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AML & CTF FRAMEWORK

Anti-money laundering (AML) and counter-terrorist financing (CTF) compliance is a reality for most businesses around the globe. As a European Union (EU) Member State, the Republic of Cyprus has transposed the applicable EU Directives into its national legal order, with the Law for the Prevention and Suppression of Money Laundering Activities of 2007 (L.188(I)/2007), as amended, being the key piece of the legislative framework governing AML and CTF compliance.

Notably, the aforesaid Law was amended in 2021 by transposing the provisions of the Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU (commonly referred to as the 5th AML Directive).

The most prominent features of the 5th AML Directive are, first, the requirement for EU Member States to establish and maintain an ultimate beneficial owner (UBO) register and, second, bringing cryptocurrencies and cryptocurrency exchanges under the scope of the existing AML/CTF regulations.

While the transposition of Directive (EU) 2018/1673 of the European Parliament and of the Council of 23 October 2018 on combating money laundering by criminal law (commonly referred to as the 6th AML Directive) is just around the corner, it is important to note its main feature is the unified list of predicate offences in Article 2 which includes, amongst others, cybercrime, environmental crime, tax crime, trafficking in human beings and migrant smuggling.

The Law 188(I)/2007, as amended, relates to both anti-money laundering and combatting terrorist financing measures. The aforesaid Law imposes an obligation on the persons (legal or physical) that fall within the scope of the Law to know their client and carry out their due diligence (regular or enhanced due diligence for high-risk clients), which includes measures:

  • To gather information on their client, their business, and the business rationale;
  • To risk-base the clients on various parameters;

  • To determine categories and types of clients that the company is willing to establish a business relationship with, reflecting the risk appetite of the company and the company’s assessment of its ability to manage and mitigate risks;

  • To monitor the client’s transactions and carry out compliance checks (both pre- and post- the client onboarding process); and

  • To report suspicious transactions internally (to the company’s AML Compliance Officer) or externally (to the competent national authority).

In the Republic of Cyprus, the competent national authority for reporting suspicious transactions is the Unit for Combating Money Laundering (MOKAS).

In addition, the Law 188(I)/2007, as amended, imposes on obligations on the persons (legal or physical) that fall within the scope of the Law to establish:

  • Source of Funds: an indication of where the money used for a particular transaction come from, which is a substantive description in nature that needs to be relevant and enable the assessor to ascertain the origin of the funds; and
  • Source of Wealth: a more detailed description of the entire assets of a particular client and the volume thereof.

Companies falling within the scope of the aforesaid Law that are under a legal obligation to carry out AML/CTF assessment procedures are monitored by one of the following competent national authorities:

  • The Central Bank of Cyprus (CBC)
  • The Securities and Exchange Commission of the Republic of Cyprus (CySEC)

  • The Cyprus Bar Association (CBA)

  • The Institute of Certified Public Accountants of Cyprus (ICPAC)

The Republic of Cyprus undergoes audits with regards to its AML/CTF legal and regulatory framework and compliance measures by the EU, the Organisation for Economic Co-operation and Development (OECD), as well as the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval).

Our AML & CTF Compliance Practice Portfolio

At ServPRO, our Compliance Team is on hand to advice you on matters relating to AML & CTF compliance in accordance with the applicable legislative framework.

Contact us today for an initial, complimentary consultation.

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