Various key Cypriot competent authorities issued, in November 2018, advisories relating to the reimposition of certain US sanctions on Iran and pronouncements by FinCEN as well as a recap on the current state-of-play in the EU on doing business in Iran, including reminders on the so-called EU-Blocking Regulation.
The Institute of Certified Public Accountants of Cyprus (ICPAC), the Cyprus Securities and Exchange Commission (CySEC) and the Ministry of Foreign Affairs (MoFA) have all issued advisories noting the publication of official guidance issued by United States (US) authorities, specifically the Financial Crimes Enforcement Network (FinCEN), in respect of re-imposition of US sanctions against Iranian individuals, companies and enterprises on 5 November 2018.
The advisories issued by ICPAC, CySEC and MoFA (the Cypriot competent authorities or CCA) urge regulated and obliged entities such as accountancy firms and financial services providers to consider the contents of the FinCEN advisory relating to Iran, in light of the risks of money laundering and the financing of terrorism that the international financial system could potentially be faced with due to malign activity in Iran.
On the face of it, and as relevant to non-US institutions, the FinCEN advisory aims to “help foreign financial institutions better understand the obligations of their US correspondents, avoid exposure to US sanctions, and address the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) risks that Iranian activity poses to the international financial system”. A copy of the FinCEN advisory is here.
In turn the CCA advisories urge members, in summary, to:
- ensure that all necessary due diligence policies and procedures are in place and the appropriate actions are being taken;
- observe any sanctions-related lists published by various organisations and other agencies such as the United Nations and the European Union (EU), as well as updates by the Financial Action Task Force relating to high-risk countries;
- regularly perform background checks regarding Iranian clients and keep the information under periodic review; and
- remain alert to any publications of sanctions relating to high-risk individuals.
EU Blocking Regulation
Of course, Cyprus is not under US jurisdiction and is instead a full Member State of the EU. It therefore implements the entire body of EU law on sanctions and restrictive measures, US sanctions law is of practical – but not legal – relevance.
As relevant to the reintroduction of US sanctions on Iran, and the consequent exit of the US from the Joint Comprehensive Plan of Action (JCPOA), the EU amended its so-called Blocking Regulation in an attempt to nullify the new US sanctions and preserve the tenets of the JCPOA. As such the EU Blocking Regulation operates to forbid EU persons from complying with extra-territorial US sanctions against Iran.
The CCAs have acknowledged in their advisories and elsewhere that while US and other international developments on sanctions and AML matters must of course be taken into account by institutions, so too must the requirements of EU law, including those under the EU Blocking Regulation.
Food for thought
The CCA advisories acts as a reminder of the importance of US sanctions (and their potential extra-territorial reach) as well as new pronouncements of the US authorities on financial crime emanating from Iran. At the same time they bear witness, in the case of commentaries on the EU Blocking Regulation, to the divergence – indeed conflict – between the treatment of the two blocs as regards the Obama-era JCPOA.
It is clearly of paramount importance that firms offering services to clients who are connected with or operating in Iran and other jurisdictions which are subject to sanctions, establish robust compliance policies and procedures in order to mitigate any significant risks which firms and their staff may be otherwise exposed to.
Harneys has significant experience in advising and assisting firms in Cyprus and elsewhere with establishing suitable compliance infrastructure for the operational needs of businesses. If you require assistance please contact Aki Corsoni-Husain, Marina Stavrou, Andrea Moundi Savvides or your usual Harneys contact.
ICPAC’s circular 19/2018 dated 7 November 2018 can be found here.
CySEC’s circular C284 dated 5 November 2018 can be found here.
MoFAs circular has not been made public to date.
 Commission Delegated Regulation (EU) 2018/1100 of 7 August 2018, which expands the scope of Regulation (EC) No 2271/96 to block the perceived extraterritorial effects of US-Iran sanctions. This Regulations operates alongside Commission Implementing Regulation (EU) 2018/1101 which enables EU persons to seek authorisation to comply with US sanctions in certain circumstances and guidance notes which aim to clarify certain aspects of the revised EU-Iran sanctions regime.