Key Strengths & Weaknesses of Cyprus' Financial Sector in 2020
The Cyprus Advisory Authority has released a statement about the recent publication of the Mutual Evaluation Report (MER) about the island, which has been conducted by MONEYVAL (the Committee of the Council of Europe) after several months of investigations and evaluations.
The assessment was conducted using the FATF methodology by a team of financial experts, and reveals the measures implemented by Cyprus to help mitigate money laundering and terrorist financing; also identifying areas of shortage, where further enhancements and improvements are required in the upcoming years.
The MER highlighted the following positive attributes of Cyprus’ anti money laundering and counter terrorist financing measures:
The islands authorities have a good understanding of the most serious ML risks at both a national and sectorial level. The national strategy and action plan are in line with these risks accordingly. The report also noted a high level of co-operation between the relevant authorities both on policy issues, and at an operational level between the various competent authorities on the island.
The banking sector has become more effective in mitigating risks. This is largely due to the increasingly sound supervisory practices of the Central Bank of Cyprus. Administrative services providers have implemented important measures to minimise such risks. Cyprus demonstrated vigilant oversight regarding terrorism sources and has a clear strong counter terrorism infrastructure in place. Cyprus Police have been conducting terrorism investigations; looking into suspicious transactions and finances, where possible and extreme enough to flag banking triggers.
Cyprus received a high score for being effective in executing requests in a timely and constructive manner in response to all types of formal requests from jurisdictions which it cooperates most vigorously with (Russia, and EU member states). The Financial Intelligence Unit (‘MOKAS’) assisted internationally and has been instrumental in freezing and confiscating assets on behalf of foreign countries.
The Financial Intelligence Unit has proved its ability to support the operational needs of relevant authorities on the island using its testing and distribution tasks while being a “key player” in the development of the system.
Areas that Cyprus could improve on, as identified in the MER were as follows:
Cyprus Police should strengthen their expertise in order to handle complex case analyses efficiently. After being generated by the Financial Intelligence Unit, to aggressively pursue money laundering cases; especially those stemming from foreign criminal proceeds. The government should increase financial investigations and subsequent freezing and confiscation of illegal proceeds.
Cyprus is not currently conducting formal and comprehensive risk assessments posed by legal persons and similar arrangements, which may be exposing the system to vulnerabilities.
The Non-Profit sector in Cyprus must carry out further risk assessments in order to identify potential weaknesses for terrorist financing or associated money laundering risks.
Supervision of the real estate sector should be significantly enhanced with more monitoring, due to the high level of Russian and Chinese HNWIs that purchase property on the island.
Cyprus should ensure that Alternative Service Providers are taking steps to enhance their ML/TF risk understanding and apply preventive measures commensurate with the risks. More effectual and discouraging penalties should be imposed for any breaches of AML/CFT requirements.
The risks arising as a result of the operation of the Integrated Casino Resort in the near future should be appropriately evaluated and mitigated; and risks related to the Cyprus Investment Programme have not been assessed comprehensively.
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