Measures taking in Ukraine for improvement of National Anti-Money Laundering system.

FATF decision of February 2004 concerning Ukraine's delisting from NCCT list, was considered in Ukraine as positive signal welcoming the process of development of the national AML system and encouraging further cooperation in implementation of international standards. There are substantial changes in approaches as to combating money laundering in Ukraine. In governmental and professional circles exists not only understanding of necessity and urgency of steps to be taken in this direction but also aspiration of active efforts on international level.

This document contains information representing the practical measures on improvement of the national anti-money laundering system in the period from January 1, 2004.

1. Activity of the Financial Intelligence Unit.

Collection, processing and analysis of information received from financial intermediaries are the main activity of Ukrainian FIU, and first of all: assessing of received information on financial transactions; detecting of suspicious transactions; examining of money laundering schemes; preparing of case referrals on transactions related to money laundering/terrorist financing.

This year there has been applied software for analysis of information received from financial intermediaries, and procedures for analysis of the corresponding reports are being developed. The reports analysis process became automated to the maximum that allows diminishing influence of subjective assessments on decision making.

Incoming information for analysis is received from financial intermediaries (as clients' transactions reports) from law enforcement and other state agencies, financial intelligence units of other countries as well as from public sources. Total amount of registered financial intermediaries is as follows: banks - 157; insurance companies - 364; professional participants of securities market - 1415; leasing companies - 75; credit unions - 857; pawn-shops -241; stock exchanges - 20; legal entities lottery-runners - 5; postal offices - 15 648; gambling institutions - 1089; currency exchange offices - 3955 (including: banking - 2161; agential - 1794).

During five months of 2004 FIU received 244 136 financial transactions reports from financial intermediaries.

Financial intermediary	Number of FIU registered financial intermediary	Reports received
Banks	155	235894
Insurance companies	353	4959
Professional participants of security market	539	2232
Leasing companies	9	17
Credit unions	201	12
Pawn-shops	36	99
Stock exchange	2	1
Legal entities lottery-runners	1	21
Other financial intermediaries	140	901

Improvement of analytical processing of information.

The process of analytical examination consists of subsequent stages regulated by FIU internal documents. Primary reports assessment is based on transaction risk level assessment.

According to established procedures an Informational Analytical System (IAS) automatically calculates risk level for every report basing upon certain criteria.

Such criteria are based upon:

- FATF 40 Recommendations;

- FATF 8 Special Counter Terrorist Financing Recommendations;

- FATF typologies of ML schemes;

- UN Security Council lists of persons involved in international terrorist activity;

- list of Non-Cooperative Countries (Territories) in the area of prevention and counteraction to legalization (laundering) of the proceeds from crime and terrorist financing as well as the list of offshore zones approved by the Government;

- expert's evaluations of ML vulnerability of financial instruments.

FIU continuously analyses quality of criteria and if necessary relevant changes are introduced. A special procedure for terrorist financing reports processing has been also established.

During a period from January, 1 to May, 31, 2004 22,6 thousand reports were selected for active work and constituted a basis for creation of 440 dossiers.

At the compilation of dossiers during five months of 2004 the FIU sent to law enforcement agencies of Ukraine 128 requests on 4238 subjects, and received replies concerning 3451 subjects of that number.

Thus, number of transactions selected during 5 months of 2004 by 16% exceeds general number of transactions closely examined in 2003. At the same time, general volume of these transactions exceeds the respective volume of transactions in 2003 by 64%.

In second quarter of this year, in the framework of Technical Assistance Project Against Money Laundering in Ukraine (MOLI-UA), FIU was provided with software for data analysis visualization of i2 Corporation - Analyst's Notebook (ANB) corporation, iBridge, which provides transformation and demonstration to analysts of complicated information as understandable charts. Corresponding training for FIU users is scheduled for the third quarter.

Tracking of case referrals.

For detailed examination of case referrals, within FIU the expert commission responsible for decision making concerning passing of case referrals to law enforcement agencies has been established. This year FIU introduced a practice of engaging law enforcement agencies experts in consideration of case referrals.

During 5 months in 2004 FIU has passed 32 case referrals to law enforcement agencies, of which 13 to the General Prosecutor's Office, 4 to the State Tax Administration, 6 to Ministry of Interior, and 9 to Security Service. Passed case referrals were based on more than 4 thousands reports on financial transactions.

Basing on mentioned case referrals the General Prosecutor's Office initiated 1 criminal case under the Article 200 and 209 of Criminal Code, and the State Tax Administration - 1 criminal case under the article 205 of Criminal Code.

