US State Department: Cyprus’s remarkable improvement on AML practices

According to a recent report published by the US State Department’s Anti-Money Laundering (AML) unit, Cyprus continues to upgrade its established AML legal framework, while authorities convicted 26 persons for money laundering offences in 2018.

The report notes that: “As a regional financial and corporate services centre, Cyprus has a significant number of nonresident businesses. However, the total number of companies has declined from 272,157 in 2013 to 216,239 at the end of 2018 as ROC (Registrar of Companies) authorities have stepped up enforcement with registration rules, including the annual submission of accounting reports.”

The report also notes, that even though the seizing of operations of old companies contributed to the decline, more than 10,000 new companies have been registered every year since 2013. According to the report: “By law, all companies registered in Cyprus must disclose their ultimate beneficial owners to authorities.”

In 2018, Cyprus awarded a multi-year, exclusive casino license to Hong Kong-based Melco International and ever since, Melco is building a multi-million euro casino resort expected to open in 2021.

The US State Department’s Anti-Money Laundering (AML) Unit expressed their concerns in the laundering methodologies and vulnerabilities, especially in the gaming sector and in the citizenship by investment plan.

Regarding the gaming sector, Cyprus authorities are just beginning to develop the capacity to supervise casino-based activity. They have established a gaming authority who is working with international gaming consultants to conduct due diligence on clients, to train staff, and to establish mechanisms to report illicit activity.

According to the report, and in regards to the citizenship by investment plan, another emerging concern is the rise of virtual banking and use of virtual currency: “The ROC’s citizenship-by-investment (CBI) program allows foreign investors to apply for Cyprus (and thus EU) citizenship after investing more than $2.2 million in business, infrastructure, or development, subject to several conditions,” it said.

“This program generated significant investment in the Republic, some $7.3 billion from 2013 to the end of 2018. Prior to 2018, eligibility requirements were not stringent and due diligence checks were lax,” it added.

But following pressure from the EU and United States, Cyprus and the Registrar of Companies (ROC) tightened eligibility criteria and oversight in 2018 and 2019.