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* Banking in Cyprus - Anti-Money Laundering Measures







In 1996, Cyprus enacted the Prevention and Suppression of Money Laundering Activities Law (hereinafter to be referred to as the “Law”) which contains both suppressive and preventive provisions against money laundering. Since its enactment the Law has been subject to several amendments in order to give effect to a number of new international initiatives and standards in the anti-money laundering field. The Law is in conformity with the European Union’s Directives on the prevention of the use of the financial system for the purpose of money laundering (Directive 91/308/EEC as amended by Directive 2001/97/EC), the Council of Europe’s 1990 Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and the Financial Action Task Force’s (“FATF”) revised 40 Recommendations against money laundering and its 9 Special Recommendations against terrorist financing.

Cyprus’s anti-money laundering legislation criminalises money laundering from all crimes punishable with imprisonment in excess of one year as well as terrorist financing activities and requires all credit institutions, investment firms, insurance companies as well as lawyers (in respect of financial business) and accountants, real estate agents and dealers in precious metals and stones to implement strict procedures for preventing the use of their services for money laundering. In this regard, persons subject to the Law are required to implement procedures for customer identification, record keeping and internal reporting as well as to ensure that their employees are aware of their obligations under the Law and receive adequate training designed to assist them in recognising money laundering transactions. They are also required to appoint properly qualified persons as “Money Laundering Compliance Officers”.

The Law designates the Central Bank of Cyprus as the competent supervisory authority for all banks operating in Cyprus and assigns to it the responsibility of ensuring banks’ due compliance with the provisions of the Law.

Under the said Law, the Central Bank of Cyprus has issued several Guidance Notes which require banks to implement customer identification, record keeping and other procedures for the prevention of money laundering, including the identification of beneficial owners of accounts and transactions and checks on the source and legitimacy of funds flowing through the banking system in Cyprus. The Central Bank of Cyprus issued in November 2004, a latest consolidated Guidance Note. Furthermore, the Central Bank of Cyprus is applying a very strict supervisory regime over banks which entails, besides the issue of Guidance Notes for the implementation of preventive measures, off-site and on-site inspections which aim at assessing banks’ compliance with their anti-money laundering obligations.

The Central Bank of Cyprus has also been appointed by the Council of Ministers as the supervisory authority for all persons licensed to provide money transmission services. The Central Bank of Cyprus has issued a Guidance Note to money transfer businesses which calls for the implementation of internal control procedures, similar to those applicable to other financial institutions, for the prevention of money laundering.

Since 1996, a special Unit for Combating Money Laundering has been set up at the Attorney General’s Office which is responsible for the receipt and analysis of suspicious transaction reports and money laundering and terrorist financing investigations. Ιn the course of investigations, the above Unit may apply to the Court and obtain an order to the disclosure of information addressed to any person, including banks, who may be in possession of information related to the investigation as well as orders for the freezing and confiscation of funds and property suspected to be derived from money laundering.

The measures taken in Cyprus for combating money laundering and countering financing of terrorism have been repeatedly evaluated, in the last few years, by the FATF and the Council of Europe's Moneyval Committee, an FATF styled regional body set up in 1997 whose membership comprises all European states, including Cyprus, which are not members of the FATF.

FATF reviewed Cyprus’s anti-money laundering system in the context of its initiative to identify “non-cooperative countries and territories” in the international fight against money laundering. In its official report published in June, 2000, the FATF also recognised that the anti-money laundering system of Cyprus is in line with international standards and excluded Cyprus from the published list of “non-cooperative countries and territories”.

Since its establishment in 1997, the Council of Europe's Moneyval Committee has evaluated three times by means of detailed questionnaires and on-site visits Cyprus's anti money laundering system. The said evaluations, carried out in April 1998, September 2001 and April 2005 aimed at checking compliance with FATF standards against money laundering and terrorist financing, the European Union's Directives for the prevention of the use of the financial system for the purposes of money laundering and the relevant Council of Europe's and United Nations' Conventions on the matter.

The subsequent three evaluation reports adopted by the Moneyval Committee in June, 1998, June, 2002 and February, 2006 respectively speak favourably about the legal and other measures taken by Cyprus in line with international conventions and standards as well as for the efficiency and effectiveness of the practical implementation of those measures for combating money laundering and terrorist financing. The full text of the reports on Cyprus can be downloaded from Moneyval Committe's web-site at the following address: www.coe.int/moneyval.