Recent legislative, regulatory and bureaucratic initiatives to increase anti‐money laundering efforts in Ukraine
| Published date | 01 October 2003 |
| Pages | 367-372 |
| DOI | https://doi.org/10.1108/13685200310809680 |
| Date | 01 October 2003 |
| Author | Trifin J. Roule,Michael Salak |
| Subject Matter | Accounting & finance |
Recent Legislative, Regulatory and Bureaucratic
Initiatives to Increase Anti-Money Laundering
Eorts in Ukraine
Tri®n J. Roule and Michael Salak
INTRODUCTION
The ®rst mutual evaluation by the Council of
Europe's Select Committee of Experts on the
Evaluation of Anti-Money Laundering Measures
(PC-R-EV) on Ukraine was conducted in May
2000. Due to only the most rudimentary legislation
being in place to combat money laundering, the
evaluation team was highly critical of Ukraine's
anti-money laundering regime, and cited signi®cant
de®ciencies in the law enforcement, legal, and ®nan-
cial sectors.
1
Over the next 12 months only piecemeal
eorts were made by Ukraine to establish an
anti-money laundering regime. Noting a lack of
progress to combat money laundering schemes, the
Financial Action Task Force (FATF) placed Ukraine
on its Non-Cooperative Countries and Territories
(NCCT) list on 7th September, 2001. Evaluators
were especially troubled by the lack of an ecient
system for reporting suspicious transactions to a
®nancial investigative unit (FIU), inadequate custo-
mer identi®cation requirements, and insucient
resources devoted to combat money laundering.
2
Another mutual review by the PC-R-EV of
Ukraine, issued on 21st June, 2002, stated that tax
fraud, abuse of powers, illegal entrepreneurship and
illegal banking activity continue to generate signi®-
cant illegal proceeds in Ukraine.
3
The Council of
Europe also concluded that Ukraine had failed to
adequately amend the legislative, regulatory and
bureaucratic frameworks to ensure that Ukraine
met international standards to combat money laun-
dering. In an attempt to dampen criticism from
members of the FATF, Ukrainian authorities pledged
in late 2001 to ratify draft legislation, intensify enfor-
cement eorts and compel a number of agencies to
increase anti-money laundering eorts.
LEGISLATIVE AND REGULATORY
RESPONSES TO FATF CRITICISMS
In response to repeated criticisms from the FATF, the
Ukrainian Parliament, or Verkhovna Rada, adopted
a new Criminal Code on 5th April, 2001, which
entered into force on 1st September, 2001. Most
importantly, the amended code expands the
number of money laundering drug oences, and
criminalises the use of illicit proceeds for legiti-
mate business activities. Article 306 of the new
Criminal Code, `The Use of Funds Obtained
from Illicit Trac in Narcotic Drugs, Psychotro-
pic Substances, Their Analog Uses or Precursors',
criminalises money laundering activities related to
the proceeds obtained from the tracking of nar-
cotics, psychotropic substances, their analogues or
precursors. Under this article, it is illegal to
place funds obtained from tracking narcotics
and psychotropic substances into banks, businesses,
non-bank ®nancial institutions, organisations or
their subdivisions.
Additionally, it is illegal under Art. 306 to
acquire proceeds from narcotic tracking, and
use the proceeds either for legitimate or illegiti-
mate business activities. Article 306 also allows
for the con®scation of property in addition to
imprisonment for a period of 5± 12 years, depend-
ing upon the seriousness of the oence. Repeat
oenders, members of a conspiracy, such as mem-
bers of an organised criminal group, or serious
infractions could result in imprisonment of 8 ±15
years, and a probationary period of three years
in which the right to hold certain posts or to
carry out certain activities is barred, and property
is con®scated.
4
The new Criminal Code also establishes a list of
predicate oences beyond criminal acts related to nar-
cotics production and tracking. Article 209 of the
new Criminal Code, `The Legalization (Laundering)
of Monetary Funds and Other Property Obtained
Illegally' expands the range of criminal activities
beyond tracking in narcotics to include the act of
obtaining funds through other criminal activities,
such as tax fraud and illegal banking, as well as
using illicit funds in legitimate ®nancial activities.
5
The legitimate use of criminal proceeds is now illegal
for all ®nancial activities, and covers the conversion
Page 367
Journal of Money Laundering Control Ð Vol. 6 No. 4
Journalof Money Laundering Control
Vol.6, No. 4, 2003, pp. 367± 372
#HenryStewart Publications
ISSN1368-5201
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