Opinion: Without regulation of the cryptocurrency market, Ukraine risks the FATF blacklist

Ukraine’s anti-money-laundering legislation needs urgent refinement, otherwise the country risks ending up in the ‘grey zone’ or being placed on FATF’s blacklist. This was stated by Maxim Demyanyuk, head of the expert group on the development of virtual assets at the Ministry of Digital Transformation.

One of the important directions is the regulation of the virtual assets market and measures to prevent their use for illicit purposes. Such requirements are mandatory for FATF member countries.

According to Demyanyuk, in order to fully launch the legalization of the virtual assets market and implement AML procedures, Ukraine needs to pass a sector-specific law defining the basic terminology, legal status, and key rules governing market activity.

“Without its adoption, the state supervisory body will not be able to implement FATF recommendations, and as a consequence, Ukraine risks being placed on sanctions lists,” said the expert.

He noted that in August the FATF-style regional group Moneyval повысила Ukraine’s rating from ‘partially compliant’ to ‘highly compliant’ in certain directions.

Unfavourable indicators include the regulatory framework, controls over non-financial activities, national statistics, and sanctions in the anti-money laundering sphere.

Countries that do not cooperate sufficiently with FATF are placed on the blacklist, which directly affects their banking system and international trade. Any payments sent to the accounts of banks in such a country are deemed suspicious and their execution may be halted, the expert noted.

Ukraine was on the FATF blacklist from 2002 to 2004, and again in 2010. At the end of 2011, thanks to bringing national securities market legislation in line with international standards, Ukraine was removed from the blacklist, and for two more years was under a special regime of active monitoring.

Ukraine is currently part of Moneyval, and as of 10 July 2020 fully complied with 11 of FATF’s 40 recommendations.

“If Ukraine is again placed on FATF’s sanctions list, it will deal a significant blow to the country’s economy – foreign investment will fall, borrowing costs for the state and business will rise, and direct and portfolio investments in Ukrainian companies will suffer,” warned Maxim Demyanyuk.

In December 2019, Ukraine adopted amendments on virtual assets in line with FATF standards. They took effect in April 2020.

Virtual assets are treated as property and can be used for payments and investments. Transactions with them, depending on the amount and destination country, will be subject to financial monitoring once the procedure is approved.

The consideration of the bill “On Virtual Assets”, which regulates the handling of cryptocurrency within Ukraine, is expected as early as this week.

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