Fines for failure to disclose beneficiaries: risks and reporting procedure for business

 

Untimely submission or failure to provide information about beneficiaries entails not only administrative fines but also serious restrictions on cooperation with financial institutions. With the tightening of financial monitoring requirements, transparency of ownership structure has become a mandatory condition for business survival.

In this article, LBA lawyers analyze in detail all types of liability — from monetary penalties to the complete suspension of banking operations. Understanding the new rules will help you avoid claims from regulatory authorities and maintain the stability of your company.

New requirements for UBO disclosure: legislative context

With the adoption of Law № 361 dated 16.09.2019 (hereinafter — the Law), legal entities have an obligation to submit updated information about ultimate beneficial owners (UBO) to the state registrar. The Law entered into force on April 28, 2020.

The primary goal of these changes is to integrate Ukrainian registers into the international control system. Disclosure of the ownership structure is now mandatory both when establishing a company and when making any changes to its information.

What documents must be submitted to the registrar?

The Law provides for the obligation to disclose UBO information by submitting an additional package of documents to the state registrar. This applies to both residents and companies with non-resident founders.

The list of mandatory documents includes:

• ownership structure in form and content determined by legislation;
• an extract or another document from the trade, banking, or court register for non-residents;
• a notarized copy of the document identifying the UBO.

Deadlines for updating and confirming data

Legal entities are obliged not only to submit data once but also to keep it up to date. Any changes in the ownership structure must be reflected in the register within 30 working days from the day they occur.

In addition, annual confirmation of information is required. This must be done within 14 calendar days from the date of the company’s state registration, starting from the year following its establishment.

Legal entities are obliged to maintain UBO and ownership structure information in an up-to-date state and report changes within 30 working days.

Technical aspects and relevance of forms

Companies registered before the Law came into force must update their data within three months after the approval of the relevant forms. However, in practice, businesses often face a lack of technical capacity to comply with these norms.

Currently, updated application forms are often at the approval stage. This creates a certain legal vacuum where the obligation exists, but the mechanism for its implementation through state registers is still being established.

Legal procedure for bringing to justice

The Ministry of Justice, by Order № 1626/5 dated 12.05.2020, clearly regulated the procedure for identifying violations. If the state registrar notices a fact of failure to submit information, they inform the territorial body of the Ministry of Justice.

After receiving a letter of demand, the head of the legal entity has a one-month period to apply to the justice authority. This is necessary for drawing up a protocol on an administrative offense.

Amount of fines and risks of account blocking

Liability for failure to submit information is provided for in Part 6 of Art. 166-11 of the CAO. The sanction of this article is quite significant for company management or authorized persons.

The main risks include:

1. Administrative fine: from 17,000 to 51,000 UAH (1000-3000 tax-free minimums).
2. Data transfer to the State Financial Monitoring Service: occurs automatically after the one-month period for rectifying the violation expires.
3. Suspension of financial activity: banking institutions may block company operations due to lack of transparency in the ownership structure.

Ensuring ownership transparency is not just a legal formality but a safeguard against business process suspension and sanctions from the regulator.

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About the Author

Denys Fedorkin — Managing Partner of Law Business Association. Has over 17 years of professional experience in law. Specializes in tax law, business protection, and asset security. Denys combines deep legal knowledge with a practical understanding of business processes, helping clients build stable and secure ownership structures.

Need help with UBO registration or protection against fines? Contact our specialists for professional consultation.