Cyprus makes ‘some progress’ in fighting money-laundering

Cyprus has made some progress in combatting money laundering and the financing of terrorism but has not fully complied to the new financial action task force (FATF) requirements, the Council of Europe’s anti-money laundering body said on Thursday.

According to a follow-up report published by the Council of Europe’s committee of experts on money laundering and terrorist financing (Moneyval), Cyprus has made some progress in improving its level of compliance with Financial Action Task Force (FATF) standards on combatting money laundering and the financing of terrorism.

However, the Cypriot authorities took some of the measures improving the level of compliance too late to be assessed by Moneyval in its follow up procedure, whilst other shortcomings have still to be addressed.

In its 2019 initial mutual evaluation report, Moneyval concluded that Cyprus complied or largely complied with 37 of the 40 FATF recommendations.

The monitoring body asked the Cypriot authorities to report back under its enhanced follow-up procedure on progress to address the remaining shortcomings for the three FATF recommendations in which Cyprus had been assessed as “partially compliant”.

The follow-up report examines a range of legislative, regulatory and institutional measures taken by the Cypriot authorities concerning risk assessment and monitoring of its non-profit sector and assessment by correspondent banks of respondent relationships. It also evaluates the powers available to investigative authorities to intercept communications and apply controlled delivery techniques to cash and bearer negotiable instruments.

The follow-up report also assesses the implementation of new international requirements for virtual asset service providers established in a revised FATF Recommendation.

Cyprus’ rating on the implementation of this revised recommendation has been downgraded from “largely compliant” to “partially compliant”.

The authorities have taken several measures to implement these new FATF requirements, including the publication in December 2021 of an assessment of money laundering and terrorist financing risks presented by virtual assets and the related services providers.

However, these measures were taken too late to be assessed in the follow-up report, Moneyval said.

As a result, Cyprus is “compliant” with 16 of the forty FATF Recommendations, “largely compliant” with 20 recommendations and “partially compliant” with four recommendations (non-profit organisations, correspondent banking, new technologies, and powers of law enforcement and investigative authorities).

Cyprus has no “non-compliant” ratings.

The follow-up report examines formal changes to Cyprus’ legislative, regulatory and institutional framework but does not assess the degree to which these reforms have been effectively implemented in practice.

Cyprus is expected to report back to Moneyval on further progress in implementing the pending recommendations in one year.

The Council of Europe’s anti-money laundering body expects that countries will have addressed most, if not all, shortcomings by the end of the third year from the adoption of their mutual evaluation report.

Late last year, the finance ministry said the system applied by the Republic of Cyprus in the fight against money laundering and terrorist financing has been repeatedly praised by the Moneyval Committee of the Council of Europe, following negative publicity surrounding the naming of the president in the Pandora Papers.

The leaked documents suggested the president was involved in setting shell companies abroad for personal enrichment.

President Nicos Anastasiades strongly rejected these suggestions that implicated the law firm bearing his name and another law practice.