In what cases can the bank refuse the client to support further business relations or refuse to establish such business relations at all, and what to do about it?

08/ 11/ 2022

Author: Victoria Doskovska, attorney at Dynasty Law & Investment According to Art. 6 of the Law of Ukraine On Prevention and Counteraction of Legalization (Laundering) of Criminal Proceeds, Financing of Terrorism and Financing of the Distribution of Weapons of Mass Destruction, banks are subjects of primary financial monitoring, which means that they have an obligation when establishing business relations with clients (opening accounts, concluding credit and deposit agreements, servicing financial transactions, etc.) apply a risk-oriented approach. Such a risk-oriented approach consists in checking the client for possible involvement in the use of the bank for criminal purposes: laundering through the bank of illegally obtained income, financing terrorism or distributing weapons of mass destruction. The key in such verification is the word possible, which, unfortunately, the bank can manipulate, because, regardless of the risk criteria established by law, banks are additionally empowered to establish their own, internal verification criteria, which constitute information with limited access, and not are disclosed. At the same time, the bank can deny the client business relations both at the initial request and after long-term cooperation, the consequence of which is the closure of all accounts opened with the bank, unilateral termination of all contracts concluded with the bank and refusal to conduct financial transactions without warning and notification of reasons. As a result of these actions, the client may find himself in a rather difficult situation, when, for example, a long-awaited payment in his favor or the clients payment of his financial obligations will be blocked by the bank, which directly affects not only the clients financial condition, but also his business reputation. Meanwhile, such right of the bank is not unlimited and such actions can be challenged and cut off, which can be helped by the specialists of Dynasty Law & Investment.

Author: Victoria Doskovska, attorney at Dynasty Law & Investment

According to Art. 6 of the Law of Ukraine “On Prevention and Counteraction of Legalization (Laundering) of Criminal Proceeds, Financing of Terrorism and Financing of the Distribution of Weapons of Mass Destruction”, banks are subjects of primary financial monitoring, which means that they have an obligation when establishing business relations with clients (opening accounts, concluding credit and deposit agreements, servicing financial transactions, etc.) apply a risk-oriented approach.

Such a risk-oriented approach consists in checking the client for possible involvement in the use of the bank for criminal purposes: laundering through the bank of illegally obtained income, financing terrorism or distributing weapons of mass destruction.

The key in such verification is the word “possible”, which, unfortunately, the bank can manipulate, because, regardless of the risk criteria established by law, banks are additionally empowered to establish their own, internal verification criteria, which constitute information with limited access, and not are disclosed.

At the same time, the bank can deny the client business relations both at the initial request and after long-term cooperation, the consequence of which is the closure of all accounts opened with the bank, unilateral termination of all contracts concluded with the bank and refusal to conduct financial transactions without warning and notification of reasons.

As a result of these actions, the client may find himself in a rather difficult situation, when, for example, a long-awaited payment in his favor or the client’s payment of his financial obligations will be blocked by the bank, which directly affects not only the client’s financial condition, but also his business reputation.

Meanwhile, such right of the bank is not unlimited and such actions can be challenged and cut off, which can be helped by the specialists of Dynasty Law & Investment.