Author: Maryna Pokotylo, Partner at F&P
Reputation is more than just a set of characteristics. For a financial institution, it is the foundation of trust, the basis of relationships with clients, partners, and investors.
Current legislation in Ukraine provides provisions that allow the National Bank of Ukraine (hereinafter referred to as the NBU), as the regulator of the relevant market, to recognize an individual’s business reputation as unsatisfactory. Such recognition is based on documented information about a natural or legal person, which allows for a conclusion to be made about the compliance of their activities with the requirements of legislation, business practices, and professional ethics, as well as information about the professional and managerial abilities of the individual.
The detection of signs of an imperfect business reputation is carried out in the following cases:
- Independent verification by a financial institution of the compliance of its executives with the qualification requirements regarding business reputation and professional suitability.
- Assessments of business reputation by the National Bank:
1) if the applicant submits a package of documents for obtaining a license for the type of financial services activity, a license for conducting currency transactions in terms of trading in currency values in cash;
2) in the event of approval/notification of the acquisition or increase of substantial participation in a non-banking financial institution (excluding credit unions), a postal operator authorized to engage in currency trading activities;
3) in the event of approval for the position of manager, key person of the united credit union, significant credit union, and insurer (candidates for these positions);
4) throughout the entire term of the license of a non-banking financial institution for the type of activity of providing financial services;
5) in the case of accreditation / registration / licensing of a branch of a non-resident insurer, a branch of a foreign institution in Ukraine;
6) in the event of a request for the appointment of a proxy who is granted the right to participate in the voting.
When assessing business reputation, the National Bank identifies the following criteria as signs of an imperfect business reputation:
- A conviction for economic, selfish, or official crimes, if it is not expunged, which includes:
- The imposition of sanctions on an individual by Ukraine or other countries (except aggressors), international organizations.
- Inclusion of an individual in terrorist or sanctions lists.
- Prohibition from holding certain positions by court decision.
- Providing false information to the National Bank.
- Failure to fulfill personal financial obligations to the National Bank.
- Citizenship or tax residency in the aggressor country.
- Ownership or management of companies subject to international sanctions.
- Providing false information, including cases where an individual or their representatives submitted documents with false data to the National Bank that could have influenced the regulator’s decision, is considered a violation.
- Violation of financial obligations, namely:
- Non-payment of taxes or fees in significant amounts.
- Significant debts to banks or other creditors.
- Declaration of a person as bankrupt.
- Functioning of payment systems.
A person is considered to have an impeccable business reputation if they:
- Managed or owned a significant share in the payment system that was shut down due to violations.
- I was the head of such a company for over six months before its closure.
- Had real control over the activities of the payment system, which threatened the security of Ukraine.
- Violations of anti-corruption and financial legislation, which include cases where individuals have received a court ruling for corrupt actions or violations of financial monitoring, their reputation is considered unsatisfactory for three years.
- Professional activity:
- Dismissal from work for gross misconduct, corruption, or abuse.
- Appointment to a managerial position without the approval of the National Bank.
- Deprivation of the right to engage in advocacy, notarial, or arbitration activities.
- Disciplinary sanctions in the civil service, law enforcement agencies, or the judicial system.
- Ownership or management of financial institutions:
- Ownership of a share or management of an institution before its bankruptcy or license revocation.
- Work in managerial positions at the institution during the year before its liquidation.
- The possibility to influence the institution’s decisions before its bankruptcy.
- Dismissal due to the requirement of the National Bank or due to violations of financial legislation.
If an individual or legal entity has signs of an impeccable business reputation, they can submit a request to the National Bank for their non-application. To do this, it is necessary to explain the reasons for the emergence of such signs and provide appropriate evidence confirming the absence of violations.
The petition must contain a reasoned position of the person and may also be supplemented by documents that support their arguments. Individuals may also submit assurances of their good business reputation.
During the consideration of the application, the National Bank analyzes the submitted documents and information from official sources. Based on the results of the review, it can make one of two decisions:
1) To recognize a person’s business reputation as unsatisfactory (if the provided information is insufficient or unsubstantiated).
2) Remove the mark of impeccable business reputation (if the request is supported by appropriate evidence).
When making a decision, the National Bank also considers whether the individual could have influenced the situation that led to a negative assessment of their reputation and analyzes the presence or absence of a causal link between their actions and the financial problems of the institution.
If the National Bank denied the request, a reconsideration is possible no earlier than one year after the decision is made.
Thus, the rehabilitation of business reputation is an important tool for restoring trust in financial institutions and their leaders. In cases where the National Bank detects signs of questionable business reputation, individuals are given the opportunity to appeal this decision by submitting a petition with appropriate evidence. This process requires detailed justification, documentary confirmation, and compliance with regulatory requirements. Therefore, legal support plays a crucial role at every stage. The team of specialists at FEDORYSHYN & PARTNERS is ready to provide you with professional legal assistance, from document preparation to comprehensive analysis and protection of individuals’ interests in the matter at hand.
