DECREE OF THE CABINET OF MINISTERS OF UKRAINE On the System of Currency Regulation and Currency Control (amended by Laws of Ukraine #3651-12 of November 25, 1993 #3891-12 of January 28, 1994 #139/95 of April 11, 1995) The Present Decree defines the procedures for conducting the hard-currency operations on the territory of Ukraine, specifies the general principles of the currency regulation; determines the powers of the state authorities, the functions of banks and other crediting and financial institutions of Ukraine at regulation of hard-currency operations; the rights and responsibilities of the currency relations; the procedures used in the currency control; responsibility for violation of the currency legislation. Section I. GENERAL PROVISIONS Article 1. Definition of Terms The terms used throughout the present Decree shall have the following meanings: 1) the "currency securities": the Ukrainian currency - monetary units in the form of bank notes, bills, coins, or in any other form, which are in circulation, and which are legal tender on the territory of Ukraine; those withdrawn, or being withdrawn, from circulation, but which are subject to replacement with the monetary units being in circulation; funds at accounts, and at deposits with the banking and other crediting and financial institutions on the territory of Ukraine; payment documents and other securities (stock, debentures, coupons to them, bonds, bills (drafts), promissory notes, letters of credit, cheques, banking orders, deposit certificates, savings books, and other financial and banking documents), expressed in the Ukrainian currency; the foreign currencies - monetary units in the form of bank notes, bills, coins, or in any other form, which are in circulation, and which are legal tender on the territory of the respective foreign country; those withdrawn, or being withdrawn, from circulation, but which are subject to replacement; the funds in the monetary units and international clearing units, being at accounts, or deposited with the banking and other crediting and financial institutions beyond the borders of Ukraine; payment documents and other securities (stock, debentures, coupons to them, bonds, bills (drafts), promissory notes, letters of credit, cheques, banking orders, deposit certificates, savings books, and other financial and banking documents), expressed in a foreign currency, or in monetary metals; monetary metals - gold and the iridium-platinum group metals in any state and condition, except jewellery, industrial and every day products made of these metals, and scrap of these metals. For the purposes of the present Decree, the terms below shall be construed as follows: "the Ukrainian currency" shall mean both the Ukrainian currency proper, and the payment documents and other securities, expressed in the Ukrainian currency; "a foreign currency" shall mean both a foreign currency proper, and the payment documents and other securities, expressed in the foreign currency and in the monetary metals; 2) "currency operations": operations connected with the transfer of the title for the currency securities, except the operations conducted between the residents, in the Ukrainian currency; operations connected with utilization of the currency securities in international circulation as a legal tender, or with the transfer of debts and other liabilities, the subject matter of which are the currency securities; operations in connection with imports, transfer and mailing to the territory of Ukraine, and exports beyond outside it, of currency securities; 3) the "authorized bank" - any commercial bank, officially registered on the territory of Ukraine and granted the licenses of the National Bank of Ukraine for the currency operations, as well as exercising control over the currency operations by its clients; 4) the "convertible currency" - a foreign currency placed in that group by the National Bank of Ukraine; 5) the "residents": natural persons (citizens of Ukraine, foreign citizens, persons without citizenship), which permanently reside on the territory of Ukraine, including those who temporarily live abroad; legal entities, subjects of entrepreneurial activities without the legal-entity status (affiliates, representative offices, etc.), located in Ukraine, which conduct their activities on the basis of the Ukrainian legislation; diplomatic, consular, trading, and other official representations of Ukraine abroad, which enjoy immunity and diplomatic privileges, as well as affiliates and representative offices of the Ukrainian enterprises abroad, which are not engaged in the entrepreneurial activities; 6) "non-residents": natural persons (citizens of Ukraine, foreign citizens, persons without citizenship), which permanently reside outside Ukraine, including those who temporarily live on the Ukrainian territory; legal entities, subjects of entrepreneurial activities without the legal-entity status (affiliates, representative offices, etc.), located outside Ukraine, which were established, and conduct their activities on the basis of the legislation of a foreign country, including legal entities and other subjects of entrepreneurial activities of Ukraine; foreign diplomatic, consular, trading, and