Re­mit­tances from Rus­sia go un­of­fi­cial amid Ukraine’s ban on Rus­sian money trans­fers

Kyiv Post Legal Quarterly - - Contents - By Ber­met Talant ber­[email protected]­

Rus­sia has been re­placed by Poland as the top des­ti­na­tion for Ukrainian mi­grant work­ers. But an es­ti­mated three mil­lion Ukraini­ans still live and work in Rus­sia and send over a bil­lion dol­lars in re­mit­tances ev­ery year.

In the past cou­ple of years, how­ever, it has be­come harder for them to trans­fer money. Since Ukraine im­posed sanc­tions against Rus­sian banks and banned Rus­sian money trans­fers sys­tems, a large por­tion of re­mit­tances flows through un­of­fi­cial chan­nels.

War, mi­gra­tion and sanc­tions

Ukraine has the low­est wages in Europe, and many Ukraini­ans find bet­ter job op­por­tu­ni­ties abroad. The Kyivbased Cen­ter for Eco­nomic Strat­egy es­ti­mated that some 4 mil­lion Ukraini­ans left the coun­try for work in 2015–2017, and about one third of them were sea­sonal work­ers.

The re­mit­tance from Ukrainian mi­grant work­ers are high too. Last year, they sent home $9.3 bil­lion in to­tal, ac­cord­ing to the Na­tional Bank of Ukraine, equal to some 9 per­cent of the coun­try’s gross do­mes­tic prod­uct. In 2018, the re­mit­tances are ex­pected to sur­pass $11 bil­lion.

Poland has re­cently be­come the top des­ti­na­tion for “zaro­bitchany,” Ukrainian sea­sonal work­ers, as more peo­ple take ad­van­tage of visa-free regime with the Euro­pean Union in­tro­duced in mid-2017 and go for short-term work.

But Rus­sia re­mains pop­u­lar too despite the Krem­lin’s war against Ukraine. The on­go­ing fight­ing in the Don­bas and sev­ered diplo­matic and travel links — there are no flights be­tween the two coun­tries since 2015 — don’t de­ter many Ukraini­ans from go­ing to Rus­sia for work due to the ab­sence of a lan­guage bar­rier.

There is no ex­act data on the num­ber of Ukraini­ans work­ing in Rus­sia, gov­ern­ment of­fi­cials and re­searchers only give ap­prox­i­mate es­ti­mates. Ac­cord­ing to the Cen­ter for Eco­nomic Strat­egy, 3.2 mil­lion Ukraini­ans moved to Rus­sia be­tween 2002 and 2017, and this num­ber cor­re­sponds with words of Ukraine’s For­eign Min­is­ter Pavlo Klimkin.

“Three mil­lion Ukraini­ans live in Rus­sia. Many of them don’t love Putin and Rus­sia but reckon they don’t have an­other choice. They say: ‘We make a liv­ing here,’ and we have to un­der­stand them, ” Klimkin said in April.

As per NBU sta­tis­tics, re­mit­tances from Rus­sia ac­counted to $1.3 bil­lion in 2017 but the real fig­ures are said to be three times higher, since many short-term sea­sonal work­ers ei­ther bring their earn­ings them­selves or send money to their fam­i­lies through un­of­fi­cial chan­nels.

The NBU ad­mits that the dis­crep­ancy was caused by the ban on Rus­sian money trans­fer ser­vices. Since Oc­to­ber 2016, Ukraine made il­le­gal seven of them: Bl­izko, Ane­lik, Zolotaya Korona, Leader, Unistream, Colibri, and Con­tact. Be­fore the ban, half of all re­mit­tances from Rus­sia to Ukraine were sent through those sys­tems.

Regis­tered in the United King­dom money trans­fer sys­tem Moneyto also found it­self on the ban list be­fore it was able to en­ter Ukrainian mar­ket be­cause its owner, a Rus­sian-bri­tish en­tre­pre­neur Ge­orge Piskov, hap­pened to be a co-founder of Unistream.

On­line pay­ment sys­tems Web­money, Yan­dex Money, and Qiwi were also black­listed.

In re­sponse, Rus­sia lim­ited cash trans­fers to Ukraine through Western Union and Money­gram — now a sender must have an ac­count or a card from a Rus­sian bank.

In a con­ver­sa­tion with the Kyiv Post, a for­mer man­ager of one of the banned Rus­sian sys­tems — who re­fused to be iden­ti­fied — sug­gested that the ban could have been lob­bied for by the Amer­i­can sys­tem Western Union, which was los­ing out the com­pe­ti­tion in Ukraine to Rus­sian money trans­fer sys­tems with lower com­mis­sion fees.

Of­fi­cial and un­of­fi­cial chan­nels

There are cur­rently a few le­gal ways to trans­fer money from Rus­sia to Ukraine and vice versa, but they are con­sid­ered pricey.

The first is to trans­fer money from a bank ac­count in Rus­sia to a bank ac­count in Ukraine us­ing SWIFT

in­ter­na­tional pay­ment sys­tem. It costs at least $20. The sec­ond is to open a bank ac­count in a Rus­sian bank and trans­fer money through Western Union and Money­gram sys­tems with about 1 per­cent com­mis­sion. The third way is through a postal op­er­a­tor with even higher charges: up to 5 per­cent from the sum of trans­fer.

“We have to re­mem­ber that it’s mainly our zaro­bitchany who send money home to their fam­i­lies. Not all of them are ready to use ul­tra­mod­ern chan­nels but they need le­gal, se­cure, and in­ex­pen­sive ways,” said Maryna Re­vut­ska, deputy head of the re­tail busi­ness depart­ment at Oschad­bank, in an in­ter­view with the Kyiv Post.

