How a bank checks an individual entrepreneur: financial monitoring, risky transactions, documents and what to do at the bank's request

The law does not establish a «safe turnover» for a Sole Proprietorship, exceeding which would automatically cause the bank to classify the account as risky. High turnover, one main customer, regular incoming payments, or a large number of transactions are not violations in themselves. The bank assesses the activities of a Sole Proprietorship as a whole: what the entrepreneur does, what transactions are carried out, who makes payments, to whom funds are transferred, whether the amounts correspond to the declared business activities, and whether the origin of the funds can be explained with documents. The law expressly requires banks to continuously compare a client's transactions with information about the client, their activities and risk profile and, where necessary, to establish the source of funds.

From the bank's perspective, the best operating model for a Sole Proprietorship is to use a separate business account, clear payment descriptions, contracts and primary documents, tax reporting, employees or contractors engaged in accordance with the law, as well as ECR/pECR, licences or permits where they are actually required. If the bank requests an explanation, the request should not be ignored: failure to provide the necessary information may itself constitute a lawful basis for refusing a transaction or terminating the business relationship.

What is bank financial monitoring of a Sole Proprietorship

Banks are primary financial monitoring entities. They must not only identify a client when opening an account but also continue to perform due diligence thereafter.

Due diligence includes, in particular:

• identification and verification of the client;

• establishing the purpose and nature of the business relationship;

• assessing the client's risk;

• continuous monitoring of transactions;

• checking whether transactions correspond to the information known to the bank about the client's activities;

• where necessary, establishing the source of funds;

• keeping client information and documents up to date.

Therefore, the verification of a Sole Proprietorship does not end after a business account is opened. If the nature of the business, turnover, geography of payments, counterparties or other circumstances change significantly, the bank may request information again.

NBU Regulation No. 65 requires banks to apply a risk-based approach continuously. A bank must not simply assign a certain risk level to a client but must identify, assess and document risks and decisions made. The NBU also expressly states that banks should refrain from unjustified de-risking — terminating relationships without sufficient grounds merely because a particular category of clients appears risky.

Can high turnover of a Sole Proprietorship cause an account to be blocked

No. The law does not establish a maximum turnover amount after which a Sole Proprietorship automatically becomes suspicious to a bank.

At the same time, the amount of transactions should correspond to the business model known to the bank. For example, if when opening the account an entrepreneur stated that they operate a small local business, but later, without explanation, begin carrying out transactions for amounts that significantly exceed expectations, the bank has the right to determine the reason for the change.

The NBU includes among its risk criteria, in particular, transactions that are unusually large for the client's activities, complex, or inconsistent with the client's financial position. This does not mean that a large transaction is prohibited. It should have a clear economic explanation and, when requested by the bank, documentary confirmation.

What does the UAH 400,000 threshold mean

The common statement that «the bank checks all payments of UAH 400,000 or more» is inaccurate.

Article 20 of Law No. 361-IX defines threshold financial transactions. A transaction falls into this category if both of the following conditions are met:

1. its amount is equal to or exceeds UAH 400,000 or the equivalent in another currency or assets;

2. it meets at least one of the criteria expressly provided for in Article 20.

Therefore, the amount of UAH 400,000 alone does not mean that a transaction is illegal or suspicious.

There are also suspicious financial transactions under Article 21. They may be recognised as suspicious regardless of the amount if the bank suspects or has sufficient grounds to suspect that the transaction is connected with criminal proceeds, money laundering, terrorist financing or other risks defined by law.

Therefore, splitting payments into amounts below a certain threshold is not a way to avoid financial monitoring.

Is it risky for a Sole Proprietorship to work with one customer

Financial monitoring legislation does not prohibit a Sole Proprietorship from having one large or regular customer.

What matters to the bank is whether the payments correspond to genuine business relationships. If one customer pays a Sole Proprietorship every month for software development, consulting, design, advertising, manufacturing goods or other genuine activities, this may be confirmed by a contract, invoices, completion certificates, technical specifications or other documents depending on the type of work.

Separately, the entrepreneur should verify whether such an operating model is permitted under their taxation system and whether it conceals an actual employment relationship. However, the concentration of income from one counterparty is not in itself a violation of Law No. 361-IX.

What behaviour does a bank actually consider risky

NBU Regulation No. 65 contains risk criteria and indicators of suspicious activity. They are used not as an automatic list of violations but as signals for further analysis.

The indicators expressly defined by the NBU include situations where:

• the client cannot clearly explain the nature of their activities;

• the client is unwilling or refuses to provide information necessary for due diligence;

• the information provided is insufficient or difficult to verify;

• there are grounds to believe that documents or information are false or forged;

• documents contain significant inconsistencies or material errors.