other official representations, located in Ukraine; international organizations and their chapters, which enjoy immunity and diplomatic privileges, as well as representative offices of other organizations and companies, which are not engaged in the entrepreneurial activities under the Ukrainian legislation; Section II. OPERATIONS WITH CURRENCY SECURITIES Article 2. The Right of Ownership for the Currency Securities 1. Both residents and non-residents have the right to be the owners of the currency securities located on the Ukrainian territory. Residents are also entitled to own the currency securities located outside Ukraine, except the cases specified by the applicable Ukrainian law. 2. Both residents and non-residents have the right to conduct the currency operations, with consideration of restrictions, stipulated by the present Decree, and by other legal acts of Ukraine on the currency regulation. Article 3. The Status of the Ukrainian Currency. 1. The Ukrainian currency is the only legal tender on the territory of Ukraine, accepted, in an unrestricted manner, as payment for any claims and liabilities, unless otherwise stipulated by the present Decree, and by other legal acts of Ukraine on the currency regulation. 2. The procedures for imports and transfer and mailing to the territory of Ukraine, and for exports and transfer and mailing abroad, by residents and non-residents, of the Ukrainian currency, shall be defined by the National Bank of Ukraine. The sums in the Ukrainian currency, legally exported or transferred abroad, may be freely imported or transferred back to Ukraine. Article 4. The Procedures for Utilization for Incomes in Foreign Currencies 1. All incomes in foreign currencies, received by the residents, shall be subject to statutory sale, through authorized banks, at the inter-bank currency market of Ukraine, except the cases specified in clause 2 of the present Article. 2. The following shall be exempt from the statutory sales: assets in free convertible currencies, acquired at the inter-bank currency market of Ukraine through the authorized banks and other crediting and financial institutions, which possess the license of the National Bank of Ukraine for currency operations - over the period, specified by the legislation on currency, to complete settlements with non- residents; foreign-currency assets received by individual residents, including payment for labor, except those generated by their entrepreneurial activities; foreign-currency assets, belonging to the authorized banks, which possess the National Bank licenses for the currency operations, including those acquired in accordance with the subclause (b) in Article 6 of the present Decree, in compliance with the rules for encashment, specified by the National Bank of Ukraine; the assets in the respective clearing units, which are used in the trading turnover with foreign countries, as well as any assets in a non-convertible foreign currency, which are used in the non-trading turnover with foreign countries, on the basis of agreements that Ukraine is a party to; foreign-currency incomes received from privatization of the state-owned property. 3. The authorized banks shall be obligated to sell all the foreign-currency incomes, received by the residents, at the inter-bank currency market of Ukraine, within five banking days from the moment when those incomes have been placed at the correspondence accounts with the authorized banks. The assets in the Ukrainian currency, received by the authorized banks from conducting those operations, shall be transferred to the residents, within two banking days from the moment that the said assets have been placed to the balances of those banks. 4. The authorized banks shall be obligated to buy the foreign currencies at the inter-bank currency market of Ukraine, upon assignment by, and at the expense of the residents, in order to fulfill the residents' obligations proceeding from paragraphs four through six in the subclause "a" of clause 4 in Article 5 of the present Decree. 5. The National bank shall be obligated to carry out the policy directed at supporting the Ukrainian currency; for that end it may act as a subject at the inter-bank currency market of Ukraine. Article 5. The Licenses by the National Bank of Ukraine 1. The National Bank of Ukraine shall issue individual and general licenses to conduct the currency operations, which fall within the scope of the licensing requirements under the present Decree. 2. The general licenses shall be issued to commercial banks and other crediting and financial institutions for conducting the currency operations, which do not require individual licenses, for entire period of validity of the currency regulations. 3. The authorized banks and other crediting and financial institutions, which obtained the general license of the National Bank of Ukraine for conducting operations in connection with trade in foreign currencies, shall have the right to open, on the territory of Ukraine, currency- exchange stands, including same on the basis of agency agreements with other resident legal entities. 