Cyprus: Knowing Your Rights As A Victim Of Financial Crime

Up until the last decade or so, the financial industry has been more or less self-regulated. This lack of transparency led to a global wave of financial crimes – often leaving behind a trail of victims in its wake.

Financial crimes come in many different forms and include classic pump-and-dump schemes, market manipulations and fraudulent practices or even stealing and blackmailing, tax fraud, cyber-hacking in relation to crypto-currency trading, including inducing people to invest in financial products that are unsuitable given their trading history and other factors.  A few examples of recent large-scale financial crimes include the:

  1. Royal Bank of Scotland LIBOR-manipulation scandal in which the bank was fined £208m by the US Commodity Futures Trading Commission for hundreds of attempts to manipulate the rates in the United States, the European Union and Asia-Pacific regions (and succeeding on a number of occasions),
  2. Madoff Ponzi scheme in the U.S. which left Bernard Madoff and many of his victims bankrupt, and
  3. recently-decided case against Deutsche Boerse AG which was fined $12 billion in an insider trading case.

As evidenced by these few examples above, financial crimes have the potential to impact (and often do impact) investors on a global scale.

Unfortunately, there are instances in which victims of financial crimes may not even be aware that they are victims- often being led to believe that they were at fault for "investing unwisely".  Although there is a thriving investment environment in Cyprus, there have been some instances in which forex companies have been accused of making unsuitable investment suggestions to inexperienced investors which include for example, making highly risky trades (such as trading on margin), and making false and misleading representations as a necessary condition for the activation of trading accounts. There have even been instances in which banks made wrongful recommendations to inexperienced investors which lead to investment losses.  In such cases, these entities have been sued in the courts of Cyprus which are well-equipped to adjudicate complex financial fraud matters.

While it is true that investing is inherently risky, financial industry experts should abide by financial regulations. Victims of financial crimes should know that there are regulations that protect them from such crimes.

Latest E.U. Initiatives for Tackling Financial Crime:

All victims of financial crimes can sue either in court or through arbitration. Although each case differs, it is possible to recover losses stemming from financial crimes either in part or in whole.  Knowing what your rights are and what cause of action to bring in which forum is half the battle.

The Council of the European Union has published legislation (and continues to do so) regarding the financial crime of money laundering. On June19, 2018, the EU adopted the 5th EU Anti-Money Laundering Directive (5AMLD) establishing jail sentences and sanctions for money launderers and terror financiers. 5AMLD addresses inter alia the potential risks associated with the latest financial products such as virtual currency and the associated virtual currency exchange service providers and electronic wallet providers. It also provides more transparency by giving the public greater access to beneficial ownership information. All EU Member-States are required to implement 5AMLD into their national legislation by January 10, 2020.

On November 12, 2018, the directive 2018/1673 on combating money laundering by criminal law, a.k.a. the 6th Anti-Money Laundering Directive (6AMLD), has taken 5AMLD a step further by (i) harmonising the definition of money laundering and the predicate offences, (ii) imposing minimum sanctions and (iii) extending criminal liability to legal persons. The 6AMLD entered into force on December 2, 2018 and it has to be transposed by Member States into their national legislation by December 3, 2022, evidences the EU's determination to create greater transparency in the financial industry and protect the public from financial crimes.

Aside from such legislation, each EU Member-State has its own national legislation to help combat financial crimes and assist victims in recovering their losses. For example, in Cyprus, under Section 32 of Court of Justice Law (14/60), victims may obtain from the courts interim orders such as freezing orders and prohibitory injunctions aiming at blocking funds or assets held by the wrongdoers not only in Cyprus but at an international level (known as the Mareva Injunctions under common law) or discovery orders and Norwich Pharmacal orders issued against third parties (i.e. banks) for the discovery of information or documents to assist fraud victims in tracing their assets and identifying wrongdoers.

The U.S. Securities Legislation:

The U.S.'s legislation is similar to the E.U. legislation and equally imposes criminal and/or civil penalties for financial crimes committed. The U.S. legislation which addresses financial crimes and imposes criminal/civil penalties include (but is not limited to) the Securities Exchange Act of 1934, the Securities Act of 1933, the Securities and Exchange Commission (SEC) Rules 10b-5 and 14a-9, sections 4b, 6(c), and 6c of the Commodity Exchange Act (7 U.S.C. §§ 6b, 9, 13a-1) and the Commodity Futures Trading Commission (CFTC) Rule 180.1 (17 C.F.R. § 180.1).

The U.S. Department of Justice and the U.S. Securities Exchange Commission typically look into financial crimes cases and the Financial Industry Regulatory Authority serves the arbitral tribunal for financial disputes.  Interestingly, there are circumstances under which victims of financial fraud with a U.S. component may seek relief and compensation under the U.S. laws even if the victims are not U.S. citizens or residents.

Obtaining Justice in Courts & Arbitral Tribunals:

Being armed with knowledge of which laws may aid in the recovery of lost capital, victims of financial crimes can sue in the courts of the jurisdiction in which there is a nexus between the jurisdiction and either themselves or the crime/tort committed. Alternatively, one may also resort to arbitration which typically leads to a faster resolution. Depending on the relationship between the victim and the entity that allegedly committed the financial fraud, arbitration may be imposed by contract. In the U.S., for example, investments made with broker-dealers usually have contracts which impose arbitral hearings at the Financial Industry Regulatory Authority (FINRA) for dispute settlement. Given the options available, it is important to consult an experienced financial lawyer for the most cost-effective way to recover your losses.

Conclusion:

Harmonized financial-crime legislation will help in protecting the public on an individual level and help prevent systemic risk. Whilst it may be difficult to completely eradicate the occurrence of financial crimes, the implementation of legislation with harsh penalties for violators allows victims to seek justice in courts and tribunals. Therefore, global legislation on financial crimes only serves to strengthen the integrity of the financial system.

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.

Authors
 
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”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions