Ukrainian business obtained access to participation in government procurement WTO

wtoOn May 18, 2016 was been completed the accession of Ukraine to the WTO Agreement on Government Procurement.

Under this Agreement Ukrainian business has the opportunity to enter the market of government procurement of 45 participating countries of the WTO Agreement, which, in particular, are: EU countries, USA, Canada, Japan, Singapore, Korea, Taiwan, Hong Kong and other.

According to Ministry of Economic Development and Trade of Ukraine the total amount of WTO`s government procurement market is estimated at 1,7 trillion dollars USA per year, that exceeds the amount of Ukrainian export in 2014 more than 30 times.

In Ministry noted that the Agreement shares the main principle of the WTO – equal access to markets – in government procurement. Foreigners will have full access to the Ukrainian government tenders as well as Ukrainian – to foreign.

At present it can be said without prejudice that the opening of the international government procurement market for Ukrainian business will be an efficient way to export Ukrainian goods.

Changes Regarding Cash Funds Receipt Introduced by the National Bank of Ukraine

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The NBU’s Letter No.25-0004/31760 dated April 13, 2016 recommends the Ukrainian banks to carry out thorough monitoring of financial transactions associated with receipt of cash funds. More specifically, in cases where the aforementioned cash funds are likely to be used for non-intended purposes, the Ukrainian banks are advised to immediately freeze the cash flow on the accounts and block receipt thereof via ATMs or over-the-counter at a bank branch.

This recommendation is explained chiefly by the NBU’s concern about the number of financial transactions associated with receipt of large sums of cash funds by banks’ clients using payment cards. The National Bank of Ukraine notes that above facts may imply higher risk of bank services being used for legalization of illegal revenues.

It should be emphasized that pursuant to Part 1, Art. 48 of the Law of Ukraine “On Banks and Banking”, the banks are not allowed to carry out any risk-related activities, which may endanger the interests of bank’s depositors or other creditors.

Factors, which constitute the basis for the NBU’s conclusion on conduction of risk-related activities by the bank, have been stipulated by Regulation on Application of Enforcement Measures by the National Bank of Ukraine, approved by Decision No.346 of the National Bank of Ukraine as of August 17, 2012.

Thus, according to the National Bank of Ukraine, the following cases may signal about risk-related activities being carried out by the banks, namely:

  • cash funds, which arrived in the card accounts in the form of returnable financial assistance from the legal entities, are received by individuals from several card accounts;
  • funds arrive in the card accounts of individuals from accounts of several legal entities with indicated purpose of payment being “subject to report”. In addition, the amount of funds transferred to the card account of each individual does not exceed 150,000 UAH. However, the total amount received per day to the account of one individual exceeds the aforementioned sum.

In view of the NBU’s recommendations outlined in the Letter No.25-0004/31760 dated April 13, 2016, it can be concluded that Ukrainian banks are recommended to not only place greater focus on taking relevant measures to examine the clients’ activities, but also analyze their financial status and purpose of financial transactions made.

We would also like to point out that business entities listed below shall be closely monitored by the National Bank of Ukraine:

  • Business entities, which operation period does not exceed one year as from the date of state registration thereof;
  • Business entities, where the authorized capital is less than 1,000 UAH;
  • Business entities, where one person is simultaneously a founder and a director and/or an accountant, whereas there are no other Company’s employees, except for the director;
  • Entities, the owners of which have been changed, prior to opening of the bank account;
  • Funds received by the said legal entities in cash or transferred to another entity with further receipt in cash, and which arrive in account(s) of the business entity from a large number of counter parties, while having different payment purposes;
  • Business entities, the funds of which arrive in the card accounts on a regular basis (nearly daily) and are withdrawn from the said accounts in cash on the same or next business day;
  • Business entities, clients or counter parties of which are involved in criminal proceeding and the like, according to the data from the Unified State Register of Court Decisions.

The given list of examples is, however, inexhaustive, therefore, the banks will also monitor the financial transactions involving entities that have not been included therein.

Having analyzed Art.10 and 17 of the Law of Ukraine “On Prevention and Counteraction to Legalization (Money Laundering) of Proceeds of Crime, Terrorism Financing, as well as Financing of Proliferation of Weapons of Mass Destruction”, it can be concluded that NBU’s recommendations fully comply with requirements of applicable Ukrainian legislation.

Pursuant to the aforementioned legislative norms, if the business entity is included in the above-mentioned list, the Ukrainian banks shall have the right to:

  • freeze financial transaction, which has the signs of risk-related activities or refuse to conduct the said transaction;
  • abandon business relationships therewith.

Werner Law Firm Shared its Experience in Providing Support for Foreign Economic Activity

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Representatives of the Werner Law Firm participated in a workshop on organization of Ukrainian goods’ export and international trade which was held by the Ukrainian Exporters Club.

In the course of the event, the team of our lawyers shared their experience in supporting export of the goods, particularly in terms of concluding foreign economic contracts with partners and obtaining approval documents required for export of the goods. Employees of the Firm also received new experience regarding practical aspects of the goods’ exports and international trade.

Konstantin Sulima, Managing Partner at the Werner Law Firm notes: “According to the data from the State Statistics Service of Ukraine, 34% of export of Ukrainian goods is accounted for the EU market. The EU-Ukraine Arrangement on Free Trade Zone which came into effect on January 1, 2016 offers attractive opportunities for access of Ukrainian business to the foreign markets. Evidently, the Ukrainian entrepreneurs expect that integration of the Ukrainian market into the EU ones will provide similar conditions for trade between the EU and Ukraine which currently exist in the EU zone. In reality, Ukrainian exporters face a number of challenges when obtaining authorization documents, engaging in negotiations with prospect partners, interacting with the customs authorities, etc. We believe that the tasks of the law firms operating in this field are not limited to just provision of legal support in connection with foreign economic contracts. Today's realities require holistic approach to finding relevant solutions to the client’s matters, with the assistance of experts from related business areas.”