Cyprus finally implements 5th AML Directive
On 18 February, the Cypriot Parliament approved the Prevention and Suppression of Money Laundering (Amendment) Law 2021 (theAML Amendment) bringing the Cypriot AML regime into line with its EU obligations by implementing the requirements of the EU’s Fifth Money Laundering Directive 2018/843 (5AMLD). Cyprus was legally obliged by the EU to have implemented 5AMLD by the directive’s deadline of 10 January 2020, so the transposition has been well overdue.
Predictably, the AML Amendment amends the core tenet of AML legislation in Cyprus, ie the Prevention and Suppression of Money Laundering and Terrorist Financing Law 2007 (the AML Law). The AML Amendment Law was published in the Official Gazette of the Republic on 23 February and are now fully in force, subject to certain grandfathering provisions which we outline below.
In line with expectations, the Amendments closely adhere to the contents of the 5AMLD, without any material "super-equivalent" provisions.
Recap of key changes
Public UBO registers: The most important change in the AML Amendment is the further implementation of beneficial ownership disclosure requirements on "undertakings" based in Cyprus. The requirements cover legal entities (ie companies – but not partnerships), non-governmental societies, associations and clubs (NGOs) and trusts in line with the requirements laid out in the 5AMLD. This AML Amendment builds on earlier preparatory works from 2018 onwards relating to UBO Registers in the form of other changes to the AML Law which implemented the EU’s earlier Fourth Money Laundering Directive 2015/849 (4AMLD).
On the face of it there are now three publicly available UBO registers in Cyprus:
- the Companies Register (section 61A) – the competent authority being the Registrar of Companies and Official Receiver (the Registrar of Companies);
- the NGOs Register (section 61B) – the competent authority being the Commissioner under the Foundations and Associations Law 2017 (NGOLaw) ; and
- the Trusts Register (section 61C) – the competent authority being the Cyprus Securities and Exchange Commission (CySEC).
Access to beneficial ownership information
In line with 5AMLD, information on the three Registers above will be accessible to the public via the relevant competent authorities. The Registers are admittedly in their infancy, with most information on the running and operation of them being issued by the Registrar of Companies on 12 March 2021. Regarding the Companies register, the starting date for information to be collected and uploaded on to the register was set at 22 February 2021 following an initial delay (the Starting Date). From the Starting Date companies have a period of six (6) months to submit the relevant information into the competent authority.
Government agencies can access the Public UBO registers without any restrictions, "obliged entities" (ie financial institutions and certain professions) may also access the public UBO register to conduct due diligence. Lastly, and arguably most controversially, members of the general public now have access to the register regarding the name, date of birth, nationality and country of residence of the UBO. In exceptional cases, access may be wholly or partly restricted for obliged entities and members of the general public where it can be demonstrated that it would be detrimental to the UBO. The legislation contains a definition of “beneficial ownership interest” in line with 4AMLD and 5AMLD and disclosure is made only where such ownership interest exceeds 25 per cent, 25 per cent plus one share (or equivalent). In line with ruels on FATCA/CRS, the legislation expressly acknowledges that a company or undertaking may have no UBO and in such cases other persons such as senior managing officials may be designated as the de-facto UBO through their controlling interests.
The Trusts Register is operated by CySEC, as it has been for some time, and will only be accessible by general public where a "legitimate interest" can be demonstrated by the requesting party. The precise procedure under which this will be effected is still to be addressed in CySEC guidance, expected to be published shortly.
Obliged entities: The notion of "obliged entities", those institutions required to conduct KYC and other similar measures, has been expanded, to include, crypto assets service providers’, tax advisers, art dealers and warehouses providing storage services for works of art. Further, persons trading in goods and providing services to the extent that any transaction in cash in the amount of EUR10,000 or more is effected, including real estate agents when acting as intermediaries in real estate rentals, are also now caught.
Crypto asset service providers are now regulated under the AML Law in Cyprus, which provides for the registration of such service providers in a relevant register which is to be kept by the CySEC. Additional provisions as relevant to registration requirements and applicable criteria are to be addressed in CySEC guidance, expected to be published at a later stage.
Additional developments concern the introduction of new provisions and (non-public) registers relevant to crypto asset service providers and an e-Registry of Bank Accounts, Payment Accounts and Safety Boxes. Enhanced provisions on politically exposed persons (PEPs), electronic money payments, and on cooperation between supervisory authorities are also included.
The AML Amendment (in Greek) can be found here.