Law obliges auditors and accountants to report transactions suspected to be financial fraud to State Financial Monitoring Service

According to the Law of Ukraine No. 1702-VII of October 14, 2014 «On the prevention of the legalization (laundering) of illegally gained income, financing of terrorism and proliferation of mass-destruction weapons», auditors, audit companies and companies providing accounting services are considered subjects of first-level monitoring. Thus, they are obliged to detect and register financial transactions which are subject to internal financial monitoring and report them to the State Financial Monitoring Service. These are transactions which are suspected by the respective entity based on criteria listed in art. 16 of the above Law.

In line with the Law, the Ministry of Finance elaborated a Regulation on the financial monitoring conducted by the subjects of first-level monitoring, whose activities are regulated and monitored by the Ministry of Finance of Ukraine (Order No. 1160 dated December 22, 2015, registered at the Ministry of Justice of Ukraine on January 15, 2016 under No. 63/28193).

According to the Regulation, subjects of first-level financial monitoring which provide accounting or audit services must report their suspicions related to the financial transactions of their customers with other parties. Suspicious can be risky transactions as well as transactions contradicting the financial situation and reports of the respective customer, transactions involving persons related to terrorist activities or standing under international sanctions.

Accordingly, the Regulation of the Ministry of Finance regulates the activities of the entities of first-level financial monitoring and sets their obligations including the following:

· they must designate persons in charge for financial monitoring;
· they must elaborate and update regulations and programs for financial monitoring;
· they must identify and verify their customers;
· they must pursue risk management;
· they must detect financial transactions which are subject to financial monitoring and can be related to the financing of terrorism or proliferation of mass-destruction weapons;
· they must suspend suspicious financial transactions etc.