FIU's case referrals, considered by law enforcement agencies are sent out to regional units for follow-up of the cases. Thus, as of today FIU's case referrals, including ones which have become a basis for criminal cases initiated under the Articles 209, 358, 212, 205 of the Criminal Code, are under investigation in following regions: Donetsk Prosecutor's Office, Donetsk Tax Militia Division of the State Tax Administration of Ukraine, Donetsk Division of the Ministry of Interior, Prosecutor's Office in city of Kyiv, the State Tax Administration in Poltava oblast, the State Tax Administration in Autonomous Republic Crimea.

Methodical provision of the financial monitoring system.

For banking institutions, professional participants of securities markets, insurance companies, joint investment institutes, etc., there were conducted 7 training workshops regarding the peculiarities of detection of financial transactions subject to financial monitoring.

FIU constantly provides consultative and methodical assistance to financial intermediaries as for organization of internal financial monitoring system and regarding the issues related to detection of suspicious financial transactions. In the assistance framework, provision of consultations to financial intermediaries was established with the help of "hot line".

On the FIU web page there are placed: list of persons and organizations related to the organization "Al Quaeda"; list of persons and organizations, determined by the United States of America as supporting terrorist. Information is received from the Embassy of the USA in Ukraine and Ministry of Foreign Affairs of Ukraine. After that, it is provided to financial intermediaries by regulators. FIU regularly summarizes and constantly provides information as for indicated persons and organizations to entities of initial financial monitoring.

The FIU representatives participated in the conference "Markets of capitals of Baltic states and CIS" in Yalta on March, 24-27, and also in the International forum "Theory and practice of development of corporate sector of economy of Ukraine in the context of goals of the third millennium and world globalization" on May, 27 - 28. The events were held under the support of the Commission on securities, State Property Fund and Ministry of Economy.

On June, 4 on invitation of the State enterprise of postal communication "Ukrposhta", FIU representatives attended the seminar-training organized by "Ukrposhta" for compliance officers of post-offices, which this enterprise has in all regions and districts of Ukraine.

It is also necessary to mention that FIU constantly initiates conduction of working meetings and trainings both with the representatives of state regulators and law enforcement experts. Such five meetings have already been conducted this year.

In a period of April 19 - 23, 2004, within the framework of the mentioned Technical Assistance project of the Council of Europe, in Yalta there was held a seminar "Improvement of cooperation of the State Department for Financial Monitoring with law enforcement agencies in the sphere of prevention and counteraction to legalization (laundering) of proceeds from crime, and terrorist financing". The representatives of the State Department for Financial Monitoring, prosecutor's office, Supreme Court of Ukraine, Ministry of Interior of Ukraine, State Tax Administration of Ukraine, Security Service of Ukraine, Coordinating Committee on combating corruption and organized crime under the President of Ukraine and representatives of Financial Intelligence units of the Russian Federation, Denmark, the Netherlands and Italy took part in the mentioned seminar.

Interagency cooperation.

The FIU continues cooperation with the state bodies in the framework of concluded agreements, orders and protocols. This year there were signed interaction agreements with two more state bodies - with the National Bank in January and with the State Committee on Entrepreneurship in May. To exchange information concerning processing status of passed case referrals, the FIU on monthly basis performs cross-checks with law enforcement agencies. State bodies are invited to attend special meetings to discuss problem issues related to combating money laundering and find solutions to address them.

Since October, 2003 under the leadership of FIU Head an Interagency Group on Research of Tendencies in Money Laundering has been operating. All state bodies involved in combating this phenomenon are comprised by the Group's representation.

During this year five meetings of the Group were held, where the issues as to implementation by the state bodies of AML legislation requirements, in particular, of Governmental Program for 2004, were constantly discussed. An Interagency Group is also a Steering Committee for a Technical Assistance Project on Combating Money Laundering in Ukraine (MOLI - UA).

Establishment of the Unified State Information System in the AML/CFT sphere.

According to the Decree of the President of Ukraine Financial Intelligence Unit jointly with other state agencies engaged in creation of the Unified State Information System (USIS) in the area of prevention and counteraction to legalization (laundering) of proceeds from crime and terrorist financing.

This system will provide Financial Intelligence Unit with information from 17 state bodies: Administration of State Board Service, Main Control and Audit Divisions, Ministry of Economy, Ministry of Finance, Ministry of Internal Affairs, Ministry of Justice, National Bank of Ukraine, Security Service of Ukraine, State Commission on Regulation of Financial Services Markets, State Commission on Securities and Stock Markets, State Committee for Regulatory Policy and Entrepreneurship, State Committee on Communication and Information, State Committee on Land Resources, State Custom Service, State Property Fond of Ukraine, State Statistic Committee, State Tax Administration.

Check mode exploitation and full mode launching of the Unified Information System is scheduled for 2005.

Highlighting of money laundering problematic in Mass Media.

