Ukrainian banks still giv­ing poor ser­vice to for­eign­ers

Kyiv Post - - Business Focus - BY JACK LAURENSON [email protected]

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 pro- spec­tive 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.

A man passes by a branch of UkrSib­bank in cen­tral Kyiv on Nov. 1, 2018. Ac­cord­ing to Ukrainian law, there are very few ob­sta­cles to for­eign­ers open­ing a bank ac­count here, but in fact many still face prob­lems when try­ing to do so. (Oleg Pe­tra­siuk)

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