4. Individual licenses shall be issued both to residents and non-residents, for conducting one-time currency operations, for the period necessary to complete such an operation. The individuals licenses shall be required for the following operations: a) export or transfer of the currency securities outside Ukraine, except: export or transfer outside Ukraine, by private individuals, of foreign currencies in the amounts defined by the National Bank of Ukraine; export or transfer outside Ukraine, by the resident and non-resident private individuals, of foreign currencies, which they legally imported or transferred to Ukraine earlier; payments in a foreign currency, directed by the residents outside Ukraine, in fulfillment of their obligations, in that currency, before non-residents, concerning payment for products, services, works performed, intellectual property rights, and other property rights, except payments for the currency securities; payments in foreign currencies, directed outside Ukraine, in the form of interest for credits, or incomes (profits) from foreign investments; imports outside Ukraine of foreign investments in a foreign currency, which was earlier made on the Ukrainian territory, in the event of termination of the investment activities; b) imports, or transfer outside Ukraine, of the Ukrainian currency, except the cases specified in clause 2 of Article 3 herein; c) providing and receiving by the residents, of foreign- currency credits, in case the terms and the amounts for such credits exceed the limits, stipulated by the applicable law; d) using foreign currencies as the means for payment, or as a security; e) placement of the currency securities at accounts and deposits outside Ukraine, except: opening of foreign-currency accounts by resident private individuals, for the period of their stay abroad; opening of correspondence accounts by the authorized banks; opening of foreign-currency accounts by residents, specified in paragraph four of clause 5 in Article 1 of the present Decree; f) making investments abroad, including same by way of acquisition of securities, with the exception of securities or other corporate rights obtained by resident private individuals as a gift or inheritance. 5. Obtaining of the individual license by a participant in a currency operation shall also mean permit for conducting of that operation by another participant, or a third person, involved in that operation, unless otherwise stipulated by the terms of the individual license. 6. The procedures and the terms for issuance of the licenses, the list of documents necessary to obtain a license, as well as the reasons for denial of issuance of the licenses, shall be defined by the National Bank of Ukraine. Denial of issuance of a license by the National Bank of Ukraine may be disputed at a court, or a court of arbitration. Article 6. Organization of Trade in Foreign Currencies 1. Trade in foreign currencies on the territory of Ukraine shall be conducted by the resident and non-resident legal entities through the authorized banks and other crediting and financial institutions, which obtained the National Bank license for trade in foreign currencies, exclusively on the currency market of Ukraine. The structure of the inter-bank currency market, as well as the procedures and the terms of trade in foreign currencies at the inter- bank currency market shall be determined by the National Bank of Ukraine. 2. The authorized banks and other crediting and financial institutions, which obtained the license of the National Bank of Ukraine, shall; a) on their own behalf, buy and sell foreign currencies on the inter-bank currency market of Ukraine, upon assignment and at the expense of residents and non- residents; b) have the right, on their own behalf and at their own expense, to buy foreign currencies in cash from resident and non-resident private individuals, as well as to sell it to the resident private individuals. 3. The resident and non-resident private individuals shall have the right to sell foreign currencies to the authorized banks and other crediting and financial institutions, which were granted the license of the National Bank of Ukraine, or, with their mediation, to other resident individuals. 4. The resident private individuals shall have the right to buy foreign currencies from the authorized banks and other crediting and financial institutions, which were granted the license of the National Bank of Ukraine or, with their mediation, from other resident individuals. Article 7. Organization of Clearing in Foreign Currencies Within the limits of a trading turnover, foreign currencies shall be used as the means of clearing between the residents and non-residents. That kind of clearing shall be made only through the authorized banks. The non-resident employers shall make payments for labor of the residents exclusively in the Ukrainian currency, in cash or non-cash forms. Clearings between the residents and non-residents in the Ukrainian currency, within the limits of trading turnover, shall be possible upon condition of an individual license being granted by the National Bank of Ukraine. Article 8. The Currency Exchange Rates 1. For the purposes of currency operations, exchange rates of foreign currencies, expressed in the Ukrainian currency; the currency securities rates in foreign currencies and in the clearing units, shall be used. The said rates shall be defined by the National Bank of Ukraine, upon agreement with the Cabinet of Ministers of Ukraine. 