This year, FIU has prepared, distributed and publicized 24 press releases in Mass Media, in particular, in "Interfax", "Ukrinform", "Ukrainian news", "Unian" and other information agencies. The analysis of certain aspects of anti-money laundering problematic is carried out in the programs of the National television company of Ukraine "Rezonans", "Vidkryta sprava", "Za velykym rahunkom".

Television programs "Zakon ye zakon", "Pravo", "Lyudyna i zakon" cover normative legal provisions on addressing reasons and conditions for "shadowing" of proceeds and corruption.

The National radio company of Ukraine in its programs performs daily informing of radio audience about illegal turnover of alcohol and tobacco products, provides materials on implementation of the Program for counteraction to legalization of proceeds from crime, in different regions of Ukraine.

2. Supervision by state regulators.

In 1-st quarter of 2004, planned and non-planned inspections covered 187 banking institutions (40 banks and 147 bank branches). In addition, certain inspections started in 4-th quarter of 2003 (transitional inspections) have been accomplished in 1-st quarter of 2004, thus consequently taken into account for this period.

As of May, 1, 2004, as result of inspections at non-banking financial services market, the regulator executed 132 non-planned inspections of credit unions on financial monitoring issues. In 19 cases the enforcement measures in form of prescriptions were applied to unions and 3 fines were imposed. There were inspected 72 pawnshops of which to 26 the letters (prescriptions) demanding to remove of violations of legislation were sent, 2 fines were imposed. The removal of violations is properly controlled. In two cases levying fines has been executed by court ruling. There were carried out 138 inspections of insurance institutions, which resulted in 17 decisions on imposition of fines, sending 20 letters of caution, suspension (withdrawal) of 5 licenses. 35 inspections of financial companies resulted in revealing of 1 violation and imposing of 1 fine.

Regulation of activity in the sphere of providing of money transfer services, and also maintenance of plastic cards. Provision of money transfer services by the International systems (Western Union, Money Gram, Anelik) needs to be specially permitted by the National bank of Ukraine.

The prepaid plastic cards Visa Travel Money are one of financial instruments in the form of plastic cards on a bearer, used in Ukraine. The sale of such cards is carried out with identification of physical person.

Improvement of currency exchange offices' activity.

Activity on conduction of currency exchange operations is regulated in Ukraine by the National bank. This year there have been adopted and come into force changes to the Instruction in the Order of Procedure and Conduction of Currency Exchange Operations on the Territory of Ukraine. The changes set new rules of registration of cash operations in the empowered banks and empowered financial institutions. This Instruction envisages that all currency exchange operations, the sum of which exceeds 50 000 hryvnas (EUR 7 800) are to be carried out only within the cash desks of banks or financial institutions. It is obligatory to identify all clients who carry out such operations.

3. Securities market.

The Commission on securities approved the Procedure of organization of professional training of specialists on financial monitoring issues of professional participants of securities market. There was approved the procedure of conducting a qualifying exam on the issues of financial monitoring of professional participants of securities market. Already at the beginning of April, it concluded agreements on cooperation with 8 educational establishments of Ukraine as for training of mentioned specialists.

Also, the elaboration of draft of exemplary rules on performance of financial monitoring by an asset management company was the result of cooperation of the Commission with the Ukrainian Association of investment business. Also, a regulator plans to elaborate methodical recommendations for other supervised financial intermediaries taking into account specificity and directions of their activity.

Indicated information, including clarification, is placed on the official web page of the Commission (http://www.sscmc.gov.ua).

Forming of state register of financial institutions which conduct professional activity at the securities' market.

By now, the State Securities and Stock Market Commission (SSSMC) holds data on all necessary essential requisites of market entities, which have licenses for conduction of professional activity at the securities' market. They are: dealers in securities, registrars of property rights to registered securities, depositary institutions, managing companies of joint investment institutions. In addition, all Ukrainian stock exchanges have been registered at the Commission.

For the official putting of this information in the order, the Commission has developed the Regulation on Forming and Conduction of State Register of Institutions, which Provides Financial Services on Securities' Market. By now, this Regulation passes the procedure of concordance and will be finally established by the end of the third quarter of current year.

Information on all subjects of securities' market is placed on the official web site of the Commission (http://www.sssmc.kiev.ua).

Other non-bank financial services market.

Among the tasks in the regulation of activity of other non-banking intermediaries, specific attention is paid to forming by the end of the year of their state register, and also banning of money laundering foremost through the reinsurance sector.

Forming of state register of financial institutions.

The Commission on regulation of financial services markets approved the Provisions on the State Register of financial institutions. The indicated document regulates the procedure of register formation and bringing in the information on legal persons. It is a necessary pre-condition of granting the status of financial institution to them.

