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National Risk Assessment of Money Laundering and Terrorist Financing Risks, Cyprus

National Risk Assessment of Money Laundering and Terrorist Financing Risks, Cyprus 

The first National Risk Assessment of Money Laundering and Terrorist Financing Risks (NRA) carried out, falls within the actions undertaken by the Cypriot authorities in order to identify, assess and understand the country’s money laundering and terrorist financing threats and vulnerabilities. This was also in compliance with the relevant Recommendations of the Financial Action Task Force, as well as the provisions of the 4th EU AML/CFT Directive, which have been transposed into domestic legislation.

The Advisory Authority against Money Laundering and Terrorist Financing, which is the advisory body to the Council of Ministers in this field, comprising of the competent supervisory authorities, the Financial Intelligence Unit - FIU, the relevant Government Ministries/Departments and the private sector, decided to conduct Cyprus’ first NRA in 2015. The project, was managed by the Central Bank of Cyprus and the FIU. It commenced in July 2015 and was completed at the end of 2017, utilising the World Bank methodology and its technical assistance. The project involved public bodies as well as stakeholders from the private sector. On 13th November 2018, the Council of Ministers decided for the publication of a concise version of the NRA Report, for reasons of transparency, as well as for informing all stakeholders on the findings of this work. More detailed and targeted briefing of the relevant stakeholders will take place in due course by the Advisory Authority and the supervisory authorities.

The NRA identified some risk mitigation factors of the system such as the following:

  • Risk reducing measures which have been adopted between the years 2012-2017 such as i) enhancement of the AML/CFT legislation with respect to the powers of the FIU and the competent supervisory authorities, according to the updated FATF Recommendations and the EU legislation ii) enhancement of the preventive measures and capacity of the competent supervisory authorities against money laundering and terrorist financing, which included the implementation of a risk based approach to supervision and the investment in IT tools and human resources.
  • Comprehensive legal system including Asset Recovery Laws (freezing and confiscation).
  • Close cooperation and coordination of the authorities, and law enforcement agencies through bilateral and multilateral relationships as well as through the Advisory Authority.
  • Tax transparency and effective exchange of information with counterpart tax authorities, as evidenced by the evaluation by the Global Forum on Transparency and Exchange of Information for Tax Purposes, as well as the availability of independent audit.
  • Availability and access to beneficial ownership information and bank account data. 

Some of the areas where more risk/threat reducing measures were deemed as warranted based on the NRA analysis are mentioned below. Relevant specific risk mitigating actions have been drawn up by the Cypriot authorities on the basis of the findings of the assessment, aiming at strengthening the risk mitigating factors of the system. Implementation of these actions commenced at the beginning of 2018 and are being followed up, by the Advisory Authority.

Such actions include the following:

  • Issuance of directives to banks on specific topics with a view to strengthening the preventive measures against money laundering and terrorist financing such as reliance on third parties and on risks emanating from abroad.
  • Enhancement of the preventive measures in the administrative services sector, with the upgrading of the internal controls of the obliged entities as well as the frequency of the assessments by the supervisory authorities.
  • Augmentation of the structure, training and capacity of investigators, prosecutors and judiciary, in order to enhance the effectiveness of prosecuting money laundering and terrorist financing offences and confiscating their illegal proceeds.
  • Further enhancement of the resources of the competent supervisory authorities and the FIU.
  • Development of data collection and statistics procedures so that threats and vulnerabilities are correctly identified, to enable closer monitoring and resource allocation.
  • Provision of specialised training to reporting entities such as on terrorist financing.

The Government, the competent supervisory authorities and the FIU, remain committed to taking all the necessary measures for minimising money laundering threats and risks to Cyprus’ system. The NRA provides a very comprehensive and useful tool in assisting all involved, in enhancing the effectiveness of measures taken.

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