KYC in Aircraft Leasing, Five Years On: The Exemption No One Uses, and Why Ukraine’s Currency Control Regime Is an EU Accession Problem

Contents

• 1. The Baseline: What Triggers Additional Analysis
• 2. The Exemption the 2020 Article Did Not Address
• 3. Islamic Finance Structures: A New Category, the Same Triggers
• 4. Master Trusts, CRD VI, and the New Financiers
• 5. Is Ukraine Unusual? A Comparative View
• 6. An Officially Acknowledged Accession Obstacle
• 7. Practical Implications
• 8. FAQ

~ 25 min read

The Exemption No One Uses, and Why Ukraine’s Currency Control Regime Is an EU Accession Problem

In September 2020, we published an analysis of how Ukrainian banks conduct KYC risk assessments on aircraft lease, novation, and ABS transactions under what was then Resolution No. 8 of the National Bank of Ukraine. Five years on, the underlying regulatory act — now grossly amended — remains substantively unchanged. The indicators our 2020 article described, the additional document requirements they trigger, and the bank’s broad discretion to request further evidence remain in force today.

This article does not revisit that ground to correct it. The 2020 analysis was, and remains, an accurate description of how the regime operates in practice. What this article adds is threefold. First, a provision in the same Resolution that the 2020 article did not address: a formal exemption from financial monitoring for transactions where a counterparty, or its subsidiary or affiliate, is included in the Forbes Global 2000 list of the world’s largest public companies. Second, an account of why that exemption, despite existing in the text of the law since the time of its adoption, has had no visible effect on how banks actually process aviation finance transactions — including transactions that should, on paper, qualify. Third, and most significantly, the fact that Ukraine’s own government has, in an official self-screening report prepared for EU accession negotiations, identified this exact regulatory model as inconsistent with the EU acquis and as one of the acts requiring removal before Ukraine can close the chapter on the free movement of capital.

The practical context for this update is a shifting aviation finance market. Master trust structures, of the kind described in a recent Walkers article on adapting aviation finance to the CRD VI landscape, are increasingly used to finance entire fleets rather than single aircraft, broadening investor participation and creating funding structures that involve several layers of special purpose vehicles. At the same time, a global shortage of leasable aircraft is drawing a wider range of financiers, including those structured under Islamic finance principles and those newly restructuring under CRD VI, into markets they might not previously have considered. Ukraine’s aviation restart will need to attract this capital. Whether the currency control framework helps or hinders that effort is the question this article examines.

Resolution No. 8 distinguishes between a standard currency transaction and one that exhibits specific risk indicators requiring additional analysis. For a straightforward aircraft lease — a recognisable lessor entity, paid directly, with no third-party payment mechanism and no subsequent novation — only the initial analysis applies: a check of the lease agreement itself to establish the legality of the transaction. The additional document requirements set out below apply only where one or more of the following indicators is present.

The Five Triggers

The pattern is consistent: every trigger relates either to opacity in the lessor’s ownership structure or to a payment flow that runs through a third party. A bank reviewing a standard, directly-paid lease from a well-known lessor incurs none of this. A bank reviewing any ABS-financed transaction — by definition structured through an SPV, frequently Irish or Cayman, with payments flowing to a security trustee — incurs all of it.

Section 4, item (7) of Resolution No. 8 provides that the Resolution’s requirements do not apply to currency transactions performed under agreements between residents and non-resident legal entities where either party to the agreement, or to the relevant currency transaction, is included in the list of the 2,000 largest public companies in the world (the Forbes Global 2000), or is a subsidiary or affiliate of such a company.

On its face, this is a complete carve-out, not merely a reduction in scrutiny. Where it applies, the transaction is exempt from the Resolution’s requirements altogether — there is no additional analysis, no KYC letter, no ownership chart. The provision is, in effect, the National Bank’s own recognition that a sufficiently large and publicly scrutinised counterparty does not present the money-laundering risk the rest of the Resolution is designed to address.

Why This Matters for Aviation Finance

Several of the lessor groups most active in the Ukrainian market before the war have a direct or indirect connection to a Forbes Global 2000 company. AerCap Holdings N.V. is itself ranked on the 2025 list, at position 686. BOC Aviation’s parent, Bank of China, has historically ranked among the world’s ten to fifty largest companies on the list. SMBC Aviation Capital’s parent, Sumitomo Mitsui Financial Group, ranked approximately 57th in 2025. On a literal reading of Section 4(7), transactions connected to any of these groups, structured so that the affiliate relationship is documented, should qualify for the exemption.

Other lessors active in the pre-war Ukrainian market do not have this advantage. Air Lease Corporation and Avolon’s ultimate parent structures require case-by-case verification and may not appear on the list at all. Carlyle Aviation Partners, as part of a privately structured asset management platform rather than a single listed parent, is unlikely to qualify under any straightforward reading of the provision.

