In June 2025, the Verkhovna Rada quietly embedded an amendment into the digital platform taxation law that reduced the period of enhanced financial monitoring of politically exposed persons (PEPs) from lifetime to 12 months after dismissal. What appeared to be a technical correction to a tax bill turned out to be a step backward after two years of efforts to bring Ukrainian legislation into compliance with FATF standards.
A norm that was adopted three times
The timeline of changes is telling. Law 361-IX from 2020 initially introduced lifetime PEP status. In November 2022, the Rada reduced it to three years — the IMF responded with a structural benchmark. In October 2023, fulfilling this benchmark, parliament restored lifetime monitoring: then the first deputy chair of the relevant committee Yaroslav Zheleznyak publicly emphasized that the law was agreed upon with international partners and complies with AML/CFT standards. And now in 2025 — another reduction, this time to one year.
What specifically the IMF documented
In the updated Memorandum on Economic and Financial Policies under the Extended Fund Facility (EFF) program, the Fund did not limit itself to general statements.
"Taken together, these changes weaken the effectiveness of the mechanism for monitoring politically exposed persons and make the PEP/CFT regime non-compliant with FATF standards."
IMF Memorandum on Economic and Financial Policy of Ukraine, 2025
The IMF also reported that its experts would coordinate further steps with all parties involved — primarily with the European Union. For Ukraine, this has a special dimension: bringing the PEP norm into compliance with FATF standards in 2023 was one of the conditions for starting negotiations on EU accession.
Why 12 months is a problem
The FATF standard does not set a fixed monitoring period for PEPs: Recommendation 12 provides for risk assessment in each specific case without automatic "resetting" after dismissal. After the new norm is adopted, banks will be able to apply enhanced measures to former officials only if there is documented justification for elevated risk — that is, the burden of proof is shifted from the client to the bank.
- Lifetime monitoring — the bank is obligated to verify PEPs without additional grounds.
- 12-month norm — after one year, the bank needs a separate individual risk assessment with documentation.
- Practical effect — fewer banks will conduct such verification voluntarily: it is costly and risks conflict with an influential client.
The mechanics of adoption raise as many questions as the substance of the norm
The PEP amendment was voted on as part of the law on taxing income from digital platforms — a mechanism known in Ukrainian legislative practice as a "gray rider": a substantive change to a relevant law is introduced through an unrelated one. No separate public discussion, no regulatory impact assessment specifically for this norm was published.
Meanwhile, the IMF noted that the PEP issue was not included in the new structural benchmarks of the first review of the EFF program — that is, the Fund documented the violation but has not yet set a formal deadline for correction. The updated benchmarks primarily concern fiscal policy.
If the IMF and the EU agree on a common position regarding the restoration of lifetime monitoring of PEPs as a condition for further financing or progress in EU accession negotiations — will the Rada have the political will to return the norm for the third time, or will this change remain in force?