2. The National Bank of Ukraine may determine the limit for margins for operations conducted at the inter-bank currency market of Ukraine by the authorized banks and other crediting and financial institutions, which obtained the license of the National Bank of Ukraine, except operations with the futures agreements. Article 9. Obligations As Regards Declaration of the Currency Securities, and Other Property 1. The currency securities and other property of the residents, which is located outside Ukraine, shall be subject to obligatory declaring with the National Bank of Ukraine. The terms of, and the procedures for such declaring shall be stipulated by the National Bank of Ukraine. 2. The National Bank of Ukraine shall guarantee confidentiality of any information, specified in clause 1 of this Article, in accordance with the provisos in Article 52 of the Law of Ukraine "On Banks and the Banking Activities". Article 10. Accounting of the Currency Operations 1. The practices, the types, forms of, and terms for presenting reports by the residents and non-residents on their currency operations, shall be defined by the National Bank of Ukraine, upon agreement with the Ministry of Statistics of Ukraine, with regard to the effective legislation of Ukraine. 2. Delayed presentation of reports, concealment or distortion of the relevant reporting data shall pre-empt responsibility, as specified in Article 16 of the present Decree. Section II. THE POWERS OF THE STATE AUTHORITIES, AND THE FUNCTIONS OF THE BANKING SYSTEM, IN THE SPHERE OF CURRENCY REGULATION AND CURRENCY CONTROL Article 11. The Powers of the National Bank of Ukraine, and of the Cabinet of Ministers of Ukraine in the Sphere of Currency Regulation 1. As regards the sphere of currency regulation, the National Bank of Ukraine shall: carry out the currency policy, proceeding from the principles of the general economic policy in Ukraine; jointly with the Cabinet of Ministers of Ukraine, prepare the payment balance of Ukraine; control compliance with the limit for the external debt of Ukraine, ratified by the Supreme Council of Ukraine; in case of necessity, determine the limits of foreign- currency obligations of the authorized banks before the non- residents; within the limits, stipulated by the present Decree, issue normative acts, obligatory for fulfillment, which pertain to operations on the currency market of Ukraine; accumulate, store, and utilize reserves of the currency securities to support the state policy on currency; issue licenses for the currency operations; take decisions about their cancellation; define the methods to determine and apply the currency exchange rates, expressed in the Ukrainian currency; the rates of the currency securities, expressed in foreign currencies or in the clearing units, as specified in Article 8 herein; upon agreement with the Ministry of Statistics of Ukraine, stipulate the uniform accounting, reporting, and recording blanks; and the procedures for control over their accuracy and timely presentation; ensure publication of the banking reports about its own operations, and those by the authorized banks. 2. As regards the sphere of currency regulation, the Cabinet of Ministers of Ukraine shall: determine the limit for the foreign debt of Ukraine, and submit it for ratification to the Supreme Council of Ukraine; take part in preparation of the payment balance of Ukraine; ensure fulfillment of the budget and the taxation policies, in their part pertaining to the movement of the currency securities; ensure formation of, and manages the State Currency Fund of Ukraine, in accordance with Article 14 of the present Decree; determine the procedures for utilization of proceeds in the international clearing units, which are used in the trading turnovers with the foreign countries, as well as in non-convertible foreign currencies, which are used in the non-trading turnovers with foreign countries, on the basis of provisos stipulated in international agreements that Ukraine is a party to. Article 12. The Sphere of the Currency Control 1. All currency operations both by residents and non- residents are subject to the currency control. Subject to the currency control are also the responsibilities as to declaration of the currency securities and of the property, which emerge from clause I in Article 9 of the present Decree. 2. The bodies exercising the currency control may request, and be granted access to, full information from the residents and non-residents about currency operations they conduct, the state of the banking foreign-currency accounts, within the scope of their powers, defined in Article 13 of the present Decree; as well as that pertaining to property subject to declaring under clause I of Article 9 of the present Decree. Article 13. The Functions of the State Authorities, and the Banking System of Ukraine, in the Sphere of Currency Control 1. The National Bank of Ukraine shall be the principal authority of the currency control, which shall: exercise control over compliance with the regulatory rules for the currency operations on the territory of Ukraine, with respect to all matters which, under the present Decree, have not been put under the jurisdiction of other state authorities; ensure performance, by the authorized banks, of their currency-control functions, in accordance with the present Decree and other legal acts on the currency regulation in Ukraine. 