Risk circumstances also include transactions whose amount, complexity or nature is inconsistent with the client's activities or financial capacity known to the bank, as well as signs of structuring transactions to circumvent thresholds established by law.

Distribution of funds among several Sole Proprietorships

The existence of several Sole Proprietorships operating within one business does not in itself prove a violation.

Risk arises when the movement of funds and documents shows signs of artificial structuring: payments without a clear business reason are distributed among related entrepreneurs, transactions are split to circumvent control procedures, or a Sole Proprietorship is effectively used only as an intermediary.

In such a situation, the bank will assess the genuine economic purpose of the transactions, while the tax consequences of artificial business splitting are a separate matter governed by tax legislation.

Transit movement of funds

The rapid onward transfer of received funds is not prohibited in itself. For certain business models, this is normal: agency services, commission-based trade, purchasing goods for a specific order, etc.

Risk arises if a Sole Proprietorship regularly receives significant amounts and immediately transfers them to other persons but cannot explain:

• what exactly the money was received for;

• to whom and on what basis it was transferred;

• where the contract, invoice, completion certificate, delivery note or other document is;

• what the economic purpose of the transaction chain is.

In court cases concerning financial monitoring, banks have raised concerns, in particular, about transit transactions without actual supply of goods where payment descriptions were changed. However, a bank must substantiate the grounds for establishing an unacceptably high risk rather than simply describe transactions as «suspicious».

Absence of certain business expenses

The absence of expenses for fuel, rent, delivery or employees in a bank statement is not in itself a violation.

Expenses depend on the business model. The premises may be owned, delivery may be paid for by the buyer, the entrepreneur may work independently, and certain expenses may lawfully be paid in another way.

A problem arises when a Sole Proprietorship describes one business model to the bank, while the actual transactions and documents contradict that model. In such a case, instead of creating an «artificial financial trail», the entrepreneur should provide the bank with a truthful explanation.

Can customer payments be received on a personal bank card

Business transactions must be conducted using an account opened for business activities.

Paragraph 10 of Section I of NBU Instruction No. 162 provides for separate accounts for business activities and personal needs. The third paragraph of Clause 24 expressly prohibits the use of current or payment accounts of an individual opened for personal needs for transactions related to business activities. The State Tax Service confirms this requirement in its current knowledge base.

Therefore, regularly receiving payment for goods or services of a Sole Proprietorship on an ordinary personal bank card constitutes improper organisation of settlements, even if the entrepreneur subsequently declares this income.

At the same time, this does not mean that a Sole Proprietorship cannot use business income for personal needs. The State Tax Service states that Instruction No. 162 does not prohibit the use of funds from a business account for personal needs; a Sole Proprietorship may also transfer them to their personal account.

What documents can a bank request from a Sole Proprietorship

There is no single universal package of documents for all entrepreneurs. The bank determines the scope of verification based on the client's risk, the nature of their activities, and the amount and frequency of transactions. The NBU expressly explains that the need to establish the source of funds also depends on the risk profile and specific transactions.

Depending on the situation, the bank may request:

Law No. 361-IX gives a financial monitoring entity the right to request information and documents necessary for due diligence, and the client must provide them. Verification may be based not only on documents provided by the client but also on information from official and other reliable sources.

The Tax Code separately requires tax accounting indicators to be based on appropriate documents. Therefore, systematic storage of contracts, delivery notes, completion certificates and other documents is useful both for tax accounting and for explaining transactions to the bank.

Does the bank check websites, social media and publicly available information

The bank is not limited to the information provided by the client in a questionnaire. Legislation allows the use of official and other reliable sources of information.

Therefore, publicly available information about a business may be used to verify the explanations provided. For example, if a Sole Proprietorship states on its website that it has a shop, warehouse, dozens of employees or conducts a certain type of activity, but during verification describes a completely different business model to the bank, the bank may request an explanation of the discrepancy.

This does not mean that every photo or advertising post constitutes legal evidence of a violation. What matters is the totality of the information obtained.

Do banks use automated financial monitoring

Yes. NBU Regulation No. 65 provides for automated procedures, rules and scenarios for detecting risky transactions. The NBU separately identifies suspicious activity indicators as elements used during automated analysis.

Therefore, a system may automatically flag an unusual transaction. However, a technical alert alone does not constitute proof of a violation: the bank must analyse the transaction in accordance with its procedures, apply a risk-based approach and document its decision.

What to do if the bank sends a financial monitoring request

The worst option is to ignore the request or send documents that do not explain the substance of the transactions.