On average, about 20 financial institutions are weekly entered into the register. The Register is going to be formed completely until January 1, 2005, as is foreseen by the joint AML Program of the Government and National Bank for 2004. Besides it should be mentioned that regulator has approved Provisions on Providing of Certain Financial Services by Non-Financial Institutions Companies.

Supervision over providing of services in the sphere of insurance.

Suggested by the Commission and coordinated with FIU and other state bodies, the Government has approved the Procedure and Requirements of Re-Insurance at Non-resident Insurer (Re-Insurer). In addition, the Commission has approved the Procedure of Reporting Data Compilation by Insurers. This enabled Commission to obtain more comprehensive and transparent information on their activity, in particular, concerning carrying out of transactions with non-resident re-insurers.

Non-admission of criminals and persons with doubtful business reputation to the financial intermediaries' management.

In accordance with the 40 FATF Recommendations financial intermediaries also take additional due diligence measures in relation to persons who take or took position, in accordance with which they have or had extensive powers of authority. The Economic Code of Ukraine, which came into force this year, determines that an independent auditor or audit company has to check whether a founder (legal person) is able to perform relevant payment to statute fund of company. At the same time, the material background of founders-citizens is to be confirmed by declaration on their profits and property, notarized by the relevant tax authority.

Also, the Law of Ukraine "On Audit Activity" foresees the obligatory conducting of audit for financial background inspection of founders of commercial banks, enterprises with foreign investments, joint-stock companies, holding companies, investment funds, trust associations and other financial intermediaries.

It should be mentioned that persons carrying out professional activity at securities market (directors and employees directly carrying out transactions) obtain from a regulator the relevant certificate only if they not are deprived of the right (under the sentence of court) to hold certain positions and carry out certain kind of activity, as well as do not have un-canceled conviction for economic and official crimes. The indicated clauses are contained in the Provisions on Certification of Persons Carrying out Professional Securities Activity in Ukraine, which is ratified by the decision of the State Commission on Securities and Stock Market.

In regard to other non-bank financial services, in Ukraine they can be rendered only by companies listed in the State Register of Financial Institutions. While making decision as to including company to the register, the State Commission on Regulation of Financial Services Markets obligatory verifies the fact of existence of managers of company of un-canceled conviction. The Commission set up such requirements for pawn-shops and financial companies. Regulator also approved the condition of absence of un-canceled conviction while issuing licenses for provision of services by insurers and credit unions.

4. Law enforcement agencies activity.

General Prosecutor's Office, Ministry of Interior, Security Service and Tax Militia during 1-st quarter of 2004 accomplished investigations and passed on to the court 47 criminal cases initiated according to Article 209 of the Criminal Code.

The Ministry of Interior during 1-st quarter of 2004 accomplished investigation and passed to the court 50 criminal cases initiated according to Article 306.

In December 2003, the General Prosecutor of Ukraine sent instructions to prosecutors of the Autonomous Republic of Crimea, regions, cities of Kyiv and Sevastopol to stir up prosecutor's supervision over observance of AML laws, as well as provide coordination and interaction between prosecutor's bodies and the Ministry of Interiors, Security Service, tax authorities. Concrete prosecutor officers (280 persons as of today) were assigned to conduct supervision over observance of laws in this sphere directly.

Work of special AML units established in the Ministry of Interiors, State Tax Administration, Security Service and State Customs Service is being continued.

The Supreme Court of Ukraine completes summarizing court practice of application of criminal cases according to Article 209 of Criminal Code of Ukraine. Plenary session of the Supreme Court of Ukraine on generalization of summarizing court practice and providing guidance to the courts on issues of application of legislation in the field of combating money laundering is scheduled for ІІ half of 2004.

Education and professional development of employees of law enforcement bodies.

General Prosecutor's Office is constantly conducting training of prosecutors and investigators on counteraction to money laundering issues. For 5 months of current year, in the Academy and its branch in Kharkiv city 12 educational events have been conducted. More than 600 prosecutors and investigators from all regions of Ukraine have enriched professional development. In May of current year, in each region there were conducted on-site workshops on pressing questions of prosecution and investigation activity, including on combating legalization of proceeds from crime.

In order to increase efficiency and quality of criminal cases investigation of the mentioned category, within the Division on particular important cases investigation of the General Prosecutor's Office, there was created a subdivision specializing directly in investigation of criminal cases on legalization of criminal proceeds. The investigators of the indicated subdivision conduct seminars on a weekly basis, where they share experience, study typical schemes of money laundering, discuss problem issues of investigation and apply acquired knowledge in practical activity.

