The measures have raised concerns over how the information will used by law enforcement authorities.
In a move that authorities say will help combat money laundering and other financial crimes, banks are scrambling to gather personal data from clients to comply with a central bank deadline of Oct. 23.
The National Bank of Ukraine passed a resolution in April that requires banks to collect information on the property, home address, monthly income and its sources from all their clients.
Many banks are now writing letters and emails to clients, asking them to fill out forms and return them or go to the bank branch to provide the information. Previously, an account could be opened with a passport and tax identification code.
While some experts say giving this information is usual practice for banks across the world, others raised concerns about how the information could be misused in a country where rule of law, identity protection and privacy rules are so weak.
(Photo: Angela Prigozhina, senior financial sector specialist at the World Bank in Ukraine)
Angela Prigozhina, senior financial sector specialist at the World Bank in Ukraine, said she saw nothing wrong with the new rule.
“It is a normal international practice. Information about family, official and unofficial sources of income, household running costs, liabilities in other banks and so on are always collected throughout the world.
The thing is that banks are interested in credit histories. And one starts not when you take a loan but when you open a current account,” Prigozhina said.
But banks complain that collecting this data from new clients or requesting it from existing ones makes them nervous about how it could be used.
“Why should I report to a bank clerk and tell him or her all about my property and earnings? I do not know how many people will see this, and the clerk can change work in hours” and take the data with them, said Serhiy Yeremenko, former deputy head of the National Bank of Ukraine.
This data is useless for marketing and client relations, because nobody needs and considers it worthwhile to check data provided by thousands of people who just have a current account, said a representative of a foreign bank in Ukraine, speaking on condition of anonymity.
This data collection also affects anyone paying cash worth more than Hr 150,000 ($18,500) onto an account, according to the National Bank.
The resolution also states that someone paying Hr 7,000 onto another person’s account will have to give their home address, tax identification code or place and date of birth.
The information collected is not automatically sent to the NBU, but its financial monitoring service can request it at any time if “suspicious activity” is noticed.
The NBU said the data will help them to fight money laundering and the financing of terrorism. But some experts aren’t convinced that this is the only reason behind the rule.
Olexandr Zholud, a senior analyst at the Kyiv-based International Center for Policy Studies, said he suspected the move to demand more information could be a ploy by the tax authorities, which are notorious for finding ways to squeeze money out of citizens.
“I believe that it was done on the request of the tax authorities. But it is almost impossible to prove, because that would mean that the widely-spoken independence of National Bank is not there,” he said.
Bank officials said even those who do not want to hand over data will not have a choice, as otherwise they will be refused service.
“According to the resolution, the bank should refuse to provide services to a client not willing to disclose that information,” said Vitaliy Chernyak from OTP Bank
Giving private data is unavoidable and designed as financial monitoring to prevent money laundering and financing terrorism, the National Bank said in a written answer to Kyiv Post inquiries.
Kyiv Post staff writer Kateryna Panova can be reached at [email protected].
