Cyprus: Combating Financial Crime in Cyprus and the Legal Framework

ADDED 2023-02-11

By our Compliance Departments

Cyprus, having the financial services and international business sector as one of the vital pillars of its economy, has in place a comprehensive and effective framework to combat money laundering and terrorist financing activities. The framework is implemented through applicable European Directives and Regulations and is updated constantly. In 2021, Cyprus has enacted the Prevention and Suppression of Money Laundering and Terrorist Financing (Amending) Law of 2021 amending the Prevention and Suppression of Money Laundering Activities Law of 2007 (188(I)/2007), to harmonise with the provisions of the EU Directive 2018/843 (the 5th AML Directive). Amongst other provisions, the Law defines and criminalizes the laundering of the proceeds generated from all serious criminal offences and provides for the confiscation of such proceeds aiming at depriving criminals of their profits.

Some of the key elements under the 5th AML Directive, was the introduction of centralized UBO registries which are accessible to obliged entities demonstrating legitimate interest, while a requirement for private UBO registers for bank accounts was introduced. Moreover, the requirement to perform enhanced due diligence on customers from high risk third countries was introduced, as well as a legal definition of cryptocurrency bringing both cryptocurrencies and cryptocurrency exchanges under the scope of existing AML regulations.

Further to the above, Cyprus is obligated to follow:

  1. The International Sanctions issued by the Security Council of the United Nations; and
  1. The Restrictive Measures adopted by the Council of the European Union.

Beyond this framework and due to the complexity and number of authorities involved in the implementation of sanctions, in June 2022 Cyprus established and operates the National Unit on the Implementation of Sanctions, to oversee the imposition of sanctions.

For the implementation of measures to combat money laundering and terrorist financing, Cyprus is being audited by the European Union, the Organization for Economic Cooperation and Development (OECD), as well as by the Council of Europe’s Committee of Experts on Money Laundering and Terrorist Financing (MONEYVAL). MONEYVAL conduced its latest assessment of Cyprus in 2022 – an enhanced follow-up on its initial assessment of 2019.  This follow-up assessment has been largely positive and acknowledges the fact that Cyprus has made progress in improving its level of compliance with the renowned 40 recommendations of the Financial Action Task Force’s (FATF) since the prior review. Key further measures that were taken concern non-profit organisations, virtual asset services providers and powers of investigative and law enforcement authorities.

As such, Cyprus remains within MONEYVAL’s enhanced follow-up programme and will continue to report back in specified timeframes, about further progress to strengthen its implementation of measures to combat money laundering and terrorist financing.