Cyprus: National Risk Assessment Of Money Laundering and Terrorist Financing Risks

Last Updated: 25 January 2019
Article by Dimitris Papoutsis

The Ministry of Finance has announced the outcome of the first National Risk Assessment of Money Laundering and Terrorist Financing Risks (NRA), which was undertaken by the Cyprus authorities to identify, assess and understand the country's money laundering and terrorist financing threats and vulnerabilities, in compliance with the recommendations of the Financial Action Task Force and the Fourth EU Money Laundering Directive, which has been transposed into domestic legislation.

The Advisory Authority against Money Laundering and Terrorist Financing, which was established to advise the Council of Ministers in this field and which includes representatives of the national anti-money laundering supervisory authorities, the national Financial Intelligence Unit (MOKAS), relevant government departments and the private sector, decided to conduct Cyprus's first NRA in 2015. The project, which was jointly managed by the Central Bank of Cyprus and MOKAS, began in July 2015 and was completed at the end of 2017, utilising the World Bank methodology and its technical assistance. In November 2018, the Council of Ministers decided to publish a concise version of the NRA report, for reasons of transparency, and to inform all stakeholders of the findings of the NRA. More detailed and targeted briefing of the relevant stakeholders is planned to take place in due course.

The NRA identified systemic risk mitigation factors, including:

Improvements to the anti-money legislation to strengthen the powers of MOKAS and the competent supervisory authorities in line with the latest FATF Recommendations and EU legislation.

Recent strengthening of the resources and procedures of the competent supervisory authorities, including adoption of a risk-based approach to supervision and investment in technology and personnel.

A comprehensive legal system including laws enabling the freezing and confiscation of assets.

Close cooperation and coordination between the relevant authorities and law enforcement agencies.

Tax transparency and effective exchange of information with tax authorities overseas, as evidenced by the evaluation by the Global Forum on Transparency and Exchange of Information for Tax Purposes, and the availability of independent audit.

Access to beneficial ownership information and bank account data.

The study also identified areas requiring additional measures to reduce risks, and proposed actions to address these, including:

Issuing directives to banks on specific topics such as reliance on third parties and on risks emanating from abroad.

Increased rigour in the administrative services sector, including stronger internal control requirements for obliged entities and more frequent monitoring by the supervisory authorities.

Capacity-building and training of investigators, prosecutors and the judiciary to improve the effectiveness of prosecuting money laundering and terrorist financing offences and confiscating the proceeds.

Further enhancement of the resources of the competent supervisory authorities and MOKAS.

Development of data collection and statistics procedures so that threats and vulnerabilities are correctly identified, to facilitate more effective monitoring and resource allocation.

Provision of specialised training to reporting entities on issues such as terrorist financing.

Implementation of these actions started at the beginning of 2018 and is being monitored and followed up by MOKAS. According to the announcement, the government, MOKAS and the competent supervisory authorities are committed to taking all necessary steps to minimise threats and risks to the financial system in connection with money laundering and terrorist financing.

The concise version of the NRA report can be viewed via this link.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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