The Cyprus Securities and Exchange Commission ('CySEC') has revised its earlier circular on the effect of recent amendments to article 62 of the Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007, which sets out requirements regarding verification of the identity of clients and beneficial owners.
Entities falling within the scope of the law are required to carry out customer identification procedures before establishing a business relationship. Article 62 provides that verification of identity should also normally have taken place before a business relationship is established. However, an exception has been introduced for cases that fall under the supervision of CySEC allowing the verification of the identity of the customer and the beneficial owner to be completed during the establishment of a business relationship if this is necessary in order to avoid interrupting the normal conduct of business and where there is little risk of money laundering or terrorist financing occurring, subject to the proviso that these procedures should be completed as soon as practicable after the initial contact.
The latest guidance, in CySEC circular 157, issued on 31 August 2016, makes it clear that this exception does not apply to Administrative Service Providers (ASPs), which are obliged to comply with article 62 at all times. In those exceptional cases where an ASP intends to rely on article 62(2A) for the completion of the verification of client or beneficial owner information, the ASP is under a strict obligation to fully justify its actions and to document its reasons for concluding that the verification of the information prior to the establishment of the business relationship would disrupt the normal conduct of its business, and why the risk of money laundering or terrorist financing is low.
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