2. The authorized banks shall exercise control over the currency operations, conducted by the residents and non- residents through those banks. 3. The state Tax Inspectorate of Ukraine shall exercise the financial control over the currency operations, conducted by the residents and non-residents on the territory of Ukraine. 4. The Ministry of Communications of Ukraine shall exercise control over compliance with the rules for transfer and mailing of the currency securities across the customs border of Ukraine. 5. The State Customs Committee shall exercise control over compliance with the rules for transfer of the currency securities across the customs border of Ukraine. Section IV. OTHER MATTERS OF THE CURRENCY REGULATION Article 14. The National and the Local Currency Funds 1. The Cabinet of Ministers of Ukraine shall form the State Currency Fund of Ukraine, utilizing the assets of the state budget of Ukraine, within the limits of expenditures approved by the Supreme Council of Ukraine, by way of purchasing the currency securities at the inter-bank currency market of Ukraine, or, upon agreement with the National Bank of Ukraine, on the international currency market; and by way of obtaining foreign-currency credits, within the limits of the external debt of Ukraine, ratified by the Supreme Council of Ukraine; as well as from other sources, specified by the effective legislation. 2. The Council of Ministers of the Republic of Crimea, the local state administrations, the Executive Committees of the local Councils of People's Deputies, shall form, respectively, the Republican (for the Crimean Republic), and the local currency funds, by way of acquisition of foreign currencies on the inter-bank currency market, with the funds available at the respective budgets, within the limits of expenditures, endorsed by the Supreme Council of the Crimean Republic, and the Councils of People's Deputies; as well as with other incomes specified by the effective legislation, and shall manage those currency funds. Article 15. The Official Currency Reserves The official currency reserves shall be created, maintained, and utilized by the National Bank of Ukraine in order to support the currency exchange rate of the Ukrainian currency. Article 16. Responsibility for Non-Compliance with the Currency regulation. 1. Illegal purchase, sale, exchange or use of currency values as a means of payment or as a pledge, i.e. conducting such actions without the due permit (licence) if such permit (licence) is obligatory pursuant to the present Decree, and with other legal acts on currency regulations, shall pre-empt the civil, administrative, or criminal responsibility, under the Ukrainian law. 2. The following penalties (financial sanctions) may be applied to the residents and non-residents, guilty of violation of the currency regulation and currency control: for conducting operations with the currency securities, as specified in clause 2 of article 5 in the present Decree, without prior obtaining off the license of the National Bank of Ukraine - the fine in the amount, equivalent to the sum (value) of the said currency securities recalculated into the Ukrainian currency at the exchange rate of the National Bank of Ukraine, valid as of the day when those operations were conducted, followed by expelling that bank from the Republican Bank Register, or without it; for conducting operations with the currency securities, requiring prior obtaining of the license of the National Bank of Ukraine, under provisos contained in clause 4 of Article 5 in the present Decree, without obtaining an individual license of the National Bank of Ukraine - the fine in the amount, equivalent to the sum (value) of the said currency securities recalculated into the Ukrainian currency at the exchange rate of the National Bank of Ukraine, valid as of the day when those operations were conducted; for trade in foreign currencies, conducted by banks and other crediting and financial institutions without prior obtaining of the license of the National Bank of Ukraine, and/or with violation of the conditions and terms of trade in the currency securities on the inter-bank market of Ukraine - the fine in the amount, equivalent to the sum (value) of the said currency securities recalculated into the Ukrainian currency at the exchange rate of the National Bank of Ukraine, valid as of the day when those operations were conducted, followed by expelling that bank from the Republican Bank Register, or without it; for failure of the authorized banks to fulfill their responsibilities, specified in clauses 3 and 4 of Article 4, and clause 2 of Article 13 in the present Decree - cancellation of the general license of the National Bank of Ukraine, granting the right to conduct the currency operations, or a fine in the amount determined by the National Bank of