On April 28, a new Law "On Prevention and Counteraction of Legalization (Laundering) of Criminally Obtained Incomes, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction" (the "Law") came into force.
The Law aims to bring current financial monitoring procedures in line with international and European standards. The Law substantially increased disclosure requirements for beneficial owners and liability for non-compliance with these requirements.
What has changed?
Formerly, director of the legal entity could fill in registration application indicating name and date of birth of beneficial owner, his/her passport data, identification code and address, which was enough to disclose information about the beneficial owner. From now on, this information should be confirmed by submission of the following documents (the "Documents") to the registrar:
- ownership structure of the legal entity;
- legalized extract or other document from the relevant register which confirms registration of a non-resident legal entity in the country of its seat – if a non-resident legal entity is a founder of the disclosing legal entity;
- notarized copy of passport of the non-resident beneficial owner as well as the Ukrainian citizen in case he/she does not have biometric passport.
Who and in what case should disclose information?
Information about the ultimate beneficial owner under the new rules (together with the supporting Documents) should be submitted by:
- legal entities registered before 28 April 2020 – within three months from the date the Ministry of Finance approves form and scope of the ownership structure of a legal entity;
- legal entities at the stage of initial registration;
- legal entities after the changes in the information about the beneficial owner – within 30 working days as from the moment of such changes;
- all legal entities – annually within 14 calendar days from the date of registration of a legal entity to confirm information about beneficial owner.
Information should be disclosed even in cases when individuals only are in the ownership structure of a legal entity.
If the beneficial owner is absent?
Absence of a beneficial owner does not release from the obligation to disclose respective information. In such a case justified reason to explain absence of a beneficial owner should be stated.
If other changes should be registered?
If there are no changes in the ownership structure of a legal entity or in the information about the beneficial owner, then it is mandatory to inform about the absence of such changes while registration of any other changes about the legal entity.
When will the new rules start to work?
The provisions of the Law binding to submit Documents to identify information about the beneficial owner are not yet in operation. The new provisions will start to work later – from the moment the Ministry of Finance approves form and content of the ownership structure of the legal entity. Currently, there is no respective order of the Ministry. Thus, same as before, it is still sufficient to fill in necessary information in the respective application. The Ministry of Justice expressed similar opinion on its website.
Responsibility for violation
Failure to submit and late submission of information about the beneficial owner or his absence can result in fines of between UAH 17,000 and UAH 51,000. The fine will be applied to the director. The same fines shall be applied in cases of non-submission or late submission of documents to confirm information about the beneficial owner.
What should be done?
The Law significantly strengthens requirements for disclosure of information about beneficial owners of legal entities. Consequently, directors should closely monitor changes in the ownership structure of their entities and timely react to such changes in order to avoid imposition of material penalties.
It is also important not to miss the date when the Ministry of Finance approves form and content of the ownership structure of the legal entity. As from this moment legal entities will have three months to update information about their beneficial owners. Ministry of Justice explains that there is no need to visit registrars until that moment.