A reasonable course of action is:

1. Read exactly what the bank is requesting. There is no need to send an unsystematic archive of all documents of the Sole Proprietorship if the bank is checking one transaction or one counterparty.

2. Provide a brief written explanation of the business model. Explain what the Sole Proprietorship does, who the customers are, how income is generated, and who the suppliers or contractors are.

3. Link each disputed transaction to a document. For example: payment of UAH 120,000 — payment under Contract No. 15, Invoice No. 31, Completion Certificate No. 8.

4. Explain an unusual amount. This may be a large one-off order, seasonality, advance payment, sale of a large batch of goods or another actual reason.

5. Explain the absence of obvious expenses if the bank asks about them. For example, delivery is paid for by the customer or the premises are owned by the entrepreneur.

6. Provide only genuine documents. Forging contracts or creating documents retroactively only increases the risk because false and contradictory information is expressly classified by the NBU as an indicator of suspicious activity.

7. Update information about the business activities with the bank if the business has changed significantly since the account was opened.

What can the bank do after verification

A request for documents does not automatically mean that banking services will be terminated.

Depending on the verification results and the legal basis, the bank may:

• allow the transaction and continue servicing the client;

• request additional information;

• conduct enhanced due diligence;

• refuse to carry out a specific financial transaction in cases provided for by law;

• suspend a transaction under the procedure established by Article 23 of Law No. 361-IX;

• establish an unacceptably high risk and terminate the business relationship if there are grounds defined by law;

• refuse to provide services if the client has not provided the necessary documents or information or has provided false information.

Therefore, the everyday phrase «the bank blocked the account» may refer to legally different situations. Suspending a specific transaction, temporarily restricting transactions, refusing a payment and terminating a banking service agreement are not the same thing.

Under the procedure established by Article 23, further suspension may be carried out by the State Financial Monitoring Service of Ukraine. Where grounds provided by law exist, the total suspension period may be extended but must not exceed 30 business days.

When can a bank close an account due to financial monitoring

Article 15 of Law No. 361-IX provides for cases in which a primary financial monitoring entity is required to refuse to establish or maintain a business relationship, open an account, provide services or carry out a transaction.

The following grounds are particularly important for an entrepreneur:

• establishment of an unacceptably high risk;

• inability to perform due diligence;

• failure to provide the necessary documents or information;

• provision of false information;

• provision of information intended to mislead the bank.

At the same time, the bank's right to terminate services is not entirely discretionary. The bank must have grounds provided by law and document the application of its risk-based approach.

Case law: a bank must substantiate an unacceptably high risk

In case No. 910/10855/24, an entrepreneur challenged PrivatBank's termination of the business relationship in connection with financial monitoring.

When considering the case, the Supreme Court emphasised that a bank's right to terminate a relationship due to an unacceptably high risk depends on the existence of circumstances defined by law. Courts must examine the specific reasons relied upon by the bank and the evidence supporting them. The Court also referred to the requirements of NBU Regulation No. 65 regarding documentation of the risk-based approach and the inadmissibility of unjustified de-risking.

This does not mean that a bank is required to provide services to every client. If the grounds provided by law are established, the bank has the right and, in certain cases, the obligation to terminate the relationship. However, the establishment of high risk itself must be based on an analysis that has actually been conducted.

Supreme Court ruling in case No. 910/10855/24 dated 16.04.2026 — Unified State Register of Court Decisions

ECR/pECR and bank financial monitoring — separate obligations

Having a business account does not exempt a Sole Proprietorship from using an ECR/pECR if the law requires it for the relevant type of settlement. At the same time, bank financial monitoring does not in itself create an obligation to use an ECR.

Law No. 265/95-VR provides for the use of an ECR/pECR for settlement transactions, including accepting cash and payments using electronic payment instruments, unless a specific exemption applies.

An important exemption is contained in Clause 2 of Article 9 of Law No. 265: if a seller provides the buyer with the details of their current account in IBAN format and the buyer independently makes a bank transfer to that account, an ECR/pECR is not used for that transaction. The current knowledge base of the State Tax Service confirms this approach.

Therefore, for both the bank and the tax authorities, it is important to distinguish correctly between a bank transfer using IBAN details and a settlement transaction made by card, cash or another payment instrument.

Is it necessary to deliberately process all expenses through the Sole Proprietorship's account

The law does not establish a rule requiring a Sole Proprietorship to generate a certain amount of expenses through its business account merely to appear «genuine» for financial monitoring purposes.

There is no need to artificially process payments for fuel, rent, delivery or other expenses if such expenses do not actually exist.

