Ten different foreigners walk into different Ukrainian banks to try and open a simple deposit account for their everyday banking needs. It might sound like the start of a bad joke, but for many expatriates in Ukraine, it leads to one of the more frustrating experiences related to living here.
According to many such prospective customers, Ukrainian banks will, more often than not, provide 10 different reasons as to why it’s not possible for a customer to open a bank account with them.
Despite attempts to liberalize, simplify and strengthen the unstable commercial banking sector here in Ukraine — a process that’s seen as a vital aspect of building confidence in the Ukrainian marketplace and attracting foreign investment into the country — many foreigners still report obstacles when it comes to simply opening a bank account.
Some observers say that the challenges posed to foreigners in obtaining private banking services in Ukraine are hindering those who want to do business here and invest in the country.
Others say that banks are now trying to apply much stricter standards across a sector that has been plagued with bankruptcy and state-mandated liquidations through recent years.
Going by the word of Ukrainian law, it should be easier than ever for a foreigner to open a bank account here, but the reality seems very different.
The Kyiv Post went into five of Ukraine’s most popular high street banks and all of them had different requirements as to what was needed for a foreigner to open a basic bank account.
Two major commercial banks said it was too complicated and declined to help or answer any questions.
All of the banks said a foreigner is required by law to have an official residency permit — temporary or permanent — for Ukraine.
But some lawyers here in Ukraine say it shouldn’t be so complicated and banks can do more to help foreigners get access to local banking services, even if they also understand why bankers are being more careful these days.
Banks apply confusing rules
“There isn’t any obstacle to non-residents or any foreign citizens in opening a bank account here — according to the law of Ukraine,” says Vasya Cherednichenko, a partner in the ExpatPro law firm in Kyiv and specialist in legal issues that affect foreigners.
A new law, passed in June 2018, that simplified all foreign currency operations for individuals and businesses in Ukraine was thought to eliminate the final challenge for foreigners who wanted to use Ukrainian banking services.
But most banks in Ukraine are still choosing to implement their own policies, as opposed to following the official instructions of the government or the country’s central state bank: the National Bank of Ukraine, or NBU.
The result is a confusing lack of uniformity across the country’s commercial banking sector when it comes to rules and standards for opening a bank account for a foreigner, Cherednichenko says.
“I’ve heard lots of different stories in my practice from foreigners… some people have been able to open bank accounts and some have been refused, for different reasons,” he said. “While there is no limitation in Ukrainian legislation that prevents a foreigner opening an account, all banks are using their own internal rules.”
Lawyers say that a foreigner here in Ukraine can, by law, open a bank account without any residency status, although they must be in the country legally and could be asked to show a visa or visa waiver stamp in their passport.
Beyond this, the most important thing that a prospective customer does need, legally, is a Ukrainian tax identification number that can be obtained by any foreigner who wants to work or do business in the country.
As to why so many commercial banks in Ukraine are often accused of being unhelpful towards foreign customers who want an account, even flatly refusing to provide services for them, this is more a case of substandard customer service than application of Ukrainian law, say lawyers.
In many cases, the bank’s employees and managers don’t know what to do when faced with a foreigner who wants an account. “We have to remember that Ukraine has only really been becoming popular with foreigners and expatriates over the last few years,” says Cherednichenko.
“Workers are learning how to give good services to foreigners… it’s a question for the banks, how to improve this.”
Using local Ukrainian banking services is useful for those who plan a long stay in the country and want to do business, rent property or pay for local utilities and services.
Such prospective customers can increase their chance of getting a Ukrainian bank account by first having a local tax ID number — applied for at any local tax office — but, most importantly, paying close attention to which bank they choose and where it’s located. “Some bigger branches of banks in central Kyiv, like UkrSibbank [part of French banking group BNP Paribas] and [state-owned] PrivatBank are more set up and prepared for foreign customers,” says Cherednichenko.
“They have English-speaking staff and better understand the rules and requirements.” Ultimately, a prospective customer who has the right documents can always try and cite Ukrainian law and insist that they’re allowed to open an account, says Cherednichenko — but there’s nothing stopping a bank manager citing his own company’s policy and insisting in the other direction either.
Know your customer
If Ukrainian commercial banks seem overzealous in how they police and select new customers — especially foreigners — and come across as hesitant to open new accounts, there could be good reason for this, according to other legal experts who say that bank policy now is to pay very close attention to who they allow to open an account.
“To enhance procedures that prevent money laundering and other serious crime, the parliament of Ukraine passed a law [in 2014] to introduce mandatory verification of clients by banks,” says Ivan Demtso, a senior associate at KPMG Law in Ukraine.
“It seems the biggest challenge for foreign citizens… is that this verification implies that a client needs to personally attend the bank in order to open and use the bank account,” he added.
According to Demtso, Ukrainian banks these days are rigorously enforcing revised “know your client” procedures, and these deep layers of paperwork and bureaucracy are having an effect on foreigners and foreign companies who want access to even the most simple banking services in Ukraine.
“They collect an extensive list of information and documents from their potential clients… For the Ukrainian offices and subsidiaries of foreign companies, this also includes documentation of ownership structure and ultimate beneficial owners.”
Demtso says that foreign banking customers in Ukraine, opening a private or business account, can be daunted by the “vast amount” of time that’s needed to collect the data and documents that banks can ask for.
“This should be taken into account by those who want and are willing to come and start a business in Ukraine… given global trends in the banking sector, these requirements [on foreign customers here in Ukraine] are unlikely to change significantly any time soon,” he concluded.
