for execution of the law and need to clarify it. The law also allows submitting and clarifying information about the beneficiary 90 days after the termination or cancellation of martial law.

Moreover, the Parliament supplemented the draft law with other important norms designed to finally introduce mechanisms for verifying information about the real owners of companies. For instance, we are talking about reconciliation of submitted information with the use of other state registers. In the same way, the procedure of actions of state bodies and legal entities regarding the detection, verification, clarification and updating of discrepancies between information on the ultimate beneficial owners and the ownership structure is determined.

Such innovations are needed by Ukraine both to fulfill international anti-money laundering requirements and to eliminate shady schemes using fictitious enterprises.

“All this ultimately creates mechanism when information about the beneficiary is not simply submitted to the state registrar “for a check mark”, but finally it will be checked with other registers, the algorithm of actions appears when discrepancies and problems are detected. In practice, this will make it possible to identify cases of declaration as beneficiaries of denominations or dead persons in general. From now on, it will be checked and attempts to deceive the state will be punished”, Shcherban adds.

We should recall that the requirement to strengthen the fight against money laundering is one of requirements for granting Ukraine the status of candidate to the EU. Amendments introduced by the Parliament implement requirements of Article 30 of Directive (EU) 2015/849 as amended by Directive (EU) 2018/843, which establishes general requirements for information on the beneficial owners of legal entities. Namely, regarding accuracy, relevance, completeness of information about the ownership structures and ultimate beneficial owners of legal entities; preservation of such information in the central state register; availability of this information for the country’s financial intelligence unit and the number of others.

Previously, according to results of the evaluation of technical compliance of our legislation with requirements of the FATF Recommendations, conducted in 2017 by the MONEYVAL mission of the Committee of the Council of Europe, experts made the conclusion that there are significant shortcomings in verification of legal information and information on final beneficiaries stored in Ukrainian register and sanctioning powers of supervisory bodies regarding dishonest legal entities. The latter resulted in significant amount of inaccurate information about beneficiaries.

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