Lifetime PEP status in Ukraine turns from anti-corruption tool into instrument of discrimination by banks against honest officials – lawyer
The lifetime status of politically exposed persons (PEPs) in Ukraine, which was introduced under the slogans of uncompromising борьба against corruption and money laundering, has in practice turned into a tool of bureaucracy and discrimination against honest officials, according to Taras Kovalsky, head of corporate practice and partner at the law firm Alekseev, Boyarchukov and Partners.
"Instead of identifying shadow empires, the system produces meaningless bureaucracy, institutional sabotage, and discrimination against honest officials, while violating fundamental civil rights. Banks openly sabotage remote services for PEPs. Services for opening accounts, including via Diia, which are advertised as mass and innovative, are blocked for former officials by artificial technical refusals such as 'try again later,'" he said.
Kovalsky believes that "unlike European practice, where the EU Anti-Money Laundering Authority (AMLA) provides clear technical standards, the National Bank of Ukraine has fully delegated the development of rules to the banks themselves."
"This creates chaos and widespread abuse at the local level. The law clearly obliges banks to provide a written justification for refusal of service signed by a manager within five days. In practice, however, banks systematically and with impunity ignore this requirement and refer only to legislative provisions without describing any factual reasons. In reality, refusals to open accounts are not based on any genuine risks other than the PEP label in the database. The best proof of this is that after an official complaint by a client, the bank suddenly 'finds no obstacles' and opens the account without issue within a month," he said.
The expert believes that the control system represented by the National Bank of Ukraine (NBU) and the State Financial Monitoring Service "demonstrates an inability to create a functioning system."
"Complaints about blatant violations by banks are reviewed by the NBU purely formally, with the process dragged out to 30 days instead of prompt response. The content of responses often boils down to: 'You eventually had your account opened after the complaint, what more do you want?' The country simply lacks an objective picture of the problem. The state deliberately does not collect data: no data, no problem. Not a single bank has been penalized by the regulator for excessive pressure on PEPs or for violating refusal procedures. Moreover, regulators openly take pride in this fact," he said.
Kovalsky said that "all the rhetoric around lifetime PEP status collapses in light of the complete absence of results in the annual reports of the State Financial Monitoring Service; the 2025 report contains no statistics on PEP refusals, blocked transactions, or shadow billions actually returned to the state."
He also stressed that "in addition to directly violating citizens' rights, lifetime PEP status has catastrophic consequences for public administration, creating an insurmountable barrier to attracting qualified professionals, ultimately the system filters out honest specialists with legitimate income."
In the lawyer's view, "drafting new 'beautiful' rules makes no sense without strong enforcement mechanisms and penalties for non-compliance."
"In addition to restoring the three-year limitation on PEP status, radical steps are needed, such as introducing direct financial compensation to clients for unjustified delays in opening accounts or failure to provide a written refusal, establishing personal liability for NBU staff and management for issuing formalistic responses to complaints and for the lack of sanctions against banks that violate clients' rights, legislating the obligation for the NBU to collect and publish statistics on PEP refusals and fines imposed on banks for abuses in financial monitoring, as well as reducing the number of fines for abuses in financial monitoring."
"Lifetime PEP status in Ukraine today is not a tool for combating money laundering. It is purely an instrument of discrimination. Restoring the three-year limit, introducing strict fines for banks, and establishing personal accountability for financial monitoring leadership are the only ways to make this imitation system work for the state rather than against its citizens," he said.
As reported, on Tuesday morning the parliamentary committee on finance, tax and customs policy reversed its earlier decision to include in draft law No. 15112-1 on extending taxation to parcels valued at up to EUR 150, a provision limiting the current lifetime PEP status to three years after leaving office, which had been intended to increase parliamentary support for the bill. This provision was replaced with another: "until EU membership is achieved, penalties for banks for violations related to PEPs are suspended."