In the fight against drops, the National Bank restricts transfers of citizens, the National Police proposes to imprison them

The National Bank of Ukraine is preparing to restrict the movement of money between cards of individuals. The regulator plans to set a limit for the so-called p2p transfers (from an individual's bank card to an individual's card) at the level of 30 outgoing card transfers totaling no more than UAH 100 thousand per month, Censor.net reports.

The limit of UAH 100 thousand is introduced to combat shadow financial transactions through so-called drops, which keep most of the funds in the country unaccounted for. Drops are used to finance Russian subversive activities, smuggling, and drug trafficking.

According to NBU Deputy Governor Dmytro Oliynyk, the restrictions on private individuals' cards will not apply to the accounts of volunteer individuals, whom banks will identify.

Restrictions on the cards of other citizens will come into effect a month after the NBU officially publishes the new rules. This is expected to happen in the coming days.

Drops in numbers

Droppers or "money mules" are people who usually provide criminals with access to their bank cards and accounts for a small fee, which are used as transit accounts for illegal money transactions to other accounts. The funds that pass through a drop account may be related to smuggling, drug trafficking, human trafficking, arms trafficking, etc.

Drop accounts are also often used for tax evasion, moving money stolen from other people's accounts.

Criminals, or so-called "drop mules", can engage "money mules" on a regular basis (when a drop person transfers the funds received on his account wherever the "drop master" tells him to, keeping a certain percentage of the transaction amount) or on a one-time basis, when a drop person, for a fee, transfers his bank cards to the criminal, including pin codes and access to web banking after opening an account for himself.

Drops are sought out by the fraudsters through ads on social media; a typical drop is a person from a socially disadvantaged background, often a student or pensioner. Currently, a typical drop student opens an account for a thousand hryvnias in advance and receives another thousand hryvnias in return for transiting the card.

This is the general profile of a typical drop-in for a bank:

1. A new customer in the bank, or one who has not had transactions for a long time, after which abnormal card activity immediately begins (high intensity of credits and payments, turnover can reach more than UAH 100 thousand in a few days);
2. More than 97% of the turnover is made up of transfers, with minimal involvement of ordinary transactions for the purchase of goods, works and services, or cash withdrawals;
3. There are almost no or rarely any common criteria or indicators in transfer transactions, different checks, different recipients, different senders;
4. The number of transfer transactions can reach hundreds per hour.

Restrictions on transactions between cards of individuals are also imposed to counter illegal online casinos; on April 20, the National Security and Defense Council decided to counteract the activities of illegal online games, which are usually financed through drop accounts.

On August 13, at a meeting of the Temporary Investigative Commission on Economic Security in the Verkhovna Rada, the head of the TIC, Yaroslav Zheleznyak, demonstrated a deposit account on one of the websites of an illegal online casino. It was an account on a private individual's card.

"This is a card of either a pensioner, student, IDP, or a person in the temporarily occupied territory who gave it to dropshippers. This system also serves the sale of illegal cigarettes via telegram, drugs, and prohibited types of typography... At the state level, this is the second payment system through which a lot of money is withdrawn," says Yaroslav Zheleznyak, MP from the Golos party, the head of the PIC.

It is difficult to estimate the possible volume of drop accounts in the banking system. In the last six months alone, 80,000 drop accounts were closed in two domestic banks (there are currently 62 banks in Ukraine).

Typically, drops transport funds in a chain of similar transit accounts, which may consist of five or six or more drops. This allows the drops to cover their tracks, to make a so-called "mixer" when it is impossible to collect the history of transactions, amounts and counterparties differ. And while the regulator is communicating with a particular bank regarding suspicious customer activity and gaining access to payment card information, the "life" of one drop or even an entire chain may be over.

A drop card usually lives for several months. On average, one drop person transits UAH 2-2.5 million per year. A drop person does not accumulate significant funds on one card. The organizer usually does not keep more than 30 thousand UAH on the account of one dropout. However, in general, a large amount of money can be stored in the dropshipper's network at the same time, which is distributed due to the large number of cards.

When the bank starts analyzing statistics and notices abnormal activity of the customer, who is subsequently blocked, the drops go to another bank's branch and get another card without any obstacles.

In the end, the non-cash funds collected from the drops often end up with real businesses for "tax optimization," for example, through individual entrepreneurs for some "services" that then "buy" something from legal entities.

It is difficult to estimate the total amount of shadow money flowing through drops in Ukraine. However, even based on indirect data, it can be argued that it is significant.

According to the National Bank, Ukrainians spend about UAH 300 billion on cards through acquiring during a month: UAH 140 billion in physical networks and the rest through online payments.

At the same time, transfers between individuals' cards amount to about UAH 264 billion per month.

How does the NBU plan to combat drops?

In addition to the already resolved issue of restrictions on transfers between individuals' cards, it is proposed to keep a special register of drops in the future so that the banking system of such individuals can track and prevent illegal transit of funds.

The National Police proposes to go even further and introduce criminal liability for drops. It is proposed to impose a penalty of up to three years' imprisonment for issuing bank cards for remuneration or providing accounts for use by drops. For the same actions committed repeatedly - up to five years behind bars.

Some countries have already criminalized drops. For example, in Latvia, drops can get up to 10 years in prison with confiscation of property.

Taxes for drops

According to Oleksandr Korchevnyi from the Department of Individual Taxation of the State Tax Service, since 2022, the tax authorities have started charging additional taxes to drops based on the turnover in their accounts. Thus, according to the National Bank, in 2023, the Tax Service sent notices of voluntary income declaration to 10 people, three of whom were charged additional UAH 210 thousand.

In 2023, the Tax Service received data from the regulator on 728 drops, with the amount of income ranging from UAH 28 thousand to UAH 36 million.

As a result, additional UAH 2.5 million of liabilities were accrued, of which UAH 1.1 million has already been paid. The rest is being collected.

Author: Olga Prokopyshina