Ukraine; for violation, on part of the residents, of the clearing procedures, stipulated by Article 7 herein - the fine in the amount equivalent to the sum of the currency securities, which were used for clearing, recalculated into the Ukrainian currency at the exchange rate of the National Bank of Ukraine, valid as of the day when such clearing was conducted; for delayed presentation of reports, concealment or distortion of the relevant reporting data about the currency operations - the fine in the amount determined by the National Bank of Ukraine; for failure of the residents to satisfy the requirements concerning declaration of the currency securities and other property, as stipulated by Article 9 of the present Decree - the fine in the sum, determined by the National Bank of Ukraine. The sanctioned, described herein, shall be applied by the National Bank of Ukraine, and, upon its order - by the bodies subordinated to it. Claims against the sanctions imposed may be considered by the court proceedings. The sums of penalties shall be channelled to the state budget of Ukraine. Article 17. Summary 1. Clause 2 in Article 25 of the Law of Ukraine "On Enterprises in Ukraine" (News Bulletin of the Supreme Council of Ukraine, 1991, No. 24, p. 272) shall be expressed in the following version: "2. The procedures for utilization of the foreign- currency proceeds of an enterprise shall be defined by the legislation on currency regulation in Ukraine". 3. In Article 21 of the Law of Ukraine "On Privatization of Property of the State-Owned Enterprises" (News Bulletin of the Supreme Council of Ukraine, 1991, No. 24, p. 348, No. 38, p. 562): "3. The non-resident buyers shall acquire the state property in the course of privatization, with payments being made in a free convertible currency. The value of objects being privatized shall be recalculated into a free convertible currency at the currency exchange rate, defined by the National Bank of Ukraine. The value of the privatized object shall be enlarged by the coefficient, defined by the State Property Fund of Ukraine. The said coefficient shall be generally applicable for all privatized objects, and may not be imposed individually on separate privatized objects; legal force of clause 4 shall be terminated. 4. Clause 2 in Article 6 of the Law of Ukraine "On Privatization of Small State-Owned Privatization (Small Privatization)" (News Bulletin of the Supreme Council of Ukraine, 1991, No. 24, p. 350; No. 38, p. 562), shall be expressed in the following version: "2. The non-resident buyers shall acquire the objects of small privatization, with payments being made in a free convertible currency. The value of objects being privatized shall be recalculated into a free convertible currency at the currency exchange rate, defined by the National Bank of Ukraine. The value of the privatized object shall be enlarged by the coefficient, defined by the State Property Fund of Ukraine. The said coefficient shall be generally applicable for all privatized objects, and may not be imposed individually on separate privatized objects". 5. Clause 4 in Article 16 of the Law of Ukraine "On Consumers Cooperation" (News Bulletin of the Supreme Council of Ukraine, 1992, No. 30, p. 414), shall be expressed in the following version: "4. The procedures for utilization of the foreign- currency revenues generated by a consumers association or union, shall be determined by the currency regulations of Ukraine". 6. In clause 4.3 of the State Program for Privatization of Property of the State Enterprises, ratified by the Resolution of the Supreme Council of Ukraine on July 7, 1992 (News Bulletin of the Supreme Council of Ukraine, 1992, No. 38, p. 567): in paragraph one, the phrase "foreign investors" shall be substituted for the phrase "the non-resident buyers"; the phrase "market exchange rate" shall be substituted for "the exchange rate"; legal force of the paragraph four shall be terminated. 7. To terminate the legal force of: paragraph six in the first part of Article 9, concerning approval of the norms for mandatory distribution of the currency proceeds between the state and the local Councils of People's Deputies; Article 12, the last part of Article 14, the last but one and the last parts of Article 16, in the Law of the Ukrainian SSR "On Foreign Economic Activities" (News Bulletin of the Supreme Council of Ukraine, 1991, No. 29, p. 377); paragraph four in clause I of Article 22 in the Law of Ukraine "On the Principles for the State Policy in the Sphere of Science and the Science-and-Engineering Activities" (News Bulletin of the Supreme Council of Ukraine, 1992, No. 12, p. 165); Article 25 of the Principles of the Ukrainian Legislation on Culture (News Bulletin of the Supreme Council of Ukraine, 1992, No. 21, p. 294); paragraph two in the first part of Article 14 of the Law of Ukraine "On the Local Councils of People's Deputies, and on the Local and the Regional Self-Government) (News Bulletin of the Supreme Council of Ukraine, 1992, No. 28, p. 387); 8. The present Decree shall enter its force at law on the day of its publication. Premier of Ukraine L. Kuchma Minister of the Cabinet of Ministers of Ukraine A. Lobov Kiev, February 19, 1993, No. 15-93