Constant attention is paid to practical aspects of court consideration of the cases of mentioned category. With the purpose of further acquaintance with the world experience of the investigation of criminal cases, initiated under the facts of money laundering, and with the financial assistance of the World Bank - the General Prosecutor's Office of Ukraine is in the process of preparation of the second international seminar for investigators and prosecutors of law enforcement agencies and FIU, and also experts of the International Monetary Fund, the World Bank and the Council of Europe. The seminar is planned to be held in October this year.

The Ministry of Interior included topics on studying of features of proving crimes, related to laundering, and methods of their investigation into the courses of retraining and professional development of law enforcement specialists at the National Academy of Interior of Ukraine. During 5 months of this year such courses were completed by 231 officials of Interior agencies.

Officials of the Security Service increase professional development at the special faculty of the National Academy of Security Service of Ukraine. In addition, within the system of post-graduate study of operative staff, the studies on theoretical and practical issues of counteraction to laundering of proceeds from crime are constantly conducted. For the improvement of professional training of investigators, "Typical program of studies for investigative agencies of Security Service in regard to investigation of criminal cases of laundering of proceeds from crime" was developed. Training on combating money laundering for specialists with higher education is conducted in the National Academy of State Tax Service: regular courses (trainings), systematic professional development of officials of the special service units, involved in the mentioned area.

The Tax Militia developed guidance recommendations in regard to disclosure and investigation of crimes, related to legalization (laundering) of the proceeds from crime. Specialists of the Scientific-Research Institute of the National Academy of Interior, jointly with the Ministry of Interior developed and forwarded to regional units the Methodical Recommendations as for disclosure and investigation of crimes related to laundering, for the study and use in work. The work is being continued as for their improvement.

Based on the results of study of foreign experience of combating money laundering, Security Service developed and forwarded to regional units the Methodical Recommendations for disclosure and investigation of criminal cases on legalization (laundering) of the proceeds from crime.

5. Resources to the state bodies.

Real development of activity of the Commission on regulation of financial services markets as an authorized state body with the special status became one of the main achievements. By the Decrees of the President of Ukraine all members of the Commission were appointed, central office personnel was formed, the issue on establishing territorial divisions was settled. At present, 8 such divisions are operating, i.e. one division covers 3 regions of Ukraine. At this time, about 225 employees work in the central office of the Commission and its territorial bodies.

Other state regulators have been also staffed with personnel - the State Commission on securities and stock market (284 specialists), and also the National Bank of Ukraine, within which about 100 people are engaged in the AML sphere.

In regard to law enforcement agencies, within their structure, numbers of experts involved in counteraction to legalization of criminal proceeds are the following: the Ministry of Internal Affairs of Ukraine - 365 employees; National Central Bureau of Interpol in Ukraine - 15; Security Service of Ukraine - 286 employees; State Tax Administration of Ukraine - 706 employees; General Prosecutor's Office of Ukraine - 280 employees.

6. Extension of national legalization in the AML sphere on the special (free) economic zones.

The Procedure of creation, liquidation and mechanism of functioning of the special (free) economic zones on the territory of Ukraine is regulated by the Law of Ukraine dated 13.10.1992 N 2673-XII "On general provisions of creation and functioning of special (free) economic zones".

Special (free) economic zone is a part of the territory of Ukraine where special legal regime of economic activity and procedure of application of the legislation of Ukraine is established and functioning.

The force of the Law of Ukraine "On Prevention and Counteraction to the Legalization (laundering) of the proceeds from crime" is extended on all the territory of Ukraine, citizens of Ukraine, foreigners and persons without citizenship, and also legal entities, their branches, representative offices and other separated units regardless of the force of the legislation of Ukraine on special (free) economic zones.

7. International cooperation.

The main aim of international cooperation with foreign partners is effective assistance to fast and constructive information exchange directly between correspondent authorities on money laundering and predicate offences.

Cooperation with international organizations.

FATF: FATF's expert mission visited Ukraine on January 19-23, 2004. During the visit, FATF's expert mission was able to get acquainted with the activity of entities of state financial monitoring and state authorities, directly involved in combating money laundering and terrorist financing. The Expert mission was also able to assess work of regional bodies involved in combating money laundering and terrorist financing in Odessa, in one of the biggest cities of Ukraine. During the visit, the members of the Expert mission met with the highest officials of Ukraine.

As a result of this visit the FATF plenary meeting held in Paris on February 2004 deliver a decision to delist Ukraine from NCCT list.

FATF Secretariat communicated this decision to the Governments of different countries, central banks, international financial organizations, leading commercial banks and investment funds. The mentioned event will definitely contribute to strengthening of positive international image of Ukraine, to increasing of investment attractiveness of Ukraine, to stirring up of external economic relations of Ukraine with world countries and will contribute to strengthening of the national security of Ukraine.

Eurasian Group (EAG): In accordance with the FATF mandate, the Russian FIU has taken the initiative of creation of regional organization for combating money laundering and terrorist financing - Eurasian group (EAG).

