What is financial monitoring and what to do with it?

Entrepreneurs face a problem: they have money in their current account, but the bank does not allow them to withdraw it through the cash desk. When you contact the bank, you hear: "Your transaction is subject to financial monitoring, you need to provide documents confirming the origin of the money." Read this article to find out what financial monitoring is, what transactions are subject to control, and how to withdraw your money from the bank.

What is financial monitoring?

Financial monitoring is a set of processes used by banks to prevent and combat corruption, money laundering, detect illegal business activities and prevent financial terrorism.

To put it simply, the main task of financial monitoring is to check questionable customer payments.

Banks have been engaged in financial monitoring since 2014, but many clients had no difficulty withdrawing cash from their accounts or receiving payments. However, after the adoption of the Law "On Prevention and Counteraction to Legalization (Laundering) of the Proceeds of Crime, Terrorist Financing and Financing of the Proliferation of Weapons of Mass Destruction" of 06.12.2019, bank clients experienced all the benefits of financial monitoring. Such close attention of banks to customer transactions is due to the fact that now the bank is responsible for illegal and suspicious transactions, not the customer, as it was before. The NBU can fine either a bank employee who missed a questionable transaction, or the bank's management, or the entire bank. The penalty can vary from a fine of several million hryvnias (from 135 million to 150 million) to the revocation of a banking license.

What transactions are subject to financial monitoring?

All Ukrainians are subject to financial monitoring, regardless of whether you are an ordinary individual, registered as an entrepreneur, founder of a large company, etc.

The bank can block any transaction: cash withdrawal (at the cash desk or via ATM), transfer from account to personal card, payment from the client, etc. If the transaction has signs of "doubtfulness", it will be blocked.

Transactions exceeding UAH 400 thousand are subject to review. Transactions not only in the national currency but also in foreign currencies, which, when recalculated at the current exchange rate, will be equal to or exceed the equivalent of UAH 400 thousand, are subject to verification. However, banks also check transactions of smaller amounts and may request supporting documents if the transaction is atypical for you (for individuals - over UAH 5,000; for individual entrepreneurs and legal entities - over UAH 30,000).

Banks check the following transactions:

• depositing, transferring, receiving and withdrawing cash or non-cash payments (over UAH 400 thousand are subject to mandatory verification);
• receiving or transferring money from/to offshore countries;
• transferring pennies across the border;
• if one of the parties to the transaction is a person whose place of registration is on the blacklist.

This is not a complete list of transactions that are checked by bank employees, as each bank has its own internal checklists for assessing the riskiness of a transaction.

If a transaction is atypical for you, for example, you only receive money but never withdraw it or pay anything, sooner or later your activities will come under the scrutiny of bank employees.

How to confirm the legality of the transaction?

If your transaction is blocked for any reason, you should contact the bank and find out the reason. If the blocking is not related to technical difficulties of the bank, you will most likely be asked to provide documents confirming the legality of the transaction.

Supporting documents include:

• contracts, invoices, waybills, acts;
• financial statements;
• documents confirming the payment of taxes;
• financial assistance agreements
• letters of explanation, etc.

Each bank has its own list of documents that must be provided to lift the restrictions. If you refuse to provide supporting documents, the bank may refuse to cooperate with you and close your account.

The good news is that you don't need to bring the supporting documents to the bank in person, just upload scanned copies in your personal account on the bank's website and the bank's employees will check everything within a day. If the documents are sufficient, your transaction will be unfrozen.