New Ways of Bank Secrecy Disclosure. Should Businesses Prepare for Arrest of Accounts?

17/ 03/ 2020

Accountant, Tax Expert of Accountor Ukraine In February 2020, the National Bank of Ukraine facilitated the procedure of bank secrecy disclosure pursuant to requirements of the Law of Ukraine On amendments to certain legal acts of Ukraine concerning confiscation of unlawful assets of persons authorized to fulfil the functions of the state or of local bodies, and on punishment for acquiring such assets. Before, banks had the right to disclose information about their clients only based on a court verdict. Today, banks can provide information at request of a state body without a relevant court decision. Who Has Access to Bank Secrecy Data? 1. Public prosecution bodies, State Security Service, State Bureau of Investigations, National Police, National Anti-Corruption Bureau, Antimonopoly Committee; 2. State Tax Service; 3. State Financial Monitoring; 4. Bodies of State Bailiff Service; 5. National Commission on Securities and Stock Market; 6. Other bank: in cases specified by the Law “On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Terrorism Financing and Financing of Proliferation of Weapons of Mass Destruction”; 7. Agency on Tracing and Managing Assets; 8. State authorities of other countries if they are searching for persons or companies in Ukraine who help their residents hide profits to avoid taxation. How Can Such Data Be Obtained? Bank secrecy data cannot be requested by any state official(s) at their whim. To obtain such data, all the required procedures must be completed. The most important one is making and sending the request properly, according to the following requirements: The request must be typed on the official letterheaded paper of a state body or sent electronically; The document must be signed by the state body’s director (or his/her deputy) and not by the official who wants the data disclosed; The legal grounds for obtaining the data must be described in a precise and detailed way and must contain references to the requirements of the appropriate laws, according which the state body has the right to obtain such information. If any of these requirements is not fulfilled, the banks have the right to refuse to disclose the data about their clients’ accounts. Bank Secrecy and Business: What Can We Expect? To learn more about the cashflow and the balance on the account, one must have certain legal reasons to do so., e.g., a lawsuit on tax evasion, money laundering or sponsorship of terrorism. Besides, one needs to have decrees of authorized organizations or verdicts of courts on the disclosure of bank secrecy data about a natural person or a company. In practice, request letters on this matter are usually submitted to courts by tax authorities during tax inspections. Very often, people and businesses either are unaware that the bank had already submitted their financial data to tax authorities/other state bodies, or they find out about it rather late. The disclosure of bank secrecy data is just the beginning. Often, the funds on the account may be blocked shortly after that, the account may be arrested, or the funds may even be written off, e.g., for the benefit of the person who has won the lawsuit, or for the benefit of state budget. This is carried out without any disputes: often, this is done by tax authorities and court officers. In such cases, a relevant court verdict is always required.

Accountant, Tax Expert of Accountor Ukraine

In February 2020, the National Bank of Ukraine facilitated the procedure of bank secrecy disclosure pursuant to requirements of the Law of Ukraine “On amendments to certain legal acts of Ukraine concerning confiscation of unlawful assets of persons authorized to fulfil the functions of the state or of local bodies, and on punishment for acquiring such assets”. Before, banks had the right to disclose information about their clients only based on a court verdict. Today, banks can provide information at request of a state body without a relevant court decision.

Who Has Access to Bank Secrecy Data?

1. Public prosecution bodies, State Security Service, State Bureau of Investigations, National Police, National Anti-Corruption Bureau, Antimonopoly Committee;
2. State Tax Service;
3. State Financial Monitoring;
4. Bodies of State Bailiff Service;
5. National Commission on Securities and Stock Market;
6. Other bank: in cases specified by the Law “On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Terrorism Financing and Financing of Proliferation of Weapons of Mass Destruction”;
7. Agency on Tracing and Managing Assets;
8. State authorities of other countries if they are searching for persons or companies in Ukraine who help their residents hide profits to avoid taxation.

How Can Such Data Be Obtained?

Bank secrecy data cannot be requested by any state official(s) at their whim. To obtain such data, all the required procedures must be completed. The most important one is making and sending the request properly, according to the following requirements:

The request must be typed on the official letterheaded paper of a state body or sent electronically;
The document must be signed by the state body’s director (or his/her deputy) and not by the official who wants the data disclosed;
The legal grounds for obtaining the data must be described in a precise and detailed way and must contain references to the requirements of the appropriate laws, according which the state body has the right to obtain such information.

If any of these requirements is not fulfilled, the banks have the right to refuse to disclose the data about their clients’ accounts.

Bank Secrecy and Business: What Can We Expect?

To learn more about the cashflow and the balance on the account, one must have certain legal reasons to do so., e.g., a lawsuit on tax evasion, money laundering or sponsorship of terrorism. Besides, one needs to have decrees of authorized organizations or verdicts of courts on the disclosure of bank secrecy data about a natural person or a company. In practice, request letters on this matter are usually submitted to courts by tax authorities during tax inspections.

Very often, people and businesses either are unaware that the bank had already submitted their financial data to tax authorities/other state bodies, or they find out about it rather late.

The disclosure of bank secrecy data is just the beginning. Often, the funds on the account may be blocked shortly after that, the account may be arrested, or the funds may even be written off, e.g., for the benefit of the person who has won the lawsuit, or for the benefit of state budget. This is carried out without any disputes: often, this is done by tax authorities and court officers. In such cases, a relevant court verdict is always required.