During a round table "Creation of the FATF-type Eurasian working group for combating money laundering of criminal proceeds and terrorist financing", which took place on February, 10-11, 2004, there were discussed issues on EG creation. In the course of the meeting, where the FIU delegation participated, there were discussed a purpose, structure, principles and stages of creation of the Group.

Ukraine supports this initiative and declare for its participation in this structure as an observer. In March, 2004, in Minsk, the summit of Ministers for foreign affairs of CIS countries took place. During this meeting the issue of creation of EG was considered. Delegation of FIU will continue negotiations on legal questions of the EG functioning during the next meeting in Moscow.

World Bank: A representative of FIU, on WB invitation, participated in the conference concerning creation of informational-analytical system of the Service for Financial Monitoring of Georgia, which was organized by World Bank and took place in Tbilisi, Georgia in February, 17, 2004. The representatives of Council of Europe, U.S. Department of Justice, U.S. Treasury and World Bank also took part in the conference. Taking into account the achievements made by the FIU in improvement and development of the National AML/CFT system, during the conference there was expressed a suggestion to use this system as a pattern for creation of the informational-analytical system of Service for Financial Monitoring of Georgia and development of suspicion operation reporting procedure.

On March, 17, within the framework of the Project of analysis of implementation results of recommendations of the Financial Sector of Ukraine Assessing Program, representatives of World Bank, who were in Ukraine with a mission to review current status of financial market of Ukraine within Financial Sector of Ukraine Assessing Program (FSAP), visited SDFM.

IMF: Ukrainian representatives took part in the workshop "Compliance with the FATF 40 Recommendations" in April, 19-23, 2004, in Vienna, Austria, on preparation of the legislation in the field of new AML/CFT standards, which was organized by the Legal Department of the IMF jointly with the UN Legal Division on drugs and crime.

OECD: During 2002 annual meeting of the Anticorruption Network for transition economies, Armenia, Azerbaijan, Byelorussia, Georgia, the Russian Federation, Tajikistan and Ukraine called upon to regional initiatives with the aim to implement The Anticorruption Action Plan in the region. The Plan was endorsed during the 5th annual meeting of the Anticorruption Network for transition economies, in September 10-12, 2003, in Istanbul, Turkey. FIU representatives participated in the program from the very beginning. OECD fully supported the implementation of this Plan. Ukrainian delegation took part also in the Second revue meeting of the Istanbul Action Plan against Corruption held in Paris, on June 16-18, 2004.

Egmont Group (EG): In the framework of SDFM's joining FATF the State Department for Financial Monitoring concluded 12 international interagency agreements, including with FIU of Russia (August 29, 2003), Belgium (September 19, 2003), Slovakia (September 23, 2003), Estonia (October 20, 2003), Spain (October 21, 2003), Panama (November 5, 2003), Italia (December 11, 2003), Slovenia (December 11, 2003), Romania (March 17, 2004), Portugal (March 24, 2004), Poland (April 14, 2004) and Brasil (July 12, 2004). Preliminary consultations are being held concerning the possibility of concluding of MOU's with other countries.

Council of Europe: Ukraine cooperates with the Council of Europe and its committee's (Moneyval) on a number of Programs of technical assistance (Octopus, MOLI - UA).

As far as Ukraine is a member of the Moneyval Committee within the Council of Europe, representatives of State Department for Financial Monitoring take part in the meetings of this committee on the permanent basis. In particular, in June 6-9, 2004 representatives of SDFM, Ministry of Justice and National Bank of Ukraine took part in the 15th meeting of the Committee on new aspects of combating terrorism, activity of international organizations and characteristics of different countries evaluation in the sphere of AML measures.

In the framework of realization of the project of technical assistance for AML in Ukraine (MOLI-UA) in March 7 - 14, 2004 SDFM delegation visited France, where it got acquainted with activity of the Unit for Processing Information and Action against Illicit Financial Flows (Tracfin) acting within the Ministry of Economy, Finance and Industry of France. Within the framework of the same project Ukrainian experts had training on April 26-30, 2004 in the financial intelligence unit of Austrian Republic and on May 2-8, 2004 to the Italian FIU.

Interagency working group of researching the methods and tendencies in laundering of proceeds from crime on May, 17, 2004 within the framework of the eighth meeting conducted the second meeting of Steering Committee of Project of technical assistance against Money Laundering in Ukraine (MOLI-UA).