The Verification Gap

Resolution No. 8 does not specify what document a bank should accept as proof that a counterparty, or its affiliate, is included in the Forbes Global 2000. The Forbes Global 2000 itself is published annually as an open list on forbes.com. It is not accompanied by a certificate of inclusion that a company can obtain and present to a third party. Forbes does operate a separate licensing portal, accolades.forbes.com, through which companies can obtain rights to use a “Forbes Global 2000” badge for marketing purposes — but accessing even basic verification through that portal requires the requesting party to state a specific monitoring purpose and obtain permission, which is not a workable compliance tool for a bank processing a routine lease payment.

The practical consequence is that a bank facing a transaction that might qualify under Section 4(7) has no standardised document to request, no official confirmation to rely on, and no established practice for accepting a screenshot of the Forbes website, a corporate press release, or counsel’s own representation as sufficient evidence. Faced with that uncertainty, and absent any regulatory guidance instructing them otherwise, banks have continued to apply the full additional analysis regime even to transactions that should, in principle, be exempt.

Theory and Practice

This is not a hypothetical observation. In our own experience advising on an ABS-financed transaction involving a lessor group connected to a Forbes Global 2000 institution, the KYC process through a Ukrainian bank took approximately six months to complete — the full additional analysis, including ownership charts, registries of members, and servicer agreement extracts, despite the theoretical availability of the Section 4(7) exemption. The international counterparties involved, accustomed to the documentary requirements of mature aviation finance jurisdictions, found the timeline and the scope of document requests difficult to reconcile with a regime that, on paper, exempted their structure entirely.

This is the same gap between ratification and enforcement that we have written about elsewhere in the context of the Cape Town Convention’s engine accession risk in Ukraine: a rule exists, is technically in force, and changes nothing about how the system actually operates, because no one — not the regulator, not the banks, not the market — has built the verification infrastructure the rule requires to function.

The growing role of Islamic finance in aircraft leasing adds a further dimension that the 2020 article did not need to consider, because it was not yet commercially relevant to the Ukrainian market. Sukuk al-Ijarah, the dominant Islamic finance structure for aircraft, typically involves a special purpose vehicle — frequently incorporated in the Cayman Islands — that purchases the aircraft and leases it to the airline under a Shariah-compliant lease, while certificates representing beneficial ownership of the underlying assets and lease revenues are sold to investors.

Structurally, this is indistinguishable from a conventional ABS transaction for the purposes of Resolution No. 8: an offshore SPV, a trust-like beneficial ownership structure, and a multi-party certificate-holder base. It will trigger indicators 41 and 42 as a matter of course. Because the SPV in a sukuk structure is rarely itself a public company, and its sponsoring financial institution may or may not appear on the Forbes Global 2000, the Section 4(7) exemption offers no straightforward route around the resulting documentation burden. As Gulf-based and other Islamic finance lessors look to deploy capital into markets with an aircraft shortage, Ukraine’s KYC regime will treat their structures exactly as it treats a conventional Cayman ABS — without regard to the religious or commercial rationale behind the structure, and without any exemption pathway tailored to it.

Recent commentary from Walkers on adapting aviation finance structures to a changing regulatory landscape highlights a parallel development: master trust structures are gaining traction as a financing tool precisely because they offer increased flexibility, broader investor participation, and the ability to finance an entire fleet rather than a single aircraft. At the same time, CRD VI is reshaping how non-EU lenders structure their lending into the EU, generally requiring the establishment of an EU branch or subsidiary, with Irish SPVs continuing to play a central role in that restructuring.

For Ukraine, this has two implications. First, master trust and fleet-level financing structures, by their nature, multiply the number of entities, certificate holders, and intermediate SPVs in the chain — each of which a literal application of Resolution No. 8 could require a Ukrainian bank to analyse individually, for a financing structure that in its home jurisdiction is designed to be administered as a single coherent platform. Second, as CRD VI pushes new categories of non-EU lenders, including an increasing number of Asian institutions, to restructure through EU vehicles, some of those institutions — several major Chinese banks among them — are themselves constituents of the Forbes Global 2000. A counterintuitive result follows: a fleet financing structure backed by a Chinese bank with proper affiliate documentation might, in principle, qualify for the Section 4(7) exemption more readily than a structure backed by a privately held US asset manager that does not appear on the list at all — provided, of course, that the verification gap described above is resolved.

The 2020 article did not ask whether Ukraine’s currency-control regime for lease payments was unusually demanding compared with other jurisdictions. With a global aircraft shortage now prompting lessors to consider a wider range of markets, that question has become commercially relevant: a lessor weighing Ukraine against other options for fleet deployment will, implicitly or explicitly, factor the compliance burden into that decision.

Other Emerging and Mid-Sized Markets

Even allowing for the very different macroeconomic and security circumstances Ukraine faces, the structural comparison is informative: India’s safe harbour allows routine lease payments below a defined threshold to proceed without case-by-case regulatory analysis; the UAE’s regime relies on standard relationship-level AML/KYC rather than transaction-specific structural analysis; Nigeria’s regulatory focus sits upstream, at the point of structuring, rather than on every subsequent rent payment. Ukraine’s regime is the only one of the four built around a continuing, transaction-level analysis of the lessor’s corporate structure, applied indefinitely for the life of the lease.

