Financial monitoring is getting tougher: why banks are blocking accounts en masse and what to do about it
28 October 18:30
Ukrainian banks have begun to react more actively to payments with “suspicious” words: they stop transactions or temporarily block customer accounts for verification. This was reported by "Komersant Ukrainian" with reference to Telegraf.
Potentially “dangerous” phrases:
- crypto;
- currency exchange;
- for goods/services (if the money is transferred to a private account rather than to the sole proprietor’s account);
- debt repayment (if such transfers are regular).
Such tokens may look like signs of unofficial business activities, cryptoasset transactions, or unidentified currency transactions.
Legal framework: why a bank has the right to “pause an account”
The key provision is the Law No. 361-IX on the Prevention of Money Laundering and Terrorist Financing.
It allows a bank to suspend a financial transaction without notice for up to two business days, and to extend the suspension by decision of the State Financial Monitoring Service (up to 30 business days in total).
At the same time, the National Bank, by its Resolution No. 65, has established a risk-based approach that obliges banks to monitor transactions that are atypical for the client and request explanatory documents.
In addition, in 2024, the national financial regulator further updated its financial monitoring procedures by clarifying the requirements for inspections and interaction between banks and customers in risky cases. This strengthens the practice of spot checking transactions that fall outside the client’s financial profile.
More than just words: what are the other common reasons for blocking accounts?
Lawyers and specialized publications name the following common reasons
- mismatch of transactions with your financial profile (suddenly the volume has increased or dozens of counterparties have appeared)
- lack of confirmed sources of funds;
- regular receipts from many persons that resemble unregistered business activities;
- transactions related to crypto exchanges and P2P platforms.
Read also: Blocking accounts without a court order: when it is legal and what to do to avoid it
What a client should do if the bank has frozen a financial transaction
Respond to the bank as soon as possible. Usually, they will ask for explanations about the nature of the transactions, sources of funds, as well as copies of contracts, invoices, receipts, and links to specific agreements. Such requests directly follow from the requirements of Law No. 361-IX and NBU regulations on financial monitoring.
Know the deadlines. The initial suspension lasts up to 2 business days, and then the bank can extend it only in cooperation with the State Financial Monitoring Service. The total blocking period should not exceed 30 business days.
Escalation of disputes. If you think the bank’s actions are excessive or communication is stalled, submit an appeal to the NBU: online form on the website, e-mail, contact center 0-800-505-240. It is important to summarize the issue, attach documents, and indicate the name of the bank.
How to formulate the purpose of payments so as not to provoke an audit
For private transfers, it is recommended to use neutral wording:
- personal transfer,
- family assistance,
- gift (one-time).
It should be remembered that the material content of the transaction should correspond to the financial profile of the person making the transfer.
To repay the loan, it is better to refer to the document: “loan repayment under agreement No… dated …”. Regular debt repayments without a contract look like a template for disguising business or crypto transactions.
To pay for goods/services, money should be transferred to the accounts of individual entrepreneurs/legal entities and the contract/account number should be duplicated in the purpose. Payments “for goods” to private cards may be treated by the bank as unofficial business activities.
Risks of transactions with crypto assets
A separate area of attention is transactions related to cryptocurrencies: crediting/withdrawing from exchanges, P2P transactions, and sudden volume spikes.
In Ukraine, the regulatory framework for VASPs is still being formed, so banks usually apply an increased level of monitoring to such transactions and more often ask for explanations and documents.
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Ukrainian financial market perspective: less gray areas, more transparency
The practice of spot checks and blocking is a “side effect” of the modern AML/CFT system. With clear agreements, transparent sources of funds, correct descriptions and compliance with the financial profile, the risk of blocking is significantly reduced. Given the updated regulatory framework of the NBU and active communication of the regulator with customers, the market expects a gradual reduction of gray areas in payment scenarios and faster verification of bona fide customers.
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