Ac­cord­ing to her, the av­er­age check sent from Rus­sia to Ukraine is $400–450 and from Ukraine to Rus­sia — $200.

She added that iden­ti­fi­ca­tion re­quire­ments are still strict by Ukrainian leg­is­la­tion. To re­ceive a money trans­fer, a per­son has to present a pass­port. “Money trans­fers are usu­ally not big sums of money, and we would like a sim­pli­fied iden­ti­fi­ca­tion with a driv­ing li­cense or any other ID doc­u­ment,” Re­vut­ska said.

In the ab­sence of cheap money trans­fer op­tions, more peo­ple have re­sorted to in­for­mal ways. For in­stance, cash is trans­ferred through so­called agents. For a lit­tle pay, bus driv­ers or train con­duc­tors who of­ten travel be­tween Ukraine and Rus­sia can de­liver en­velopes with cash to mi­grant’s rel­a­tives.

An­other semi-le­gal way is to open an ac­count in a Rus­sian bank that has a branch in Ukraine, for ex­am­ple, Sber­bank. The card is handed over to a fam­ily mem­ber in Ukraine who can with­draw money from Sber­bank’s ATMS with­out fees.

But this may not be an op­tion soon. Sanc­tioned Rus­sian state-owned banks are leav­ing Ukraine. Sber­bank sold its VS Bank to Ukrainian banker Ser­hiy Tigipko’s TAS Group and is look­ing for a buyer for its sub­sidiary Sber­bank-ukraine. Vneshe­conom­bank is also sell­ing its Ukrainian sub­sidiary, Promin­vest­bank. VTB closed down most of its branches in Ukraine, and BM Bank de­cided to give up its bank­ing li­cense.

Af­ter the ban came into force, the amount of money trans­ferred through in­ter­na­tional trans­fer sys­tems dropped by two times, from $811 mil­lion in 2016 to $444 mil­lion in 2017. At the same time, money trans­ferred through in­for­mal chan­nels has dou­bled from $680 mil­lion in 2015 to al­most $1.3 bil­lion in 2018.

TYME is out

There are ways to cir­cum­vent the ban through an in­ter­me­di­ary money trans­fer sys­tem. How­ever, it is risky.

In June, one of the lead­ing Ukrainian money trans­fer sys­tems TYME lost its li­cense af­ter the Se­cu­rity Ser­vice of Ukraine re­port­edly found that it had worked with one of the banned Rus­sian money trans­fer sys­tems Con­tact.

The com­pany de­nied the al­le­ga­tions and called the NBU de­ci­sion too harsh, but fol­lowed the or­der and shut down its op­er­a­tions. Reached by phone, TYME direc­tor Vi­taliy Petruk re­fused to talk to the Kyiv Post.

To­day, TYME is a cau­tion­ary tale to those few money trans­fer sys­tems op­er­at­ing in Ukraine — Welsend, Ria, Meest, Khazri, and In­tel Ex­press.

“The money trans­fer sec­tor al­ways changes. What worked yes­ter­day, may not work to­day,” Ukrainian cit­i­zen Vladimir Go­ry­achev, who had ex­pe­ri­ence of re­ceiv­ing some pay­ments for his ser­vices, told the Kyiv Post.

“I once had money sent by a client from To­li­atti (a city in western Rus­sia) through one money trans­fer sys­tem. Next time I checked, it had been banned in Ukraine. But peo­ple find ways be­cause they have rel­a­tives (in rus­sia) or do busi­ness there. If one sys­tem is blocked, an­other one will ap­pear.”

Go­ing on­line

Be­sides ac­count-to-ac­count trans­fers, some Ukrainian banks al­low trans­fers of money from one bank card to an­other, in­clud­ing Visa, Master­card, and Mae­stro cards is­sued by Rus­sian banks.

The ban gave a boost to a num­ber of on­line tools such as Pay­send. com and as well as to a few Ukrainian al­ter­na­tives — Liq­pay from Pri­vat­bank, Port­mone, and which also of­fer quick and cheap on­line card-to-card trans­fers.

“This part is un­touched be­cause Rus­sian banks pre­tend it is hard for them to con­trol these kind of trans­fers. In re­al­ity, it is not hard to limit card-to-card trans­fers,” said Alexan­der Kar­pov, head of Ukrainian in­ter­bank as­so­ci­a­tion of pay­ment sys­tems EMA, adding that he fully sup­ported the po­si­tion of NBU.

As the la­bor mi­gra­tion from Ukraine is shift­ing to­wards Western economies such as Europe, Is­rael, and the United States, young Ukraini­ans turn to new ser­vices such as Trans­fergo and Trans­fer­wise.

Uk-regis­tered Trans­fergo cre­ated by Lithua­nian de­vel­op­ers launched on­line money trans­fers to Ukraine a lit­tle over a year ago. To­day, over 70,000 Ukraini­ans use it to send money — 200 euros on av­er­age — from Poland, Hun­gary, Lithua­nia, Ger­many, and Den­mark. “In eight months the to­tal num­ber of trans­ac­tions from Europe to Ukraine in­creased by four times com­pared to last year,” Anas­ta­sya Fomenko, Trans­fergo growth man­ager for Ukraine told the Kyiv Post. Ac­cord­ing to the Na­tional Bank of Ukraine, re­mit­tances from Rus­sia ac­counted for $1.3 bil­lion in 2017 but the real fig­ure may be three times higher since many short-term sea­sonal work­ers ei­ther bring their earn­ings them­selves or send money to their fam­i­lies through “in­ter­me­di­aries,” for ex­am­ple, bus driv­ers or train con­duc­tors, who of­ten travel be­tween Ukraine and Rus­sia, and for some pay de­liver en­velopes with cash.

A sign of Western Union money trans­fer ser­vice on a street in Kyiv on Sept. 25. (Volodymyr Petrov)

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