Ukraine -- Travel Rule Implementation Regulatory Overview

Ukraine has made significant strides in implementing the FATF Travel Rule, primarily through its comprehensive Anti-Money Laundering (AML) framework. While a specific "Virtual Assets Law" exists, the core AML obligations for Virtual Asset Service Providers (VASPs), including the Travel Rule, are primarily derived from broader AML/CFT legislation.

Here's a breakdown of the status:

1. Whether Adopted

Yes, the principles of the FATF Travel Rule (Recommendation 16) have been adopted into Ukrainian law. This was largely achieved through amendments to the primary AML/CFT legislation, which predate the dedicated Virtual Assets Law.

• Primary Legislation: Law of Ukraine "On Prevention and Counteraction to Legalization (Laundering) of Criminal Proceeds, Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction" (Закон України "Про запобігання та протидію легалізації (відмиванню) доходів, одержаних злочинним шляхом, фінансуванню тероризму та фінансуванню розповсюдження зброї масового знищення") No. 361-IX.

  • This law, significantly updated in 2019, specifically incorporated virtual assets and VASPs into the scope of financial monitoring.
  • URL: https://zakon.rada.gov.ua/laws/show/361-20#Text (Official Ukrainian text on Verkhovna Rada website)

• Supporting Legislation (Virtual Assets Law): Law of Ukraine "On Virtual Assets" (Закон України "Про віртуальні активи") No. 2074-IX.

  • This law was passed on September 8, 2021, and signed by the President on March 15, 2022. While it defines the legal status of virtual assets and aims to create a regulatory framework for the market, its full implementation (especially regarding licensing and market regulation) has been delayed, partly due to the martial law. However, it reaffirms that VASPs are subject to AML/CFT legislation.
  • URL: https://zakon.rada.gov.ua/laws/show/2074-20#Text (Official Ukrainian text on Verkhovna Rada website)

2. Effective Date

The core AML/CFT obligations, including those related to the Travel Rule for virtual assets, became effective with the entry into force of Law No. 361-IX on April 28, 2020.

3. Threshold Amounts

Law No. 361-IX mandates the collection of originator and beneficiary information for virtual asset transfers where the transaction value is UAH 30,000 (thirty thousand Ukrainian Hryvnias) or more (or its equivalent in foreign currency or virtual assets).

This threshold applies to transactions that trigger "obligatory financial monitoring." Below this amount, simplified due diligence or other monitoring requirements might still apply, but the full Travel Rule data collection is typically triggered at this threshold.

4. Which VASPs Are Covered

Law No. 361-IX explicitly designates "virtual asset service providers" as subjects of primary financial monitoring. The definition of a VASP aligns with FATF recommendations, covering entities that perform or operate as a business one or more of the following activities or operations for or on behalf of another natural or legal person:

• Exchange between virtual assets and funds (fiat currencies);
• Exchange between one or more forms of virtual assets;
• Transfer of virtual assets;
• Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets;
• Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.

5. Technical Implementation Requirements

Ukrainian legislation, like many national laws, specifies what information needs to be collected and exchanged, rather than prescribing a specific technical solution (e.g., TRISA, Sygna, Travel Rule Universal Protocol - TRUP).

• Required Information: VASPs are required to collect and transmit:

  • Originator Information: Name, unique identifier (e.g., account number or wallet address), physical address, national identity number (if applicable), date and place of birth, and customer ID.
  • Beneficiary Information: Name, unique identifier (e.g., account number or wallet address), physical address, national identity number (if applicable), date and place of birth, and customer ID.

• Transmission: This information must be securely transmitted to the beneficiary VASP (or collected when receiving funds from another VASP).

• Regulatory Guidance: The National Bank of Ukraine (NBU) and the State Financial Monitoring Service of Ukraine (SFMS) are the key regulators for AML/CFT. While specific technical standards for Travel Rule protocols haven't been mandated by law, they may issue sub-regulatory guidance, recommendations, or best practices over time to ensure compliance. VASPs are generally expected to use robust, secure, and interoperable solutions.

6. Penalties for Non-Compliance

Law No. 361-IX establishes a robust system of penalties for non-compliance with AML/CFT requirements, which apply to VASPs as subjects of primary financial monitoring. Penalties can be severe and include:

• Fines: Significant monetary penalties for both the legal entity and responsible officers.
  • For failure to provide information on financial transactions subject to monitoring (including Travel Rule data), fines can range up to UAH 340,000 (approx. USD 9,000, as of late 2023/early 2024, subject to exchange rate fluctuations).
  • For systemic or repeated violations, especially regarding customer due diligence, reporting, or internal controls, the maximum fine for financial institutions (including VASPs) can be up to UAH 135 million (approx. USD 3.6 million).
• Suspension or Revocation of Licenses: In case of serious or repeated violations, the regulatory body (e.g., NBU) can suspend or revoke the VASP's operating license or registration.
• Disqualification of Management: Responsible individuals within the VASP's management may face disqualification.
• Criminal Liability: In cases involving significant money laundering or terrorist financing activities, individuals may face criminal charges.

Ukraine has demonstrated a clear commitment to aligning its regulatory framework with international standards, particularly FATF recommendations, for virtual assets. While the full market regulation of virtual assets under Law No. 2074-IX is still evolving, the AML/CFT obligations, including the Travel Rule, are firmly in place under Law No. 361-IX.