In connection with a huge number and variety of anti-corruption services, which are now in Europe, and with the purpose of improvement of experience exchange between such services, conduction of training for countries, wherever such services doesn't exist or must be improved, Council of Europe organized the Meeting of Interaction Octopus on the issues of the specialized anti-corruption services - best practice of Europe. This meeting was held in Strasbourg in the period of November, 5 - 7, 2003 and assembled over 100 representatives of member states of Council of Europe, nongovernmental and international institutions, majority of which work in anti-corruption services. Ukraine supported the Octopus initiative on spreading of the best European practice and took part in preparation of review materials in May 2004.

International cooperation of state bodies.

International cooperation in the AML activity is carried out with the direct coordination of Ministry of Foreign Affairs of Ukraine. On March of this year MFA jointly with the experts of UN Office on Drugs and Crime organized an international conference "Implementation of the universal counterterrorist instruments to the national legislation of Ukraine". During this conference the issue of AML measures and counteraction for financing terrorism were discussed.

MFA initiated the examination of Ukrainian national legislation in this sphere by the UNODC experts. As a result of this examination on July 2004 MFA introduced to the Ukrainian Government suggestions about some modifications of national legislation.

The AML measures were object of discussion on the International research-and-practical conference "Improvement of Cooperation Between the CIS States in the fighting organized crime, terrorism, illicit drugs traffic and other new challenges and threats" and, also, during the Third Joint Meeting of the CIS Councils of Ministers for Foreign Affairs and Heads of Law Enforcement Bodies (Kiev, 7-8/04/2004). These events were organized jointly by the Ukrainian MFA and Ministry of Internal. Delegation of CIS countries, experts of other countries, representatives of the United Nations, Interpol and US State Department took part in these events.

Ministry of the Interior of Ukraine: Nowadays, the Ministry of the Interior is the party of 162 international agreements and protocols with more than 40 countries in the sphere of legal assistance in criminal cases, combating crime, international cooperation, other issues related to activity of the agencies of Interior.

The Ministry of Interior of Ukraine established direct relations with foreign law enforcement agencies of Austria, Bulgaria, Great Britain, Greece, Italy, Spain, Macedonia, Netherlands, Germany, Norway, Poland, Romania, Slovakia, Turkey, France, Hungary, Czech Republic, Switzerland, the Benelux countries, CIS and Baltic States, in particular. Assisted by the Ministry of Foreign Affairs of Ukraine the Ministry of Interior of Ukraine maintains contacts with special anti-organized crime units of other European countries. The steps are being taken to conclude bilateral intergovernmental agreements on cooperation in the area of combating crime and international terrorist activity with Denmark, Cyprus, Lithuania, Malta, Norway, Portugal, Sweden, Yugoslavia and countries of Benelux.

State Customs Service of Ukraine: The legal basis for international custom cooperation of Ukraine provided by more than 40 intergovernmental bilateral agreements concluded almost with all CIS countries, Baltic States, most of the Eastern European countries of (Poland, Romania, Bulgaria, Hungary, Czech Republic, Slovak Republic).

The State Customs Service cooperates with all EU member-states under the Protocol on Customs Assistance Provided by Administrative Authorities. The protocol is an integral part of Agreement on Partnership and Cooperation between European Communities, their member-states and Ukraine.

Close and effective cooperation on customs and law enforcement issues has been established by Ukraine with foreign states in the framework of the Regional Intelligence Liaison Office (RILO), World Customs Organization. Since 1994, the State Customs Service of Ukraine has joined the Regional Intelligence Liaison Office of Central and Eastern European countries (RILO-Warsaw). Usage of modern technologies and possibilities of RILO-Warsaw enabled the State Customs Service, if necessary, to receive real time law-enforcement information from overseas customs authorities.

The officers of the State Customs Service took part in 37-th Training Session of International Law-Enforcement Academy (ILFA) for representatives of law enforcement authorities of Ukraine, Hungary and Albany. An agenda included the issues of financial crimes investigations, money laundering, coinage offences, indications of money imitation, combating terrorism, etc. Also, the State Customs Service officers took part in International Practical Conference "Counteraction to Money Laundering and Terrorist Financing: Public Support and Control".

Within the framework of the TACIS "Customs-7" program, working meetings with EURO CUSTOMS officers took place, where have been discussed the issues of prospects and ways of international cooperation development between customs authorities of Ukraine and the EU.

The State Tax Administration of Ukraine pays particular attention to cooperation with Interpol and with border regions of Russia, Hungary, Poland, Belarus and other states. Regional AML/CTF Units sent 500 requests concerning non-residents who formerly carried out economic activity in Ukraine or cooperated with Ukrainian businesses, to Interpol representative offices throughout the world.

The State Tax Administration cooperates with the Netherlands within the framework of Working Agreement between the State Tax Administration of Ukraine and Tax and Customs Directorate General of Administration of the Netherlands as well as with Customs Policy and Legislation Directorate General of the Netherlands concerning execution of simultaneous tax inspections, since within the Tax Service of Netherlands operates a Group on Combating Money Laundering (on researching of money laundering).

