Financial monitoring is a set of measures taken by financial monitoring authorities to prevent and counteract legalization of proceeds from crime and terrorist financing.
The special authorized executive authority in financial monitoring is the State Financial Monitoring Service of Ukraine.
The National Bank of Ukraine (the NBU) is the supervisory authority of the banking sector and non-bank financial institutions that have the general license of the NBU for money transfers. It exercises its supervisory and regulatory functions within its mandate as the state authority in financial monitoring.
The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) acknowledged the NBU’s role in implementation of the risk-based approach to building an anti-money laundering system in banking institutions.
According to the MONEYVAL report, published on 30 January 2018, the NBU receives significant information to provide it with a broad understanding of ML/FT risks of each bank and the banking sector in light of its knowledge.
Illegal economic activities:
- fictitious entrepreneurship
- tax evasion
Organized crime expansion
Activity of conversion centers
High cash circulation
Terrorism financing risk
The NBU’s official website has the section Financial monitoring, which contains the NBU’s materials on the system of anti-money laundering and combatting the financing of terrorism (AML/CFT) in banking institutions.
Risk-based approach is an on-going analysis of a customer’s financial transactions regarding their correlation with the customer’s financial standing, business activity, and economic feasibility of the transactions.
Banks at their own discretion identify respective indicators and lists of customers to apply measures of financial monitoring based on the risk-based approach as an AML/CFT tool and a way to prevent risky activities.
Cash and scheme transactions
Politically exposed persons (PEPs)
Identification of ultimate
Ordinary household transactions
The NBU and the banking system work together on projects to improve the AML/CFT system. One of the examples of such cooperation is the NBU’s participation in the project of the Independent Association of the Banks of Ukraine (NABU) «Best Practices in Financial Monitoring».