In February 2020, the Council of Europe's MONEYVAL Committee published its fifth Round Mutual Evaluation Report on the prevention of money laundering and the financing of terrorism in Cyprus and the country's compliance with the recommendations of the Financial Action Task Force (FATF). The report was highly anticipated by both the national authorities and prospective investors worldwide.
The 280-page report concluded that Cyprus had achieved significant progress in five key areas. However, MONEYVAL also noted nine other areas where the national authorities need to step up their efforts.
The report praised Cyprus for the following five positive developments:
- The Cypriot authorities are aware of the money laundering and terrorist financing risks their country faces. They have adopted measures accordingly, which should effectively mitigate some of the major risks to a great extent.
- There is good cooperation and coordination between the competent local authorities. That is evident at the policy and operational level alike.
- The continued supervision of the Central Bank of Cyprus and the introduction of efficient supervisory instruments have helped make the banking sector better at mitigating risks.
- The report found that the country's national financial intelligence unit is capable of effectively supporting the competent authorities by providing expert analysis and dissemination of information.
- Cyprus has set in place mechanisms capable of providing both formal and informal assistance to other countries.
Further to the above, the MONEYVAL report identified some areas for further improvement:
- Although Cyprus has been instrumental in assisting other countries, the authorities should be proactive at confiscating foreign criminal proceeds.
- Also, Cyprus' blooming company incorporation and administration industry requires a formal assessment of risks posed by legal persons to follow.
- Finally, given Cyprus's recent status as an international financial centre, administrative service providers need to step up and embrace their role as gatekeepers of the country's economy, adopting a uniform approach toward the risks of TFS evasion.
While there is definitely room for improvement in effectively combating money laundering and the financing of terrorism in Cyprus, MONEYVAL's report is optimistic about the future of the country as an investment fund jurisdiction.
There is substantial and measurable progress in five key aspects, which bodes well for current and prospective investors alike. As long as the national authorities stick to their commitment to improving Cyprus's risk assessment and mitigation systems, the future looks good for the local investment climate.
Savva & Associates aims to work with clients to ensure their Cyprus, international and personal structures are established and administered to the highest level of international standards. Our highly experienced and qualified team will ensure the correct structuring of your companies and provide comprehensive advice in all VAT and tax matters.
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