Fighting drops or threat to business. Why are card transfer restrictions increasing?

Ukrainian banks signed a Memorandum on ensuring market transparency on December 10. The memorandum was signed by the National Bank, the Association of Ukrainian Banks (AUB), the Independent Association of Banks (NABU), and four large issuing banks: JSC Oschadbank, JSC Raiffeisen Bank, JSC KB PrivatBank, and JSC Universal Bank (monobank).

They account for about 65% of the population's funds and about 88% of active payment cards. Other Ukrainian banks also want to join this memorandum.

Its main goal is to reduce the shadow economy and combat money laundering and drop schemes.

How will this initiative work? Who will it affect? Will it help in the fight against fraudsters and what changes can Ukrainian bank customers expect? This is covered in the LIGA.net article.

What will be the restrictions?

The memorandum provides for checks on clients at the stage of opening accounts. As well as a division into those for which there are criteria for "high" risk and "low". This will depend on whether the client has proof of income or not.

If there is no documented income, banks will set limits on P2P transfers (transfers to individual cards).

They will apply to transfers by card number and IBAN details for transactions from February 1, 2025. For "high" risk clients, a limit of up to UAH 50,000 per month has been set.

The memorandum also affected transfers using IBAN details, because after the introduction of restrictions on card transfers by the NBU in October 2024, the number of IBAN transactions increased by 26%.

For clients with "medium" and "low" risk levels, in accordance with the limits and terms of phased implementation, the conditions will be as follows:

• from February 1, 2025 – in the amount of up to UAH 150,000 per month;
• from June 1, 2025 – in the amount of up to UAH 100,000 per month.

Recall that since October 1 of this year, limits on P2P transfers have been in effect in Ukraine, set by the National Bank – UAH 150,000 per month for transactions on individual accounts. The regulator set them for six months – until April 2025.

Will a memorandum harm business?

Banks and associations assure that the restriction will affect a minimal number of customers, and the majority have nothing to worry about. For example, according to PrivatBank statistics, almost 98% of the bank's customers make transfers in amounts that do not exceed this limit.

National Bank Chairman Andriy Pyshny noted that nothing will change for most bank clients. According to the NBU chairman, the limits apply to clients who have not provided documentary evidence of their income. Especially those defined as "high-risk". According to bank estimates, this is no more than 1% of the entire client base.

"If you work "in the white", receive a "white" salary, or can otherwise document your income or wealth, nothing will change for you at all," Pyshny's comment on Facebook reads.

AUB President Andriy Dubas noted that he does not believe that the National Bank's restrictions were not enough. But this memorandum is a new stage in improving the payment infrastructure. The market is mature and ready for such actions. He also noted that the initiative to develop the memorandum was even before the National Bank's restrictions of UAH 150,000 came into effect.

"There were many different variations of this restriction. What we came to is shown in the memorandum. This will not affect the outflow of funds from the system. Because, choosing a combination of such wording, we set ourselves the goal of making sure that the maximum number of banking service users would not feel or see this," says Dubas.

He added that if a person really earns more than 150,000 UAH per month, there are no such limits for them. The memorandum states that if you provide documents confirming that you have income (there is a huge list of documents that can confirm this) from entrepreneurial activity, salary, sale of real estate or a car, you have a reason to use these funds for transfers.

Those who will be affected are those who engage in drop schemes and use payment infrastructure with violations, using third-party cards.

"Purchasing food, paying in cafes or coffee shops, purchasing goods on the Internet are not subject to these restrictions in any way. This concerns exclusively transfers from card to card, or from IBAN account to IBAN account. An individual entrepreneur's account is a different story. You cannot just transfer money to an individual entrepreneur's account, you must indicate in the purpose of the payment what these funds are for," Dubas explained.

Acting Executive Director of NABU Dmytro Hlinsky emphasizes that people and entrepreneurs who have official income will continue to use the payment services of banks that have joined the memorandum, without hindrance, as they do now.

"There is no need to switch to "shadow" payment methods. At the same time, within the framework of the memorandum, banks agreed that they would apply enhanced verification measures to high-risk clients. And in the absence of confirmation of income sources, their transactions will be limited to UAH 50,000 per month. But this will not affect clients with confirmed income, so there will be no migration from the "white economy" to the "shadow" either," believes Hlinsky.

Ivan Marynyuk, head of the tax law practice at Ilyashev & Partners Law Firm, says that there are cases when banks do not always see certain patterns and features of certain transactions. Or they evaluate the latter less meticulously, accepting the risk of financial sanctions from the regulator. But at the same time they earn on transaction commissions. Therefore, on the one hand, the introduction of risk identification and control mechanisms in connection with the transfer of funds can really become an effective mechanism for combating "drop schemes", money laundering, and financing of illegal activities.

"On the other hand, it may increase the costs of financial monitoring and reduce the bank's income due to a decrease in the volume of customer transactions or refusal to cooperate with the latter," says Marynyuk.

Will it help in the fight against dropsy?

Dmytro Glinsky noted that synchronizing approaches to countering these phenomena at the system level will add effectiveness to the individual efforts of individual banks.

"In addition, the accession to the memorandum of most banks gives market participants confidence that they will not lose customers just because their competitors are less careful in studying customers and monitoring transactions," explained Glinsky.

Ivan Maryniuk adds that if a mechanism for assessing and detecting risks and controlling card transfers is properly implemented, as well as exchanging data on detected facts between financial institutions, the volume of drop transactions may indeed decrease.

"At the same time, participants in drop schemes will also not stand still and will try to circumvent banks' financial monitoring algorithms. Therefore, a real fight against drop schemes will require certain experiments, constant improvement, and the readiness of financial institutions to take such steps. Otherwise, "droppers" will migrate from one "demanding" bank to a more loyal one," Maryniuk comments.

Andriy Dubas noted that this memorandum is one of the ways to solve the problem with drop schemes.

"The worst thing is that drop schemes are often used to work with cryptocurrencies, and it is through this scheme that representatives of our enemy, Russia, pay for services when they hire people in Ukraine to set fire to military vehicles, to pay for services to gunners, etc.," says Dubas.

What are they planning next?

In a comment to LIGA.net, the NBU noted that thanks to this Memorandum signed by the banks, the NBU can lift its restriction ahead of schedule.

"The use by banks of the unified approaches proposed by the memorandum may be a step towards the early abolition of the restrictions previously introduced by the National Bank. The limits of UAH 150,000 per month for outgoing card transfers established by the NBU from October 31 are currently introduced for half a year. But the market is self-regulating and establishes other approaches and deadlines for their implementation," the NBU explained.

Now other banks want to join this initiative. AUB says they are already receiving phone calls asking: how can I join the memorandum?

"I believe that if not the vast majority, then all market participants will join this initiative," Dubas noted.

He concluded that the second stage of the fight against drop schemes is the development of a register of "droppers", that is, cards used in these schemes.