Banks may temporarily block outgoing transactions on accounts of individual entrepreneurs (sole proprietors) if the entrepreneur cannot confirm the origin of funds or sharply increases turnover, bankers said at a round-table hosted by 'Financial Club'.
Reasons for blocking: excessive turnover and atypical payments
Marina Holovanova, Director of the Business Clients Department at Idea Bank, named one cause of blocking as a significant exceedance of declared or expected turnover without supporting documents. 'Financial monitoring is a pain for every business. If turnover is exceeded and the client does not provide supporting documents, the account is blocked for outgoing operations,' she said.
Holovanova also noted that blocking is possible when the exceedance is more than double the usual turnover and the client does not confirm by contract where the funds came from. To confirm the origin of funds, the entrepreneur can provide contracts, invoices, statements from other banks or a lease agreement.
Trigger indicators and banks’ practice
At PrivatBank they say banks react to atypical operations: large receipts, the resumption of activity after a pause or splitting payments can raise questions. 'What do banks most often react to? The atypical nature of operations. For example, a very large receipt or a situation where a sole proprietor has not worked for a while and then suddenly resumes activity with large sums,' said Anton Pereyaslavets, Head of the Microbusiness Department at PrivatBank.
Pereyaslavets added that tighter controls are linked to the spread of schemes involving drop accounts and shell companies, as well as a significant volume of cash transactions. The bank checks counterparties, and a client can pre-check via a special service whether an operation is likely to prompt additional questions.
Different approaches: the role of banks and the state in financial monitoring
Adam Ojehovskyi, Executive Director of the Individual Clients division at Kredobank, compared the Ukrainian model of financial monitoring with the European one. He said that in Europe banks pass information about risky transactions to state institutions, which decide on further action, whereas in Ukraine banks themselves delay operations and assess whether the documentation is sufficient.
According to Pereyaslavets, an atypical operation by itself does not mean service will be terminated: if the bank requests explanations and the entrepreneur provides sufficient documents, operations can be quickly unblocked. He added that over 80% of account openings for new FOPs occur without questions, about 14% require additional queries, and 90% of those clients provide answers and continue to operate.
