The National Bank (NBU) and the Cabinet of Ministers of Ukraine suggest to Verkhovna Rada that the number of entrepreneurial units authorized to open foreign currency exchange outlets on the basis of agency brokerage agreements be reduced.
The explanatory note to the mooted bill says that the ban on exchange operations by agency outlets is supposed to tighten control over the purchase and sales of foreign currency cash, preclude tax evasion, and ensure transparency of the domestic currency market. The NBU notes that today “almost every” establishment can conduct foreign currency exchange operations. The Bank points out that agents registered, as of October 1, 2257 exchange outlets which are responsible for the most instances of currency law breaches, such as doctoring their accounting documents before submitting them to a bank (because the outlets do not conduct their operations through the computerized system), functioning without an NBU permission or after canceling the brokerage agreement with a bank. Agency outlets account for 57% of all the exchange outlets but only for 29% of all currency exchange operations. According to the NBU, this indicates income cover-up and tax evasion. Therefore, suggesting that agency outlets be closed, the NBU also refers to FATF (an international organization to combat money laundering) recommendations. The NBU also believes this will entail no grave consequences because 75% of such outlets function in Ukraine’s five largest cities — Kyiv, Kharkiv, Donetsk, Lviv, and Odesa — with a well-developed banking infrastructure. And, what is more, the National Bank does not think the closure of these outlets will hinder individuals from conducting currency exchange operations on this country’s territory. On paper, everything is good and correct.
This point of view is shared by Kyiv Auditors’ Group board of directors’ chairman Vadym Lynnyk. In his opinion, this fact cannot affect the economy because such entities no longer earn big money. Yet, should the situation on the monetary market change for the worse, then Mr. Lynnyk believes this kind of business will be interesting again. Is this being done in anticipation of such changes?
Meanwhile, Interfax-Ukraine points out that the current difference between the sale and purchase rates in agency outlets is several times as narrow as at bank-based exchange facilities. This means that if banks monopolize this sector of entrepreneurial activity, individuals will have no other choice than turn to those whose services are costlier.
The Day’s experts are also doubtful about the NBU’s intentions. For instance, Natalia Kozhevina, director-general of the Yednannia (“Unity”) Association for Promoting Private Entrepreneurship, is sure this can impair a sizable part of small business and, besides, this country will again be crawling with illegal moneychangers, “as I was recently cheated by a swindler in Odesa when I urgently needed money.” Moreover, cheating can occur everywhere, even in bank- based exchange outlets, Ms. Kozhevina says.
Ksenya Liapina, project coo rdinator at the Institute of Competitive Society, recalled that, when independent exchange facilities were previously closed down, the reasoning was exactly the same: we were promised that the retail currency market would face no more problems after the “reform.” Three years later, all the old illnesses still remain, Ms. Liapina says. “If I were a National Bank analyst, I would ask myself if we are solving these problems correctly,” the expert shares her doubts, “Still, the NBU continues to do the same.” As Ms. Liapina told The Day, the NBU resorts to surgical, not therapeutic, methods in the field of currency regulation. In her opinion, closing agency exchange outlets is “an utterly unwise decision which will impair currency exchange possibilities for individuals as well as the mechanism of setting a true market value of currencies, including the national one, with the help of individuals.” It will be very difficult to understand if there is a demand for ready cash, Ms. Liapina affirms. At the same time, she maintains, banks consider cash exchange as something trivial, unprofitable, and unnecessary, the more so that this entails never -ending inspections and various restrictions, and they only earn on a margin. Ms. Liapina says banks will not hasten to fill the space left out by agency outlets, so individuals will find it far more difficult to sell and buy currency. In other words, if you go, for example, to a market on weekend, you will have a choice: either to run about in search of a bank-based exchange outlet, thus testing on yourself the “banking infrastructure development,” or to turn to wheeler-dealers, running the risk of being cheated. Like in the “good old” times of the earlyto-mid-90s.
