As the head of the State Financial Monitoring Service, I am proud of our efforts to protect the financial system of our country, especially under martial law. Our primary mission is to detect and prevent terrorist financing, which has become critical in this context.
Over the last period, we detected and analyzed suspicious financial transactions amounting to more than 147 billion hryvnia. This is more than 1,800 materials during the period of martial law.
It is clear that we are now focusing on analytical investigations related to the financing of terrorism, separatism and military aggression from Russia, as well as investigations related to collaboration and corruption. Currently, 347 cases are being investigated on suspicion of treason.
The State Financial Monitoring Service provided law enforcement agencies with information about 487 collaborators and traitors. 2500+ accounts blocked.
Using a risk-based reporting approach
The introduction of a risk-based approach has become a key step in our work. This has enabled us to more effectively detect financial crimes and improve the quality of information we receive from financial institutions.
Since 2020, financial monitoring subjects have adhered to case-based (risk-based) reporting on suspicious transactions of clients and their activities.
Let me give you an example. If during 2022 more than 52,000 case reports were submitted to the State Financial Monitoring Service, then in just 11 months of 2023 we registered information about 132,000 such cases. We are not just talking about technical messages, but solid and high-quality cases with suspicions identified on the basis of a risk-based approach.
I will be frank - the quality of information from the financial sector received by the State Financial Monitoring Service has increased in recent years. This means that the private sector is increasingly adopting a risk-based approach.
Condition and protection of the financial system of Ukraine
The current state of Ukraine’s financial system and its protection from global threats are the focus of the State Financial Monitoring Committee. Especially in the context of Russian aggression against Ukraine, which is certainly terrorist in nature. Our work focuses on countering the financing of terrorism and other illegal activities that undermine global order and security.
We recognize that current counterterrorism financing standards have traditionally focused on terrorist groups and individuals rather than states. This is why the actions and reactions to the Russian war in Ukraine have been unprecedented for global financial institutions such as FATF, MONEYVAL and Egmont Group. An important step was the suspension of Russia's membership in these organizations and its disconnection from international intelligence exchange.
At the same time, adding a country to the FATF blacklist is a complex and lengthy process that requires a detailed assessment of risks and threats. We maintain active cooperation with the FATF, working to ensure that the global financial system is adequately protected from various threats posed by Russia. This work is confidential, but I can assure you that our team and our international partners are working tirelessly and justice will prevail. Specific follow-up decisions will be communicated accordingly.
Legislative changes
Law No. 3419-IX, which was recently adopted and received significant attention and criticism, has a significant impact on the field of financial monitoring. I believe that this law will play a key role in the transparency of the definition of politically exposed persons, which is an important step towards Ukraine's European integration.
This law redefines the term "national public figures", introducing the status of a public figure without limitation by term of office. This issue was key in the context of our European integration efforts and was discussed at a high level. The efforts of the executive and legislative branches made it possible to find a compromise and make an informed decision. This mechanism is generally accepted in most civilized countries, and Ukraine is no exception. In practice, this does not lead to fundamental changes in the procedure for financial monitoring of public figures. We have actually returned to the legislation that was in force in 2020-2022, introducing the necessary clarifications to improve it.
One of the important aspects of our work at Gosfinmonitoring is interaction with subjects of primary financial monitoring, especially in the context of identifying politically exposed persons (PEP). We understand that this can be a dilemma for banks and other financial institutions, because it is often easier to refuse a potentially risky client than to risk violating the law. Therefore, our office actively works on outreach, providing clear guidance on the definition of PEP to help the private sector correctly apply the law.
Regarding the creation of a separate register of national public figures, we are of the position that following international experience is the best solution. It is important to note that the creation of such a registry is not supported by the international community, and its support would require significant resources. In addition, there is a risk that financial institutions will rely solely on this register, which may lead to insufficient risk assessment. At the same time, our main goal is to ensure efficiency and compliance with international standards in the field of financial monitoring.
Action Plan for 2024
Over the 21 years of its existence, the State Financial Monitoring Service of Ukraine has achieved significant success in its work, developing in accordance with European standards. Although many of our processes are confidential, we strive to be open and transparent in our communications with the public. Our main task is to ensure the functioning of financial intelligence.
One of the significant results of our work was the removal of Russia from international financial organizations such as FATF and Egmont Group. In conditions of martial law, we will contribute to the victory of Ukraine. We have clearly defined priorities and full support at the highest political levels, which allows us to work effectively for the benefit of national security.
In the future, we will focus on further developing and adapting financial monitoring to modern challenges. We plan to introduce new IT solutions, expand international cooperation and ensure closer interaction with the private sector. We want to create a strong, transparent and effective financial monitoring system that can adequately respond to modern financial threats and contribute to the economic development of Ukraine.
I believe that together we can build a strong and stable financial system that will become the foundation for the prosperity of our country.
