AML/CFT Services in Ukraine: Combating Money Laundering and Terrorism Financing

Money Laundering is the process of concealing the source of money obtained by illicit mean. Money Laundering takes many forms including:

• "Classic money laundering", turning dirty money into "clean money";
• Handling the benefit of acquisitive crime e.g. tax evasion, fraud or theft;
• Handling stolen goods;
• Being directly involved with any criminal or terrorist property, or entering arrangements to facilitate the laundering of criminal or terrorist property;
• Criminals investing the proceeds of their crimes in a whole range of financial products.

Three stages of money laundering:

• Placement: Illegally obtained funds are introduced into the financial system (e.g., through deposits or purchases).
• Layering: The money is moved through complex transactions to obscure its origin (e.g., wire transfers, shell companies).
• Integration: The funds re-enter the economy appearing as legitimate assets (e.g., investments, real estate).

An AML/CFT risk assessment is a core element of the risk-based approach, which every bank is required to apply in a manner that is proportionate to the nature and scale of its activities. According to Ukrainian regulatory expectations and international best practices, the risk-based approach must be grounded in a two-tiered risk assessment, which includes:

1. Assessment of the bank’s risk profile

• Identification and evaluation of ML/TF risks inherent to the bank’s operations.
• Analysis of existing risk mitigation measures to reduce or minimize those risks.
• Definition of the bank’s risk appetite in the AML/CFT domain—i.e., the level of ML/TF risk the bank is willing to accept.

2. Assessment of the customer’s risk profile

• Identification and evaluation of the inherent risk of establishing or conducting a transaction with a customer.
• Analysis of controls in place to reduce the customer’s ML/TF risk to an acceptable level, aligned with the bank’s risk appetite.
• Assessment of the residual risk of the customer relationship.

The full list of AML risk criteria is outlined in Annex 19 of the Regulation on Financial Monitoring by Banks №65. Purpose of the risk assessment:

• Identifying gaps and opportunities to improve AML/CFT controls (policies, procedures, and processes).
• Informing senior management and the supervisory board about key risks, control weaknesses, and remediation actions.
• Supporting organization-wide decisions on the bank’s risk appetite, control implementation, resource allocation, and technology investments.
• Helping senior leadership make strategic decisions about the discontinuation of certain business activities.
• Ensuring alignment between resources, priorities, and the actual risk exposure.
• Developing risk mitigation strategies across business lines, including internal control enhancements to reduce residual risk.
• Reporting to regulators to demonstrate awareness of key risks and the bank’s response plans.
• Facilitating communication with correspondent banks regarding the bank’s AML compliance programme

An effective AML/CFT assessment is vital for protecting the organization from involvement in money laundering and terrorist financing, safeguarding its reputation, and ensuring a secure and compliant operating environment.

PwC helps financial institutions develop and implement AML/CFT risk assessment methodologies aligned with Ukrainian regulations and international best practices.

Ukraine is not currently classified as a high-risk country for anti-money laundering by the Financial Action Task Force (FATF) as of the latest updates from June 2025.

Financial monitoring is the activity of detecting illegal incomes and combatting the financing of terrorism (AML/CFT). Ukraine’s financial monitoring system operates on two levels: state and primary.

Banks and non-bank financial institutions financial compliance monitoring by verifying the identity of customers and analyzing their financial transactions. If suspicious transactions are detected, banks report them to the Financial Intelligence Unit (FIU) and Ukrainian law enforcement authorities.

The National Bank of Ukraine (the NBU) is one of the authorities in Ukraine that conducts financial monitoring. The NBU performs financial monitoring and surveillance to prevent money laundering in Ukraine’s banking system.

PwC assists financial institutions in strengthening their financial monitoring systems and ensuring compliance with AML/CFT legislation.

According to the Law on AML/CFT in Ukraine, the primary subjects of financial monitoring includes:

• Banks, insurance companies, credit unions, pawnshops, and other financial institutions.
• Payment system operators and postal operators providing financial or currency exchange services.
• Capital and commodity market participants.
• Branches or representative offices of foreign financial service providers.
• Designated non-financial businesses and professions (DNFBPs), such as:
  • Auditors, accountants, tax consultants;
  • Lawyers, notaries, legal service providers;
  • Real estate intermediaries;
  • Dealers in precious metals and stones;
  • Gambling and lottery operators;
  • Cultural property traders.
• Virtual asset service providers.
• Other legal entities offering financial services without being licensed financial institutions.

Financial institutions often face several recurring challenges when assessing their AML/CFT risk profiles. These could include:

• Limited business unit involvement;
• Absence of a unified risk and control library;
• Failure to incorporate findings from the National Risk Assessment (NRA);
• Incorrect weighting of risks;
• Inadequate / Incomplete data collection;
• No clear action plan following the risk assessment;
• Lack of an effective system for monitoring risk indicators on a regular basis, etc.

These challenges highlight the need for a more integrated, data-driven, and strategically aligned approach to AML/CFT risk profiling.

To develop an effective AML/CFT programme, financial institutions should consider key components such as:

• Risk assessment;
• Policies and procedures;
• Customer due diligence;
• Transaction monitoring;
• Reporting and record-keeping;
• Training and awareness;
• Independent audits.

These components work together to establish a robust framework that promotes compliance with AML regulations and enhances risk management practices.

PwC helps design and implement comprehensive AML/CFT programmes, including policies, procedures, training, and independent diagnostics.

To effectively respond to current AML/CFT challenges, financial institutions in Ukraine can take the following steps:

• Conduct independent diagnostics of AML/CFT functions and practices;
• Analyze and optimize the target operating model;
• Update the organizational-level AML/CFT risk assessment methodology;
• Review and enhance the customer risk rating (CRR) model;
• Evaluate and optimize sanctions screening systems;
• Assess and improve transaction monitoring (TM) systems;
• Build a robust KPI and management information system (MIS);
• Implement additional IT systems.