The EU Comparator

The most significant comparator, however, is not another emerging market but the destination Ukraine has formally committed to reach. Article 63 of the Treaty on the Functioning of the European Union provides that all restrictions on the movement of capital between Member States, and between Member States and third countries, shall be prohibited. Council Directive 88/361/EEC, which implements this freedom, requires the removal of exactly the kind of transaction-level currency control that Resolution No. 8 embodies. In an EU Member State, a Ukrainian-style regime requiring banks to analyse the ownership structure of every lessor in every ABS or novated lease transaction, with discretion to demand any document the bank considers necessary, simply does not exist. Cross-border lease payments between a Member State lessee and a non-resident lessor are payments protected by the free movement of capital, subject only to ordinary AML/CFT obligations under the EU’s anti-money laundering directives — obligations that are narrower in scope and, critically, are defined by clear, harmonised criteria rather than by a bank’s open-ended discretion to request “any documents confirming the essence, purpose, and economic feasibility” of a transaction, as Resolution No. 8 permits.

This is not merely our own comparative assessment. In February 2023, the Cabinet of Ministers of Ukraine launched a large-scale self-screening exercise assessing the alignment of Ukrainian legislation with the EU acquis across all 34 negotiating chapters, involving more than 80 state authorities and processing roughly 28,000 acts of EU law. The resulting report addresses Chapter 4, “Free Movement of Capital,” directly.

The report identifies Council Directive 88/361/EEC — the directive requiring full liberalisation of capital movements — as one of the priority acts Ukraine has yet to implement, and states plainly that gradual easing of the foreign exchange restrictions imposed during martial law will take place “as soon as circumstances allow,” following consultation with IMF experts, with implementation timing tied to macroeconomic conditions rather than a fixed date.

The report’s own statistics on Chapter 4 record only one of the 44 relevant EU legal acts as fully implemented, with martial law identified as one of the chapter’s key systemic obstacles. Resolution No. 8, as the operative instrument through which the current currency control regime is administered, is squarely within the category of measures that full liberalisation under Directive 88/361/EEC will eventually require Ukraine to dismantle or substantially recast.

This reframes the KYC regime for aviation finance, and for cross-border transactions generally, as something other than a permanent feature of doing business in Ukraine. It is, by the government’s own official assessment, a transitional, wartime-justified departure from a free movement of capital standard that Ukraine has bound itself to reach. For lessors and financiers evaluating the Ukrainian market today, the compliance burden described in this article is real and immediate — but it is also, on the present trajectory and barring further disruption, a feature of the market with a finite, if currently undefined, lifespan.

For lessors and arrangers structuring transactions into the Ukrainian market today, several practical conclusions follow. First, the baseline distinction matters: a transaction structured to avoid indicators 41, 42, 31, and 32 — a direct lease from a transparent, directly paid lessor, with no novation and no third-party payment mechanism — remains subject only to the initial legality check, and avoids the additional analysis regime altogether. Where an ABS, sukuk, or master trust structure is commercially necessary, the additional documentation burden described in Section I should be anticipated and prepared in advance, not discovered mid-transaction.

Second, where a lessor group has a plausible claim to the Section 4(7) exemption through a Forbes Global 2000 parent or affiliate, that claim should be documented as part of the standard transaction file — an affiliate certificate, an extract from the relevant Forbes list with a clear date reference, and a corporate organisational chart showing the relationship — even though no Ukrainian bank has, to date, reliably accepted such documentation as a basis for exemption. Building this documentation now serves two purposes: it tests, transaction by transaction, whether individual banks are prepared to apply Section 4(7) as written, and it creates a body of practice that may accelerate recognition of the exemption as more Forbes-listed and Forbes-affiliated financiers enter the market.

Third, lessors and financiers without a Forbes Global 2000 connection — a category that, on present evidence, includes a number of significant players in global aviation finance — should factor the full KYC timeline, realistically measured in months rather than weeks, into their assessment of the Ukrainian market’s relative attractiveness as aircraft become scarcer globally and lessors have a widening choice of jurisdictions in which to deploy them.

Conclusion

Five years after our original analysis, the regulatory text has barely moved, but the context around it has moved substantially. A formal exemption exists for transactions involving the world’s largest public companies, but there is no infrastructure to make it usable. A new generation of financing structures — Islamic finance vehicles, master trusts, CRD VI-driven EU restructurings — is emerging that the original indicators were not designed with in mind, yet which they capture without distinction. And the Ukrainian government has, in its own official accession documentation, identified the underlying regulatory model as something the country has committed to dismantle, on a timeline it cannot yet specify.

For now, the practical reality for anyone financing aircraft into Ukraine is the one our 2020 article described: a careful, document-heavy, multi-month process, with broad bank discretion and few firm guarantees. The difference five years on is that we can now say with more precision why that process exists, why an exemption written into the law has changed nothing about it, and why, on Ukraine’s own account, it is not meant to last.