National Bank to Pay More Attention To Capital Flows

The National Bank of Ukraine (NBU) and the State Customs Committee are to introduce a special online computerized system to monitor the movement of goods across the border and the making of payments with respect to them. The information will be recorded simultaneously by the customs service and NBU, announced Serhiy Brahin, director of the NBU currency-control and licensing department, on October 26. He further explained that many agencies, including the State Tax Administration, have evinced interest in his system.

Mr. Brahin believes the National Bank’s previous initiative to check the outflow of capital abroad through nonresident loro accounts was a success. Neither the customers nor bona fide commercial banks suffered from the five-day restriction on money transfer from these accounts. On the other hand, those who utilized loro accounts for currency conversion or other unfair practices had to disappear: the turnover of funds in these accounts has dropped almost tenfold, which only confirms the suspicions of experts about this channel being used for smuggling hard currency out of Ukraine.

Having analyzed the flows of capital, the National Bank has noticed lately that many banks have begun to work with “non- material things.” As Mr. Brahin said, there have been more instances of quite sizable money transfers for the so-called copyrights. There were even cases when, on these grounds, some firms paid up to $70 million: formally, they did not breach the law, although such deals are clearly illegitimate.

Also still under close NBU scrutiny are currency-exchange points. There are over 6,000 of them today, with 40% belonging to banks and 60% working on a contractual basis. It is the latter that, according to Mr. Brahin, are the source of numerous violations. Half of them serve dubious owners. An average 200-300 of this kind of offices close every year after routine NBU inspections. This is why the National Bank suggests that the new version of the law On Banks and Banking delete the clause on the activity of contract-based exchange points.