FINANCIAL MONITORING IN UKRAINE: OPERATIONAL CHALLENGES FOR BUSINESS AND WAYS TO OPTIMIZE THE SYSTEM

This article investigates the operational challenges and obstacles encountered by Ukrainian businesses due to the practical application of financial monitoring regulations. It analyzes the significant administrative burden imposed on business entities through customer due diligence (CDD) procedures, document collection, and reporting requirements. The study considers substantial direct and indirect compliance costs, which are particularly onerous for small and medium-sized enterprises (SMEs). Problems of operational disruptions are highlighted, notably payment delays and the freezing of bank accounts, which can paralyze business activities. The research identifies that the key obligations of reporting entities (REs) include registration, internal organization, appointment of a responsible employee, development of internal Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) rules and programs, staff training, conducting CDD (including identification and verification of clients and their ultimate beneficial owners – UBOs), ongoing monitoring of business relationships, data updating, and the application of a risk-based approach (RBA). Simplified Due Diligence (SDD) and Enhanced Due Diligence (EDD) measures are analyzed in relation to the client’s risk level. The monitoring of threshold and suspicious financial transactions is also examined. It is noted that the complexity of the legislative framework and numerous obligations demand considerable resources from REs. Emphasis is placed on the ambiguous and potentially overly cautious practical application of the RBA, which may lead to “de-risking”. Operational uncertainty is underscored, stemming from a lack of predictability in the application of rules by different REs and subjectivity in risk assessment. Based on an analysis of international experience and Financial Action Task Force (FATF) guidelines, pathways for system optimization are proposed. The importance of robust risk assessment, clear RBA guidance, continuous dialogue between regulators and the business community, and the implementation of technological solutions (RegTech/SupTech) to automate processes and reduce the administrative load is stressed.