Expert Guide to Financial Sanctions Enforcement in Ukraine

Ukrainian sanctions regulation does not provide for the possibility to automatically bring EU sanctions into effect in Ukraine directly.

However, EU acts and regulations are considered the grounds for imposing Ukraine’s own national sanctions according to the procedure stipulated by Ukrainian laws.

The main act regulating the application of sanctions in Ukraine is the Law of Ukraine No.1644-VII “On sanctions” (the “Law”).

Another key legal acts in the context of financial sanctions are:

• the Regulation “On Licensing of Banks”, adopted by the National Bank of Ukraine’s Resolution No. 149, dated 22 December 2018 (the “Regulation on licensing”);
• the Regulation “On realisation of special economic and other restrictive measures (sanctions)”, adopted by the National Bank of Ukraine’s Resolution No. 65, dated 11 May 2023 (the “Regulation on realization of sanctions”).

The framework established by the Law applies to all sanctions listed in the Law including the Financial Sanctions applied against countries other than russia.

The list of sanctions applied against the countries (sectoral sanctions) is available in the State Register of Sanctions - https://drs.nsdc.gov.ua/actions/sectoral.

Ukrainian sanctions legislation does not provide for any “licenses” or “permits” authorizing activities otherwise prohibited by the laws on sanctions.

The official consolidated list of individuals and companies subject to sanctions in Ukraine is the State Register of Sanctions maintained by the National Security and Defence Council of Ukraine- https://drs.nsdc.gov.ua/ 

A breach of sanctions is not considered a criminal offence in Ukraine. However, the adoption of respective changes aimed at prescribing criminal liability for non-compliance, obstruction, or evasion of sanctions is being actively discussed at the government and parliamentary levels.

In some cases, a breach of sanctions can be interpreted as committing an accompanying criminal offence which may entail the charges, for example, for cooperation with the aggressor state, terrorism financing, threats to national security, etc.

Thus, non-compliance with Ukraine’s sanctions regime may trigger a scrutinised attention of the Ukrainian security and law enforcement authorities to non-compliant parties.

As was mentioned above, a breach of sanctions is not considered a criminal offence in Ukraine.

The examples of penalties for typical accompanying criminal offences (i.e., penalties stipulated not for the breach of sanctions as is but when such a breach is interpreted as committing another criminal offence) are:

1. Collaboration activity (financing or supplying the aggressor state) – a fine up to circa EUR 3,869.47 or imprisonment for a term of 3 to 5 years, with disqualification to hold certain positions or engage in certain activities for a term of 10 to 15 years and confiscation of property;
2. Financing of terrorism - imprisonment for a term of 5 to 12 years, with disqualification to hold certain positions or engage in certain activities for a term of up to 3 years and confiscation of property;
3. Financing of acts committed with the aim of violent change or overthrow of the constitutional order or seizure of state power, changing the boundaries of the territory or state border of Ukraine - imprisonment for a term of 3 to 10 years, with disqualification to hold certain positions or engage in certain activities for a term of up to 3 years and confiscation of property;
4. Aiding the aggressor state – imprisonment for a term of 10 to 12 years, with disqualification to hold certain positions or engage in certain activities for a term of 10 to 15 years and confiscation of property.

Accompanying criminal offences (i.e., acts committed in breach of sanctions but interpreted as other offences) described above are investigated by the Security Service of Ukraine.

The Law does not prescribe any direct formal non-criminal penalties for violation of financial sanctions.

At the same time, the Regulation on licensing provides that if an individual or legal entity, being a shareholder of a Ukrainian bank or financial institution, has been sanctioned by Ukraine or other states, it means that such an individual or legal entity has a compromised business reputation. This may further lead to a situation where the National Bank of Ukraine, as the financial regulator, may take certain actions against this person, including freezing their shares in a bank or requesting that they sell their shares to a third party who complies with business reputation requirements. These actions could directly impact the financial institution in Ukraine.

Also, the Regulation on realization of sanctions stipulates that if sanctions are imposed against a person or legal entity the funds available on their accounts are blocked and financial operation related to the account are freezed.

Furthermore, in some cases, a breach of sanctions can be interpreted as committing an accompanying administrative offence. For example, some types of sanctions restrict the sanctioned person’s ability to operate normally (e.g. conduct certain activity, hold certain licenses, etc.). Violation of such restrictions constitutes an administrative offence in some cases (e.g.  conducting business activities without or with a suspended license).

However, a breach of sanctions may entail other civil law consequences, such as being grounds for invalidating a contract involving the sanctioned persons as violating public order.

There are no penalties for a non-criminal breach of sanctions itself.

The penalties for typical accompanying administrative offences (i.e., penalties stipulated not for the breach of sanctions as is but when such a breach is interpreted as committing another administrative offence) depend on the particular accompanying offence and usually include fines and confiscation of property. 

A non-criminal breach of sanctions itself is not investigated by any government body.

The authority investigating the accompanying non-criminal offences (i.e., acts committed in breach of sanctions but interpreted as other offences) depends on the offence at issue (e.g. National Bank of Ukraine, Antimonopoly Committee of Ukraine, National Securities and Stock Market Commission, etc.).

Ukrainian government has not published any official guides on sanctions. The most comprehensive guide and FAQ to date are available on the website of the National Bank of Ukraine (Ukrainian text only) -

https://bank.gov.ua/ua/supervision/monitoring/sanctions