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Ukraine: The National Bank improves currency operations licensing rules

20/ 05/ 2018
  The National Bank of Ukraine (the “NBU”) has adopted Regulation No. 45 dated 26 April 2018 aimed to improve the currency control regulations. The introduced amendments, amongst other things, simplify the e-licence issuance procedure, thus extending opportunities for resident individuals, including also entrepreneurs, to place funds and make investments abroad. The NBU has also allowed certain transactions to be conducted through resident companies’ foreign accounts without requiring a licence, e.g. payment of bank’s fees, taxes, accrued interest, etc. However, the NBU does now have additional grounds to cancel, or refuse the granting of a licence. When deciding whether to issue a licence, the NBU can also request information from both the applicant and third parties, not only on transactions, but also on the applicant’s beneficiaries, sources of funds, bank accounts, etc. This requires both the applicant and its business to be more transparent in order to obtain a licence. Extended e-licence opportunities. E-licences can now be obtained by individual entrepreneurs, provided that licensed operations are conducted for their own needs and not related to their business activities. The NBU has also simplified the rules for obtaining e-licences through: outlining a clear list of sources of funds that must be confirmed by applicants by providing relevant documents in order to obtain an e-licence, including: (1) salary and/or other income under an employment agreement; (2) income derived from economic / independent professional activities; (3) proceeds from sales of movable and / or immovable property; (4) investment income; (5) inherited funds; and (6) other payments under civil agreements; extending the list of documents that can be provided by an applicant in order to confirm sources of funds, e.g., sale-purchase agreements of movable or immovable property; and providing the opportunity to conduct licensed operations with funds jointly owned by spouses. Exclusion of guarantee/insurance costs from the maximum interest rate cap calculation. The maximum interest rate cap, set with respect to payments for the use of a cross-border loan, no longer includes payments of a resident borrower, including an authorised bank-borrower, made to reimburse actual expenses of a non-resident creditor for a guarantee (suretyship) or insurance provided in connection with such loan by a foreign state, including its authorised entities, with an “A” rating, as confirmed by Fitch Ratings, Standard & Poors, Moodys, or a foreign legal entity whose shareholder is such foreign state. This exemption previously applied only with respect to export-credit agencies listed on the official website of the Organisation for Economic Co-operation and Development. More options for banks to do transaction abroad. Banks are now allowed, without an individual licence from the NBU, to place funds not only in their foreign correspondent accounts, but also in any other of their accounts opened abroad, which extend the list of the transactions that the bank can conduct abroad. This is subject to a bank having a general NBU licence for currency operations, which provides for the right to raise and place foreign currency in international markets. Clarified list of operations on foreign accounts. The NBU has introduced a list of crediting and debiting operations that can be carried out in regards to foreign accounts under an individual licence. The permitted crediting operations are determined mainly by reference to a source of funds and include crediting of interest on account balances, taxes reimbursement, default payments from a licensee’s counterparties, previously debited funds returned to a licensee due to default of counterparties, compensation payments in the case of insurance events, funds previously debited from an account by mistake or in an excessive amount, or mistakenly written-off by a non-resident bank, and other operations specified in the licence. The permitted debiting operations include payments of a non-resident bank’s fees, payments of taxes and other mandatory duties in accordance with the laws of a jurisdiction where an account has been opened, payments to be returned by a licensee to counterparties in connection with its default and payments under other operations specified in the licence. Expanded authorities of the NBU to request documents. In order to assess whether or not a licence should be granted, the NBU can now request information, documents and conclusions in relation to the terms of the transaction being licensed, not only from the applicant, but also directly from state authorities, institutions, banks, other legal entities and individuals. Moreover, the information, documents and conclusions which may be requested are not only those that relate to the essence of a transaction but also to an applicant’s final beneficiaries (controllers), the purpose of a transaction, conformity of the nature of a transaction to an applicant’s activities, sources of an applicants funds (assets), sufficiency of the financial resources available to an applicant to conduct (initiate) transactions, and economic feasibility of transactions. At the same time, legal entities are no longer required to submit a certificate from an authorised bank in Ukraine and a certificate from a non-resident bank regarding the number, type and currency of an opened account to the NBU in order to obtain an individual licence. Instead, applicants themselves have to submit a certificate in free form listing all their current accounts with authorised banks in Ukraine. This certificate shall contain information regarding the authorised bank’s name, currency of accounts, opening date of accounts, balance of funds and total amount of cash flow transferred in and out of the accounts for at least the last six months. As for individuals, the requirement to submit an account information certificate from a non-resident bank has ceased to exist. However, they still have to submit documents confirming the sources and amount of their funds, as well as documents required for an e-licence application. More grounds for NBU to refuse granting or cancel a licence. One more ground is envisaged to allow the NBU to refuse to grant an individual licence. This is the case where, within the year prior to the date on which an application is received, the NBU has established, or obtained information (in documentary form from law enforcement agencies or state authorities), that an applicant has violated Ukranian banking and currency legislation, capital market legislation or legislation on the prevention of and counteraction to legalisation (laundering) of the proceeds of crime, terrorism financing or financing the proliferation of weapons of mass destruction (such legislation to include the NBU’s regulatory acts) and/or that an applicant has been subjected to measures of influence or penalties for violation of the aforementioned Ukrainian legislation . The NBU may also cancel an individual licence if a general licence for conducting currency operations of a licensee has been revoked. Legislation: Regulation of the Board of the National Bank of Ukraine “On Introducing the Amendments to Certain Regulations of the National Bank of Ukraine” No. 45 dated 26 April 2018. Authors: Vitaliy Radchenko, Partner, vitaliy.radchenko@cms-cmno.com   Kateryna Chechulina, Senior Associate, kateryna.chechulina@cms-cmno.com Anna Pogrebna, Partner, anna.pogrebna@cms-rrh.com

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