National Risk Assessment of Money Laundering and Terrorist Financing Risks in Cyprus

The Advisory Authority against Money Laundering and Terrorist Financing (theAdvisory Authority) has reported on the first National Risk Assessment (NRA) of Money Laundering and Terrorist Financing Risks which has effectively been carried out in Cyprus as required under the provisions of the Fourth Anti Money Laundering Directive (4AMLD).

The Advisory Authority issued its report on Cyprus’ first NRA on 13 November 2018. The NRA was headed by the Central Bank of Cyprus (CBC) and the Financial Intelligence Unit (FIU), and was carried out and effectively completed as of the end of 2017. The NRA conducted by the Cypriot authorities was carried out in compliance with the provisions of the 4AMLD and the Recommendations of the Financial Action Task Force (FATF), the key findings of which have been published in a NRA Report (the Report). A copy of the report can be found here.

The Report examines the level of risk in respect of various aspects of the system and identifies certain measures adopted between the years 2012 to 2017 which are considered to be risk mitigating, such as:

• compliance with FATF Recommendations in respect of an enhanced Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) legislation with regards to the powers of the FIU and other regulators;
• comprehensive criminalisation of Money Laundering (ML) as an offence within the Republic and adequate asset recovery laws in place;
• effective functioning of the FIU and adequate capacity to deal with ML intelligence analysis, including dealing with significant numbers of suspicious transaction reports and close cooperation with other supervisory authorities and law enforcement agencies; and
• access to beneficial ownership information and bank account data.

The Report further outlines a number of risk mitigating factors which are currently in the process of being implemented, as of the beginning of 2018. Responsible for overseeing such implementation is the Advisory Authority which consists of the competent supervisory authorities, the FIU, relevant government Ministries or Departments and the private sector, all of which form the advisory body to the Council of Ministers of the Republic.

Such risk mitigating actions include:

• reinforcement of training of investigators, prosecutors and judiciary in respect of ML and terrorist financing offences, as well as confiscation proceedings;
• upgrade of internal controls in the administrative services sector and enhancement of frequency of assessments by the supervisory authorities;
• issuance of directives to banks specifically dealing with preventive measures against ML and terrorist financing; and
• augmentation of the resources of competent supervisory authorities and the FIU.

The NRA serves as a functional guide for regulated entities and supervisory authorities involved in enhancing measures minimising ML risks to the Republic. AML and CTF legislation appears to be of more relevance than ever before for professionals of various backgrounds, as well as government bodies and supervisory authorities.

Harneys advises many of the world’s top institutions on AML and CFT legislation in the jurisdictions we cover, including Cyprus. It is now of paramount importance that firms operating in jurisdictions subject to such legislation be in the forefront of change and establish robust compliance policies in order to mitigate the significant risks which firms and their staff may be otherwise exposed to.