MONEYVAL report on Cyprus

On 12 February 2020, MONEYVAL, the Council of Europe’s expert committee on the evaluation of anti-money laundering and counter financing of terrorism (AML/CFT) measures, published a report summarising their findings on the Cyprus AML/CFT measures in place following the on-site visit which took place between 13 to 14 May 2019 for the period 2013-2018.

The report makes a comprehensive assessment of the effectiveness of the Cypriot AML/CFT system and its level of compliance against the 40 recommendations of the Financial Action Task Force (FATF).

The report concludes that Cyprus understands the money laundering (ML) and terrorist financing (TF) risks that it faces to a large extent, however the understanding of terrorist financing risk is less comprehensive.

Based on the results of its evaluation, MONEYVAL applied its enhanced follow-up procedure and invited Cyprus to report back to MONEYVAL at the first plenary meeting in 2021.

Positive comments

According to the report, some of the elements functioning adequately are the following:

• Overall Cyprus understands the risks emanating from ML/TF to a large extent and recognised that measures have been implemented to tackle ML/TF in Cyprus in a coherent way.
• MONEYVAL recognised that the banking sector has become more efficient in addressing ML/TF risks – largely due to the strict supervision of the regulator.
• Cyprus delivers constructive and timely assistance to other countries and the local Financial Intelligence Unit, MOKAS, has the ability to support the operational needs of other competent authorities.
• There is a good level of domestic co-operation and co-ordination between the competent authorities both on policy issues and at an operational level.
• Cyprus has developed mechanisms which are capable of delivering constructive and timely assistance to other countries both on a formal and informal basis.

Less positive comments

Various shortcomings were also identified in the report, including:

• The competent authorities are not yet sufficiently pursuing ML from criminal proceeds generated outside of Cyprus, which pose the highest threat to the Cypriot financial system in light of Cyprus being an international financial centre.
• The competent authorities have not been proactive at freezing and confiscating foreign criminal proceeds at their own initiative, although they have been instrumental in assisting other countries.
• Cyprus has not conducted a formal assessment of risks posed by legal persons, despite having a developed company formation and administration sector. This has reduced the authorities’ ability to implement more targeted mitigating measures to ensure the transparency of legal persons.
• There are weaknesses in the implementation of preventive measures by the trust and corporate services sector as a whole.
• While significant strides have been made by Cyprus to implement a comprehensive supervisory framework for trust and corporate services providers, further progress is required, with certain areas requiring major improvement.
• The risk in the real estate sector has increased rapidly since it has become the preferred choice of investment vehicle to acquire citizenship under the Cyprus Investment Programme. The risks related to the Cyprus Investment Programme have not been assessed comprehensively.
• Administrative service providers did not demonstrate a uniform level of understanding of the risks of TF evasion.

A national strategy for AML/CFT and an associated action plan have been recently introduced. There is good knowledge of ML risks at the national and sectorial level; in some aspects, particularly where the Central Bank of Cyprus is involved, understanding is very effective.

The competent authorities in Cyprus apply comprehensive controls in relation to preventing criminals from owning or controlling licensed financial services firms. Cyprus implements TF-related targeted financial sanctions without delay through a combination of multinational (at EU level) and national mechanisms.

The press release can be found here.

MONEYVAL’s report can be found here.