Cyprus: The Law Providing For The Imposition Of Restrictions On Transactions Under The Emergency Of 2013 ("The Capital Controls Law")

Last Updated: 8 April 2013

On 23 March 2013, The Cyprus Parliament Enacted A Law Empowering The Government To Impose Restrictions On Capital Movements On Individuals And Businesses Operating Accounts With Credit Institutions In Cyprus. These Restrictions May Be Activated By The Relevant Authorities Only "In Cases Of Emergency And Following Consultation With The Relevant European Authorities And The International Monetary Fund ("IMF").

The Restrictions That May Be Imposed Include Limits On Daily Cash Withdrawals, Restrictions On Accessing Cash In Fixed Savings Accounts (For Example By Imposing A Notice Period), Limits On Cashing Cheques And Restrictions On Movements Of Funds. The Minister Of Finance May Impose Such Restrictions For Any Time Period And For Any Sums As He Or She Considers Appropriate.

It Should Be Stressed That Any Restrictions Apply Only To Banking And Monetary Transactions Involving The Cyprus Banking System. They Do Not Affect Corporate Or Other Structures Which Do Not Use The Cyprus Banking System.

Credit Institution

The Term "Credit Institution" Is Widely Defined In Section 2 Of The Law To Include Any Bank Which Operates Under The Banking Operations Law, Any Co-Operative Society Which Operates Under The Co-Operative Societies Law And The Housing Finance Corporation Which Was Established On The Basis Of The Housing Finance Corporation Law. It Therefore Extends To Overseas Banks' Cyprus Operations.

Powers Of The Minister Of Finance

Section 4 Of The Law Empowers The Minister Of Finance To Impose Temporary Restrictive Measures, Including Restrictions On The Movement Of Capital, On Credit Institutions And Any Other Natural Or Legal Persons On The Recommendation Of The Governor Of The Central Bank Of Cyprus (The "Governor"). The Minister May Impose Restrictive Measures Over Credit Institutions Only With The Agreement Of The Governor Only When Restrictions Are Considered To Be Absolutely Necessary. Before Imposing Any Restrictions The Minister Must Consult The IMF, The European Commission, The European Central Bank, The European Banking Authority And The Relevant Regulatory Authorities Of The Home Country Of Any Overseas Credit Institution Concerned.

Scope Of Restrictions Or Prohibitions

Section 5(1) Of The Law Sets Out The Measures That The Minister May Impose, As Follows:

  • Restrictions On Cash Transactions
  • Prohibition Of The Premature Termination Of Maturing Fixed Deposits
  • Mandatory Renewal Of Maturing Fixed Deposits
  • Restrictions On Or Prohibition Of The Opening Of Bank Accounts
  • Conversion Of Funds Held In Current Accounts To Fixed Deposits; The Term "Current Account" Is Defined To Include Current Accounts And 1 Week Notice Accounts With Or Without Overdraft
  • Prohibition Or Limits On Non-Cash Transactions;
  • Restriction On Inter-Bank Transactions Or  Transactions Within The Same Banking Institution
  • Prohibition Of Or Limits On Cheque Encashment
  • Restrictions On The Use Of Credit Or Debit Or Pre-Paid Cards In Transactions With Banks
  • Restrictions On Transactions By The Public With Credit Institutions:
  • Restrictions On The Movement Of Capital, Payments And Transfers
  • Imposition Of Penalty On Deposit Withdrawals
  • Any Other Restrictive Measure As The Minister May Consider Appropriate Under The Circumstances For Ensuring Financial Stability.

Any Restrictive Measures Under Section 5(1) Of The Law May Be Imposed By An Order Of The Minister Published In The Official Gazette (Section 5(2)). The Entry Into Force Of The Restrictive Measures Is To Be Specified In The Ministerial Order (Section 6(1)). Restrictions Will Not Apply To The Republic Of Cyprus Or The Central Bank Of Cyprus Itself.

Foreign Branches Of Cyprus Banks Also Affected

Similar Restrictions May Be Imposed On Overseas Branches Of Cyprus Banks To The Extent That They Are Necessary To Protect The Financial Stability Of Credit Institutions Within The Republic Of Cyprus And On That Basis The Should Be Notified To The Relevant Authorities Of The Host Country In Which They Operate (Section 5(3)).

Restrictions Do Not Trigger Protection Under Any Depositor Or Investor Compensation Schemes

Section 5(4) Of The Law Provides That The Imposition Of Restrictions Under The Law Does Not Trigger The Provisions Of Any Compensation Scheme Such As The Depositor Protection Schemes For Customers Of Banks And Co-Operative Societies Or Schemes For The Protection Of Investors Or Clients Of Credit Institutions Or Of Cyprus Investment Firms, Pursuant To The Provisions Of Each Respective Law Applicable Within The Republic.

Restrictions Do Not Trigger Contractual Or Statutory Events Of Default Or Insolvency Provisions

Furthermore, The Imposition Of Any Restrictions Does Not Trigger Any Contractual Or Statutory Provision Which Would Otherwise Initiate Any Winding Up Or Insolvency Proceedings Or Any Event Of Default Or Any Other Equivalent Event Relating To Insolvency (Section 5(3)(D)).

Restrictions Do Not Invoke The Rights Of Secured Creditors In Respect Of The Assets Of The Affected Credit Institutions

Similarly The Imposition Of Any Restrictions Under The Law Does Not Trigger Any Rights Of Any Secured Creditors Of An Affected Credit Institution Or Foreign Branch In Respect Of Any Assets Or Rights Over Which Security Applies In Relation To Their Claims Against The Affected Credit Institution Including A Foreign Branch Of Such Institution (Section 5(3)(E)) Nor Does It Lead To Bankruptcy Or Liquidation Proceedings Or The Inclusion Of The Said Person To The Central Archive Of Information (Known As "ΚΑΠ").

Penalties And Administrative Fines

Contravention Of Any Restrictive Measure Applied Pursuant To The Law Is A Criminal Offence Punishable By A Fine Of Up To Twice The Value Of Any Transaction Which Was Realised In Contravention Of The Restrictive Measure, By Imprisonment For Up To Five Years Or Both (Section 7). If A Credit Institution Violates Any Restrictive Measure Imposed Pursuant To The Law, The Relevant Regulatory Authority May Impose An Administrative Fine Of Up To Twice The Value Of The Transaction, Or May Suspend Or Revoke The Licence Of The Credit Institution Or Both (Section 8(1)). Comparable Administrative Fines And Penalties Apply In Respect Of Any Board Members, The Chief Executive Officer Or Managers Or Employees Of The Credit Institution (Section 8(1)).

Supervisory Committee

The Law Provides For The Establishment By The Ministry Of Finance And The Central Bank Of Cyprus Of A Committee To Apply And Monitor The Application Of Any Restrictive Measures Imposed Under The Law. The Committee Will Have The Power To Exempt Certain Transactions From The Scope Of Restrictive Measures.

Conclusion

It Was Made Clear By The Parliament That The Purpose Of The Law Was To Give The Minister The Powers To Deal With Emergencies, And That The Powers Should Only Be Exercised In The Event Of An Emergency.

Measures Will Be Imposed Under The Law Only If This Is Unavoidable For The Purpose Of Ensuring The Stability Of The Cyprus Banking System, And Only For A Limited Time. Any Measures That Have To Be Imposed, Especially Those Affecting The International Business Sector, Will Be Lifted As Soon As Possible.

As Soon As Any Order Or Directive Is Issued We Will Publish A New Announcement On The Matter Together With A Commentary On How The Restrictions Affect The Operations Of Corporate Structures And Clients Who Currently Use Cyprus.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.