In the midst of the war in Ukraine, Polish entrepreneurs are concerned about establishing cooperation with new contractors. This is now of great importance due to the high sanctions that threaten for violating the embargo imposed on Russia and Belarus in connection with military aggression in Ukraine. Trading with companies from these countries may result in high penalties, not only financial, for the Polish contractor. So, how can economic intelligence be conducted to verify a company in Ukraine and protect oneself from multimillion-dollar sanctions?
Economic turnover with Ukraine
According to a report by the Ministry of Development and Technology, based on data from the State Statistics Committee of Ukraine, in 2021, Ukrainian exports of goods reached a value of over $68 billion, an increase of 38% compared to 2020. Imports increased by 34% and reached a value of over $72.8 billion in 2021. China was Ukraine’s most important recipient with exports worth $8 billion, followed by Poland with $5.2 billion. China is also Ukraine’s largest partner in imports, worth $10.9 billion. Poland is the fourth-largest source of Ukrainian imports, with a value of $4.95 billion.
Due to the war, the National Bank of Ukraine has introduced a temporary moratorium on foreign transfers (with the exception of payments for goods of strategic importance). Ukraine, with certain exceptions concerning the activity of banks, insurance companies, and pawnshops, has no legal restrictions on the choice of legal form for conducting business. There are also no such restrictions on the registration of a company by individuals or legal entities that are not residents of Ukraine. This makes it easier for foreign entities, including those from Russia and Belarus, to create a company under the Ukrainian registry.
Polish and EU sanctions
In connection with the outbreak of the war in Ukraine, the European Union has already imposed 9 packages of sanctions on Russia until the end of 2022. Poland also imposes its additional sanctions. These include the most important persons in Russia, as well as companies from that country and Belarus. Trading goods and services with Russian and Belarusian companies is prohibited. Polish entrepreneurs who violate this can face a financial penalty of up to PLN 20 million and even up to 15 years’ imprisonment. However, Russian and Belarusian entrepreneurs have learned to circumvent international bans, using, among other things, complicated holding structures, in which it is difficult to detect the real ownership structure. So, how to check a company in Ukraine to avoid sanctions?
National and EU Information Resources
Detailed information about the types of economic transactions prohibited by the EU with Belarus and Russia can be found on the European Council’s websites: https://www.consilium.europa.eu/en/policies/sanctions/restrictive-measures-against-russia-over-ukraine/ and https://www.consilium.europa.eu/en/policies/eu-response-ukraine-invasion/. A list of individuals and entities subject to sanctions can be found in the EU Official Journal at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721. The Polish Ministry of Internal Affairs and Administration also maintains an up-to-date register of entities subject to sanctions, where you can check a contractor, their connections, reasons for inclusion in the register, and applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
Therefore, the first step in checking a company in Ukraine would be to check if it appears in any of the above registers. Regulation (EU) 2022/576 of the European Council of April 8, 2022, amending Regulation (EU) No. 833/2014 concerning restrictive measures in connection with Russia’s destabilizing actions in Ukraine, is also a valuable source of information.
Business Intelligence: How to Verify a Contractor from Ukraine?
Verification of a contractor can be entrusted to a professional business intelligence firm that specializes in conducting such orders. A private detective in Warsaw, Poznań, Wrocław, or other cities will know how to obtain the necessary information to verify a current or future contractor.
The most important way to verify a contractor and their possible connections with Belarus or Russia is to identify the real beneficiary and then check if they are listed on the aforementioned sanctions list maintained by the Polish Ministry of Internal Affairs and Administration. This can be done through the Central Register of Ultimate Beneficial Owners maintained by the Minister of Finance: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj.
Direct Inquiry to the Contractor
If there are difficulties in determining the ownership structure of a business partner using available registers, another method of checking can be used as part of business intelligence activities, which is to directly ask the contractor to confirm who their ultimate beneficiary is. Of course, to authenticate the response, a foreign entrepreneur can be asked to provide documents confirming their declarations.
A publicly available way to gather information about a business partner is to search the resources of the Internet. We can verify the company, check if it has a website, what opinions exist about it, and perhaps we will come across some publication about it. We can also request references from other companies that have dealt with this business partner.
If we don’t want to do it ourselves for certainty, we can entrust a detective research agency specializing in professional business intelligence. Because there are many more sources of information than just the web. For example, we can contact the Polish Embassy in Kiev with a request for information about a specific entity, whether complaints from other entrepreneurs have already been received, or according to the knowledge of the diplomatic mission, the Ukrainian contractor has a bad reputation? Similar information can be provided by Polish-Ukrainian chambers of commerce.
In the bulletin of the Ministry of Entrepreneurship and Technology’s public information, as the minister responsible for the economy, he maintains a register of representations of foreign entrepreneurs. If we find the representation of our contractor in this register, we can assume that he himself still exists and is conducting business.
Ukrainian business registers
The main source of information about foreign entrepreneurs are their national registers, equivalent to the Polish CEIDG and KRS. How to check a company in Ukraine? In the official state register of Ukrainian companies (equivalent to KRS): https://usr.minjust.gov.ua/content/free-search, current information is available: the date of registration of the company, contact details, list of founders, persons authorized to represent, beneficiary of the company, types of activities conducted, the amount and division of the share capital, information about bankruptcy and enforcement proceedings. A report with a wider scope is possible to order. A separate register of enforcement proceedings is available on the website: https://asvpweb.minjust.gov.ua/#/search-debtors, and bankruptcy: http://www.arbitr.gov.ua/pages/157
The register https://corruptinfo.nazk.gov.ua/ contains information on persons held responsible for corruption, related court decisions, and imposed penalties. In addition, on the website: http://www.reyestr.court.gov.ua/, a register of court proceedings is available, where you can find the history of such proceedings involving a Ukrainian contractor.
The Ukrainian Stock Exchange: http://www.ux.ua/en/ contains a list of members and basic information about issuers. On the other hand, https://youcontrol.com.ua/ is a commercial database with some details for companies. The register of all participants in the financial market, auditors, banks, commissions, etc. can be found on the website https://bank.gov.ua/ua/supervision of the State Commission for Regulation of Financial Services Market. Ukraine also provides a national register of real property rights https://kap.minjust.gov.ua/services?product_id=1
Better to check the contractor well
Before making a transaction or cooperating with a contractor from Ukraine, it is better to conduct an economic investigation and check them thoroughly, whether they are not related to Belarus or Russia. Violation of sanctions imposed on trade with these countries can result in a financial penalty of up to PLN 20 million and from 3 to 15 years of imprisonment.
Do you know how to check a company in Ukraine? If not, or if you need to find more detailed information, we can help you. Contact us.