Foreign banks blocking payments of Ukrainian companies from frontline regions - NBU

The National Bank recommends that Ukrainian banks contribute to solving problems with settlements under foreign economic contracts of clients registered in the territories of the regions of Ukraine that are partially occupied by russia.

This is stated in a letter to banks and banking associations, in which the National Bank reported on appeals from Ukrainian companies and business associations regarding the blocking/refusal of foreign banks, primarily European, from making payments to/from Ukraine under foreign economic contracts, the Ukrainian News agency reports.

The letter states that foreign banks block operations involving legal entities registered in the Zaporizhzhia, Kherson, Donetsk and Luhansk Regions, regardless of whether the relevant settlement is under the temporary occupation of russia or under the control of Ukraine.

This is explained by the fact that foreign banks do not have a reliable source of data on the status of such territories of Ukraine.

Therefore, additional communication of Ukrainian banks on this issue with foreign banks is necessary.

"For the most part, foreign banks do not detail the reason for the blocking/refusal with reference to the requirements of their internal policies and compliance procedures. According to the National Bank, non-fulfillment of payment may be related to sanctions restrictions (in particular, sectoral sanctions of the European Union regarding territories not under the control of the Government of Ukraine in the Donetsk, Kherson, Luhansk and Zaporizhzhia Regions), as well as the requirements of international standards and national legislation of other countries on financial monitoring, risk management, etc. We believe that such de-risking by foreign banks in relation to Ukrainian business entities is unfounded,” the letter of the NBU stated.

The National Bank reminds that in order to eliminate obstacles during settlements under foreign economic contracts, the following resources have been developed and are currently available for foreign banks to carry out compliance checks:

- the English-language landing page of the Ministry of Reintegration of Temporarily Occupied Territories of Ukraine (hereinafter referred to as the Ministry of Reintegration), which contains, in particular, a list of temporarily occupied settlements of Ukraine (by regions and districts) in a structured xlsx format, which simplifies integration into banking systems. The Ministry of Reintegration promptly updates the target page and works on its improvement, in particular regarding the possibility for users to download information in English about the status of a certain settlement;

- on the official website of the European Commission, updated questions and answers regarding the implementation of EU Council regulations regarding sanctions restrictions on the temporarily occupied territories of the Donetsk, Kherson, Luhansk and Zaporizhzhia Regions of Ukraine (hereinafter referred to as DG FISMA explanation) have been published, which, in particular, state the control of the Government of Ukraine over the cities of Zaporizhzhia and Kherson and a hyperlink to the target page of the Ministry of Reintegration.

In order to inform foreign banks about the above-mentioned resources to minimize the risks of blocking funds / refusal to carry out an operation, the National Bank recommends to banks that serve clients registered in the territories of the regions of Ukraine partially occupied by russia, or that face problems when making payments for foreign economic contracts, to communicate with the involved foreign banks (correspondent bank and/or servicing bank of the client's counterparty) regarding the following:

- before initiating the payment, make preliminary communication with the authorized division of the relevant partner bank (available electronic means of communication) to explain the content of the transaction and provide additional information / documents regarding the Ukrainian company / payment (if necessary), taking into account the clarification of DG FISMA;

- detailing of payment messages - with regard to outgoing payments, comprehensive information about the control of the settlement in Ukraine, where the paying client is registered, a link to the clarification of DG FISMA and to the landing page of the Ministry of Reintegration (for verification by a foreign bank of the relevant information) should be indicated in the corresponding fields of the payment message; regarding payments in favor of the Ukrainian client – ​​to provide the client with similar instructions for further communication of their counterparty with the servicing bank and the correspondent bank;

- in case of blocking of funds for the client's payment transaction / in favor of the client - contact the bank that blocked the payment to find out the reasons for the refusal and agree on the amount of additional measures / information needed by the foreign bank for its implementation.

The letter also states that the banks must inform the National Bank within a month of the results of the measures taken (including the list of relevant clients, involved banks, identified grounds for blocking/refusal, the status of the decision made by the foreign bank regarding the payment/revision of the measures taken) as well as problematic issues identified during communication with the partner banks, and proposals for possible ways to solve them.

As the Ukrainian News agency earlier reported, the National Bank of Ukraine has introduced a new method of on-site supervision - in-depth analysis.

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