At the same time, systematic accounting of genuine transactions makes it easier to demonstrate the logic of the business. When accounting records allow sales, customer payments, purchases of goods, supplier payments, returns or expenses to be matched, it is much easier to explain transactions to the bank.

Bank statements, payments and pECR in Torgsoft for documenting Sole Proprietorship transactions

Torgsoft has an additional «Bank Statements» feature that allows you to track incoming payments for goods without separately logging in to Privat24, monobank or UKRSIBBANK. In the software, you can work with current account transactions, specify the payer and counterparty, and match payments with business documents.

For payments, Torgsoft provides payment orders indicating the current account, recipient-counterparty, amount, financial analysis category and payment description. Access levels to bank statements can be configured for individual users — incoming payments only, outgoing payments only or full access. This helps maintain structured internal accounting of actual cash flows but does not replace contracts, primary documents or documents that the bank may separately request.

For entrepreneurs who, under Law No. 265, are required to fiscalise settlement transactions, Torgsoft provides software ECR connection. The documentation describes stationary and mobile pECRs, a self-service checkout and a pECR for online commerce, as well as the preparation and submission of an application using Form No. 1-pECR. This means that sales, payments, bank transactions and fiscal transactions can be recorded in one system, making it easier to prepare information about the actual movement of goods and funds.

How to reduce the risk of financial monitoring problems

A Sole Proprietorship should organise its operations so that any significant transaction can be explained without creating documents retroactively:

• receive business payments into the Sole Proprietorship's business account rather than a personal bank card;

• state payment descriptions correctly;

• retain contracts, invoices, completion certificates, delivery notes and other documents relevant to the specific business;

• ensure that tax reporting corresponds to actual activities;

• use an ECR/pECR if the specific payment method requires it;

• have a licence or permit if the chosen type of activity is regulated;

• engage actual employees or contractors in accordance with the nature of the actual relationship;

• inform the bank promptly about significant changes in business activities;

• do not split or structure transactions solely to circumvent control procedures;

• when responding to a financial monitoring request, provide a specific explanation together with documents supporting it.

Financial monitoring does not mean that a Sole Proprietorship must have a certain percentage of expenses, a certain number of counterparties or a specific turnover structure. The requirement is different: the activities and transactions must be lawful, understandable, consistent with information about the entrepreneur and supported by documents where the law or the bank, within the scope of due diligence, requires such confirmation.

Official sources

1. Law of Ukraine «On Prevention and Counteraction to Legalisation (Laundering) of Proceeds of Crime, Financing of Terrorism and Financing of Proliferation of Weapons of Mass Destruction» dated 06.12.2019 No. 361-IX. Key provisions: Articles 7, 8, 11, 12, 15, 20, 21, 23.
Official text of Law No. 361-IX on the website of the Verkhovna Rada of Ukraine

2. Resolution of the Board of the National Bank of Ukraine dated 19.05.2020 No. 65 «On Approval of the Regulation on Financial Monitoring by Banks». Key provisions: risk-based approach, transaction monitoring, risk criteria — Annex 19, suspicious activity indicators — Annex 20. The document is effective in the version dated 17.07.2026.
Official text of NBU Regulation No. 65 on the website of the Verkhovna Rada of Ukraine

3. Resolution of the Board of the National Bank of Ukraine dated 29.07.2022 No. 162 «On Approval of the Instruction on the Procedure for Opening and Closing Accounts for Users by Payment Service Providers Servicing Accounts». Key provisions: Clause 10 of Section I — separate accounts; Clause 24 of Section I — prohibition on using personal accounts for business transactions; Clause 33 — opening an account for a Sole Proprietorship.
Official text of NBU Instruction No. 162 on the website of the Verkhovna Rada of Ukraine

4. Law of Ukraine «On the Use of Registrars of Settlement Transactions in the Sphere of Trade, Catering and Services» dated 06.07.1995 No. 265/95-VR. Key provisions: Articles 2, 3 and Clause 2 of Article 9 regarding transfers to an account using IBAN details. The document is effective in the version dated 26.06.2026.
Official text of Law No. 265/95-VR on the website of the Verkhovna Rada of Ukraine

5. Tax Code of Ukraine dated 02.12.2010 No. 2755-VI. For documentary confirmation of business indicators, Article 44 concerning record-keeping based on documents is particularly important.
Official text of the Tax Code of Ukraine

6. Public Information and Reference Resource of the State Tax Service. Official clarifications regarding the prohibition on using a personal account for Sole Proprietorship transactions and the use of ECR/pECR for payments made using IBAN details.