Cyprus: EU AML Framework Developments On UBO Registers And Early Structuring Considerations

Last Updated: 1 March 2019
Article by Vassos Paraskevas

A. Background Information on AML framework and developments

Currently the EU is placing significant attention to AML/CFT in light of the increasing numbers of terrorist attacks as well as the continuous revelations of the failure of the banking system to properly implement the AML laws and regulations and prevent money laundering. The ECB is heavily criticized for failing its supervisory role and penalties imposed on banking institutions have increased from millions to hundreds of millions and the notion of a single supervisory mechanism is promoted.

At the moment all member states should have transposed the 4th EU AML directive (AMLD4) into their national law. Cyprus has completed the transposition on the 3rd of April 2018.

Following AMLD4, a new Directive has been adopted and published, the 5th EU AML Directive (AMLD5), whose provisions should be implemented by January 2020.

From a Cyprus perspective the current law in force is, as of the 3rd of April 2018, "the (consolidated) Prevention and Suppression of Money Laundering and Terrorist Financing (Amending) Law of 2018" (the AMLD4 Transposition Law) which is the transposition of AMLD4 into the national AML/CFT legal framework.

The most significant amendments to the Law vs. AMLD3 as well as the main changes to be expected from the implementation of AMLD5 are outlined in this memo along with some early structuring considerations.

B. Most significant changes from AMLD4 Transposition Law

The most significant changes introduced by the AMLD4 Transposition Law are the following:

  • Definition of "beneficial owner" (BO): The percentage of ownership/control was increased from 10%+1 share to 25%+1 share.

Beneficial Ownership Registry for Companies

  • Beneficial Ownership Information: The Law provides for the maintenance of a central register of UBOs of companies that will hold adequate, accurate and current information on their beneficial ownership. The register will be accessible to:
  1. Without any restriction:
    1. The Competent Supervisory Authorities
    2. MOKAS
    3. Tax Authorities
    4. The Law Enforcement
  1. Within the framework of customer due diligence:
    1. Obliged entities (ASPs, Banks, etc)
  1. Persons or organisations that can demonstrate legitimate interest.
  • The particular provisions of the operation of the registry as well as the procedures for verifying legitimate interest will be determined in relevant Regulations which are being drafted.

Beneficial Ownership Registry for Trusts

  • Information held by the trustee of an express trust: The Law provides for the maintenance of a central register of beneficial owners of trusts which generate tax consequences in Cyprus.
  • The Trusts register must hold adequate, accurate and current information on their beneficial ownership, including the identity of:
    • the trustee,
    • the settlor,
    • the protector,
    • the beneficiaries or class of beneficiaries and
    • any other natural person exercising effective control over the trust.
  • Access, within the framework of their responsibilities, will be held by:
    • The Competent Supervisory Authorities
    • The FIU/ MOKAS
    • The Tax Authorities
    • The Law Enforcement
    • Obliged entities will also have access to the UBOs in the framework of customer due diligence.

The specific provisions for the creation and operation of the Trusts register will be determined in relevant Regulations which are being drafted.

C. Main changes from AMLD5 implementation by 20/1/2020

The AMLD5 entered into force on 9/7/2018 modifying AMLD4 released in 2015. AMLD5 was proposed in July 2016 as part of the Action Plan against terrorism announced in February 2016, after the attacks in Paris and Brussels, and as a reaction to the Panama Papers published in April 2016. The plan to implement the changes by January 2017 resulted overambitious; a final compromise text was reached only in December 2017.

EU Member states are obliged to transpose the modified regulations into national law latest by 20/1/2020.

The main changes introduced by AMLD5 are the following:

  • extends the scope to virtual currency platforms, e-wallet providers, and traders of art.
  • grants access to the general public to UBO registers of EU based companies.
  • makes it an obligation to consult the UBO registers when performing AML due diligence.
  • obliges member states to create a list of national public offices and functions that qualify as politically exposed (PEP).
  • introduces strict enhanced DD measures for financial flows from high-risk third countries.
  • ends the anonymity of bank and savings accounts, as well as safe deposit boxes and creates central access mechanisms to bank account and safe deposit boxes holder information throughout the EU.
  • makes information on real estate holders centrally available to public authorities.
  • lowers thresholds for identifying purchasers of prepaid cards and for the use of e-money.
  • further enhances the powers of the FIUs and facilitates cooperation and information exchange among authorities.

Changes relating to UBO registries

  • For companies the Registers of beneficial ownership information created under the AMLD4 will be made accessible to the general public.
  • The need to demonstrate a legitimate interest for access will be eliminated except for trusts and similar legal arrangements. In that case access to beneficial ownership information will be granted to any natural or legal person that can demonstrate a legitimate interest as well as to any person filing a request in relation to a trust or similar legal arrangement which holds or controls any corporate or other legal entity.
  • Member states must implement mechanisms to ensure that information in those registers is accurate and up to date and apply effective sanctions in cases of breach.
  • Obliged entities will have to notify the authorities of discrepancies found while conducting customer due diligence (KYC) between the UBO registers and the UBO information they hold. 
  • The EU Commission has been tasked to ensure the interconnection of the many registers at EU level by 10 March 2021.

D. Early planning considerations

The Regulations relating to the creation of the UBO Registers for Cyprus Companies and Trusts under the AMLD4 Transposition Law, are still being drafted whereas the transposition of AMLD5 into local legislation is expected to take place close to the deadline of 20/1/2020. It is our view though that those who are looking to limit public access to the beneficial ownership of their structures should consider, following a relevant tax and legal review, the establishment of a trust as the ultimate holding vehicle of their assets.

Fiduserve can assist in putting in place structures which give due consideration to international tax provisions and conditions, and personal as well as family circumstances, and provide the necessary support and resources to successfully maintain it in a compliant manner.

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 Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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