PwC offers practical solutions including diagnostics, TOM development, CRR optimization, and MIS implementation to strengthen AML/CFT functions.

Financial monitoring applies to both threshold financial transactions and suspicious financial transactions (activities), as defined in Articles 20 and 21 of the Law on AML/CFT in Ukraine and Regulation on Financial Monitoring by Banks №65.

A financial transaction or an attempt to conduct one - regardless of the amount - is considered suspicious if a primary financial monitoring entity has a suspicion or sufficient grounds for suspicion that it is the result of criminal activity, or is related to or involves the financing of terrorism or the financing of the proliferation of weapons of mass destruction.

The primary financial monitoring entity must immediately, upon the emergence of suspicion or sufficient grounds for suspicion, report such financial transactions to the State Financial Monitoring Service of Ukraine (FIU).

Stages of identifying suspicious financial transactions (activities):

• Automated detection of unusual financial transactions (complex, unusually large, lacking an obvious economic or lawful purpose, inconsistent with the customer’s financial condition or expected behaviour) using rules/scenarios;
• Analysis of customer financial transactions (or their aggregate) for the presence or absence of indicators of suspicious financial activity, including the use of automated modules;
• Monitoring of business relationships and customer financial transactions for consistency with the information held by the bank about the customer, their activities, and risk profile.

A comprehensive list of indicators of suspicious financial transactions is provided in Annex 20 to the Regulation on Financial Monitoring by Banks №65.

Under Ukrainian AML legislation, threshold financial transactions are defined based on the amount involved and the presence of specific risk indicators.

A financial transaction is considered threshold if:

• It equals or exceeds UAH 400,000, or the equivalent in foreign currency, bank metals, or other assets at the official exchange rate at the time of the transaction.
• For entities involved in lotteries or gambling, the threshold is lower - UAH 55,000

Risk indicators (at least one must be present):

• One party is registered, resides, or located in a country:
  • that commits armed aggression against Ukraine;
  • that fails to comply with FATF or other international AML/CFT standards;
  • or if the party has a bank account in such a country, or its UBO is a citizen or resident of such a country.
• The transaction involves a politically exposed person (PEP), their family member, or a person associated with a PEP.
• The transaction involves transferring funds abroad, including to jurisdictions classified as offshore by the Cabinet of Ministers of Ukraine.
• The transaction involves cash deposits, transfers, or withdrawals.
• The transaction is conducted by an electronic resident (e-resident).

PwC assists in setting up monitoring systems and controls to ensure compliance with threshold transaction requirements.

In Ukraine, the AML Officer plays a critical role in ensuring that a primary financial monitoring entity (PFME) complies with national legislation and effectively prevents financial crimes.

The AML Officer is appointed at the management level of the PFME and must be approved by the National Bank of Ukraine (NBU).

Key functions of AML Officer include:

• Ensure timely reporting of financial transactions subject to financial monitoring
• Notify of any discrepancies between the official UBO/ownership structure data and the information obtained during customer due diligence;
• Conduct internal audits of any department or employee regarding compliance with internal AML/CFT policies;
• Access all premises, documents, databases, communication systems, and archives of the institution;
• Engage employees in financial monitoring and related internal checks;
• Organize the development, approval, regular updating, and enforcement of internal AML/CFT documents;
• Obtain explanations from any employee regarding AML/CFT matters, regardless of their position;
• Facilitate inspections by authorized representatives of state financial monitoring authorities;
• Decide on the provision of information to the Financial Intelligence Unit (FIU) and law enforcement agencies upon request;
• Fulfil additional functions as defined by legislation and internal AML/CFT policies.

PwC provides training and advisory services to AML Officers, helping them fulfill their responsibilities and strengthen internal controls.

Effective AML/CFT risk assessment at the organizational level is built on a structured, three-pillar approach:

1. Assessment of primary risks

This involves identifying inherent risks based on:

• Evaluating customer profiles and their risk exposure
• Assessing the risk level of offerings provided by the institution
• Analyzing the locations of both the bank and its customers
• Reviewing how services are accessed or delivered (e.g., online, in-person)

2. Risk mitigation measures (controls)

To mitigate identified risks, institutions should implement and regularly review:

• Governance and oversight
• Know Your Customer (KYC) procedures
• Policies and procedures
• Transaction monitoring systems
• Training and awareness programs
• Sanctions screening, etc

3. Residual risk evaluation

After applying controls, institutions must:

• Define a clear residual risk profile aligned with their business model
• Accurately identify high-risk criteria
• Detect and prioritize gaps in existing controls for remediation
• Maintaining a compliance-oriented AML/CFT programme
• Developing plans to enhance controls
• Conducting regular analysis of emerging risks and trends

PwC helps financial institutions develop and implement AML/CFT risk assessment methodologies aligned with Ukrainian regulations and international best practices.

A bank’s risk appetite refers to the level of AML/CFT risk that the bank is willing to accept in advance, within a defined acceptable threshold, to achieve its strategic objectives and fulfil its business plan.

When defining its risk appetite, a bank considers:

• Risks it is willing to accept;
• Risks it may accept only after implementing mitigation measures;
• Risks that are entirely unacceptable.

Establishing the bank’s risk appetite directly influences the next step - implementing measures to minimize AML/CFT risks. The definition of acceptable risks must be aligned with the bank’s senior management.

PwC supports banks in defining and operationalizing their AML/CFT risk appetite through strategic planning and control alignment.