FATF Status

Ukraine is not on the FATF List of Countries that have been identified as having strategic AML deficiencies.

Compliance with FATF Recommendations

The last follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Ukraine was undertaken by the Financial Action Task Force (FATF) in 2020. According to that Evaluation, Ukraine was deemed Compliant for 11 and Largely Compliant for 22 of the FATF 40 Recommendations. It was also deemed Highly Effective for 0 and Substantially Effective for 2 with regard to the 11 areas of Effectiveness of its AML/CFT Regime.

US Department of State Money Laundering assessment (INCSR)

Ukraine is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes. 

Overview

Money laundering remains a significant problem in Ukraine.  Public corruption is the primary source of laundered funds.  Ineffective state institutions allow criminal proceeds to go undetected.  Launderers use shell companies and foreign bank accounts to avoid detection and integrate laundered money into legal businesses.  

Legislation in 2021 reinstates anticorruption procedures previously overturned by the Constitutional Court of Ukraine (CCU) and strengthens the independence of the National Anticorruption Bureau of Ukraine (NABU).  The NABU investigates and the Specialized AntiCorruption Prosecutor’s Office (SAPO) prosecutes money laundering and its predicate offenses as a mechanism for pursuing high-level corruption.  Pressure from vested interests exerting influence through members of Parliament and the judiciary, including the CCU, pose a significant threat to Ukraine’s institutional anticorruption architecture. 

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                          36

World Governance Indicator – Control of Corruption             29

A combination of rampant corruption, market volatility and political instability in Ukraine represents major business risks for foreign investors. Bribery and facilitation payments are widespread among Ukrainian public officials, severely complicating business registration and trade procedures for international companies. Public procurement also suffers from pervasive corruption, burdensome regulations and favoritism, severely impeding fair competition. Corruption, extortion, bribery of foreign public officials, abuse of office and facilitation payments are criminalized under the Criminal Code, and official corruption - including conflicts of interest, asset disclosure and gifts and hospitality - is also covered under Ukraine's legislative framework. Ukraine’s anti-corruption laws encompass corrupt misconduct in both the private and the public sectors. The Law On Prevention of Corruption introduces measures for monitoring the effective implementation of anti-corruption provisions. However, a weak judicial system limits the enforcement of Ukraine's anti-corruption laws. For further information - GAN Integrity Business Anti-Corruption Portal

Despite the Russia’s full-scale invasion, Ukraine offers a large consumer market, a highly educated and cost-competitive work force, and abundant natural resources. The government continues to advance legislation to capitalize on this potential with numerous corporate governance and other economic reform draft laws designed to bring Ukraine into compliance with EU standards and regulations currently moving forward. Ukraine’s increasing momentum toward integration with the EU offers potential opportunities for investors seeking to access the EU market. Additionally, Ukraine’s reconstruction is anticipated to attract hundreds of billions of dollars from governments, International Financial Institutions (IFIs), and the private sector. Corruption, especially in the judiciary, remains a challenge.

Many U.S. companies have found success in Ukraine, particularly in the agriculture, consumer goods, and technology sectors. Ukraine is an agricultural powerhouse and one of the world’s largest grain exporters despite Russia’s efforts to block grain exports. Ukraine has long had a skilled workforce in the IT service and software R&D sectors. The technology sector has grown over the last year even with Russia’s full-scale invasion of Ukraine.

The April 2019 election of President Zelenskyy raised hopes that Ukraine would make the breakthrough reforms necessary to unlock its vast economic potential. The government has worked to protect the gains of recent years and to implement many of the administration’s promises. Vested and corrupt interests, however, have resisted and even succeeded in rolling back some of the critical reforms enacted since the 2014 Revolution of Dignity. However, on March 4, 2023, the Cabinet of Ministers of Ukraine adopted the State Anti-Corruption Program for 2023-2025 that offers an action plan and timeline to reduce corruption.

Despite Ukraine’s potential, foreign direct investment (FDI) remains low. Russia’s intentional destruction of Ukrainian civilian infrastructure, occupation of a significant share of Ukrainian territory, fierce fighting on the frontlines, missile and drone attacks on civilians and civilian infrastructure throughout Ukraine, disruption of the workforce due to the invasion, unexploded ordnance contamination and other ecological consequences of the war pose challenges to new and existing investors. However, most areas of Ukraine are not on the frontlines. Highlighting the different risk perceptions of foreign investors in Ukraine with those outside the country, several existing foreign investors are making new direct investments of tens of millions of dollars each while investments by new investors are limited. Pre-existing problems with corruption and an unreliable judicial system persist, and Ukraine’s adoption of wartime currency controls and a fixed exchange rate regime has added new complications. Nevertheless, reconstruction and recovery offer significant potential opportunities, particularly for early moving investors with a high risk tolerance.

Country Links

The State Financial Monitoring Service of Ukraine (SFMS)

National Securities and Stock Market Commission (NSSMC)

National Bank of Ukraine

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