The Cyprus Securities and Exchange Commission (CySEC), the Cyprus Bar Association (CBA) and the Institute of Certified Public Accountants of Cyprus (ICPAC) have all issued circulars recently reminding supervised entities about the relevance of recent US sanctions imposed against Russian individuals, companies, enterprises and officials.
The key competent authorities regulating the financial and professional services industries in Cyprus have recently reminded members and supervised entities of the importance and relevance of the US sanctions regime on Russia. Cyprus is, of course, not under US jurisdiction and as an EU Member State complies with the Union’s Common Foreign and Security Policy rather than US sanctions. As such the commentary provided is unusual but nevertheless remains helpful as a reminder to Cypriot businesses of the extra-territorial reach of US sanctions in certain circumstances.
The circulars from CySEC, the CBA and ICPAC (the Cypriot Competent Authorities or CCAs) urge regulated entities to thoroughly study the provisions of the sanctions implemented under the Countering America’s Adversaries Through Sanctions Act 2017 (CAATSA), including the Specially Designated Nationals (SDN) list which was released by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) on 6 April 2018. It should be recalled that, within the legal framework of CAATSA, the US Treasury included in its SDN list 7 prominent high net worth Russian businessmen, 17 Russian government officials and 14 companies in response to alleged “worldwide malign activity”. In summary, the US regulatory framework forbids US persons from transacting with these individuals and entities and mandates the freezing of all of their funds and economic resources. Moreover, the US may impose ‘secondary sanctions’ on non-US persons which ‘facilitate significant transactions’ with targeted individuals and entities.
The CCA circulars urge members firms to:
- thoroughly and meticulously study the sanctions imposed by the US government, including the SDN list, and assess the extent to which these measures affect themselves, their firms and their clients;
- assess the risks they may assume in the eventuality of involvement in any significant transaction or facilitation to carry out such a transaction, with any person subject to the sanctions; and
- assess with rigour the risks associated with any new clients and the measures that will need to be adopted, including avoiding the commencement of any business relationship with the client.
Finally, as a reminder, the CCAs request firms to carry out the due diligence that they are legally obliged to undertake under Cypriot law and to regularly update their client records and compliance policies to comply with the latest developments in this area.
Harneys advises some of the world’s top institutions on the extent of EU and other sanctions regimes in the jurisdictions we cover, including Cyprus. It is now more important than ever for firms operating in jurisdictions subject to sanctions (including Russia and Ukraine) to remain ahead of the curve and establish robust compliance policies and procedures which deal with the intricacies of these overlapping and different regimes in order to mitigate the significant risks which firms and their staff may be otherwise exposed to.