The State Tax Administration cooperates also with relevant overseas authorities through the General Prosecutor's Office of Ukraine in the framework of agreements on legal assistance.

The State Securities and Stock Markets Commission (SSSMC) is Ukrainian representative at the International Organization of Securities Commissions (IOSCO). Geographically, the Commission is a member of the European Regional Committee, by market development - it is a member of the New Markets Committee.

The SSSMC performs bilateral cooperation with overseas securities markets regulators under the Memoranda of Understanding between the Commission and state regulators of the Russian Federation, Moldova, China and Belarus. At present, the Memoranda of Understanding between the Commission and regulators of the USA, Kyrgyzstan, Bulgaria, Brazil, Poland, Lithuania, Latvia, Egypt, Korea, and the Republic of Panama are being prepared for signing. The issue of signing of Memoranda of Understanding between the Commission and regulators of Mongolia and Uzbekistan is currently being negotiated.

The State Commission for Regulation of Financial Services Markets is involved in international organizations activities, such as International Association of Insurance Supervisors (IAIS), the International Network of Pension Regulators and Supervisors (INPRS).

There has been established cooperation with foreign regulators: in the framework of the PADCO project (Planning and Development Collaborative International Organization) - with Hungarian regulator; in the framework of the CIDA project (Canadian International Development Agency) - with Canadian regulator; in the framework of the First Initiative project - with regulators of Baltic States and Great Britain; in the OSI project - with regulators Poland and Ireland.

The State Commission for Regulation of Financial Services Markets participates in the World Bank projects in Ukraine: Programmatic Adjustment Loan, Financial Sector Evaluation Program, Rural Development Financing Program, Project of introduction of pension reform in Ukraine, Project on research of non-banking financial institutions in Ukraine.

8. Aspects of further improvement of the National AML System.

For further improvement and development of the National AML/CFT system and stirring up of Ukraine's participation in development of international cooperation in this area, the following is planned:

Implementation of a new edition of Forty Recommendations of Financial Action Task Force (FATF)

The draft Law of Ukraine "On introducing amendments into some legislative acts of Ukraine as to prevention of legalization (laundering) of proceeds from crime, and terrorist financing" has been developed and forwarded to the Verkhovna Rada of Ukraine. In April this year, this draft Law passed the expert judgment and was approved by the Main Scientific-Expert Division of the Verkhovna Rada of Ukraine.

In accordance with the Regulations of the Verkhovna Rada of Ukraine, a draft Law has been considered and highly assessed by profile committees of the Verkhovna Rada of Ukraine, in particular, the committee on combating organized crime and corruption (November, 2003), the committee on finances and banking (May, 2004) and the committee on legislative provision of law-enforcement activity (June, 2004). As a result of such assessment, it was recommended to the Parliament to adopt the draft Law in the first reading for basis.

The basic provisions of the draft Law are the improvement of criminal legislation as to specification of corpus delicti of "money laundering" and threshold extension of predicative crimes, improvement of international cooperation in relation to identification of capacities of state bodies for performing international information exchange.

In addition, the draft Law envisages:

- improvement of organization of initial and state financial monitoring - expansion of list of proper entities, new requirements for work with clients, introduction of new entities of state financial monitoring, establishment of additional obligations of these entities;

- differentiation of administrative and criminal responsibility for non-compliance with the requirements of the legislation of Ukraine on combating money laundering;

- creation of legal provisions of organization of combating terrorist financing- defining terrorist financing as a separate crime. It is also planned in the nearest time:

- to create within FIU a Training and Methodological Center for preparation of state authorities officers and financial intermediaries on AML/CFT issues, providing proper financing;

- to introduce AML/CFT issues training system within courses of professional development for senior leadership members;

- to provide AML/CTF units with necessary human and material resources. The Government has taken a decision to provide FIU with separate building;

- to create regional FIU subdivisions;

- to hold of Supreme Court of Ukraine Plenary Session where to consider practice of court rulings on criminal AML/CTF cases;

- to summarize AML typologies which were the results of criminal cases investigation initiated under Article 209 of the Criminal Code of Ukraine;

- to introduce standard form for criminal cases and courts rulings records keeping concerning ML/TF connected crimes;

- to approve Comprehensive Program on counteraction to legalization (laundering) of proceeds from crime for 2005-2010;

- to introduce the Unified State Information System in AML/CTF area;

- to perform permanent monitoring by regulators of AML/CTF steps taken by financial intermediaries, in particular concerning gambling institutions, pawnshops, currency exchange offices, post offices, money remittance offices of such remittance systems as Western Union, Money Gram, Anelik, etc.).

Department of New Challenges and Threats MFA of Ukraine                July, 2004