Cyprus Implements the 5th Anti-Money Laundering Directive

Introduction

On the 18 February 2021, the House of Representatives enacted the 5AMLD into law (the “New Law”). With the enactment of the 5AMLD, Cyprus has complied with the provisions and changes imposed by the EU Directive 2018/843.

The new law was published in the Official Government Gazette on the 23 February 2021 and is now fully effective.

The 5 Key Elements of the New Law

1.Ultimate Beneficial Ownership Registries (“UBO Registries”)

The New Law imposes greater transparency on the financial sector regarding beneficial ownership with a focus on the beneficial ownership of trusts.

The New Law establishes two Registers: The Companies Register held by the Registrar of Companies (“RoC”) and the Trusts and Similar Arrangements Register, held by the Cyprus Securities and Exchange Commission (“CySec”).

The aim of these UBO Registries is to grant access to the public, competent authorities and other persons proving legitimate interest (under certain conditions to be laid down by internal regulations of each the RoC and CySec) on the information that is disclosable, the maintenance and operation of these.

a. Companies Register

This Register will be open to the general public and all relevant information regarding ultimate beneficial owners (“UBOs”) as prescribed the New Law will be available.

Specifically, the public will have access to the name, surname, date of birth, nationality, ID or passport number, residential address, the date of acquisition of the asset and registered in the Register, the date of when a UBO ceased to be an owner, the nature and extent of the ownership of shares held, either directly or indirectly by each UBO.

b.Trusts & Other Similar Legal Arrangements Register

This Register will not be open to the general public but to the competent regulatory authorities and persons who can prove a legitimate interest by applying to CySec, justifying why he / she should be granted access and by submitting evidentiary documentation to this end.

c. Other Legal Bodies

Information regarding other bodies such as clubs, foundations, federations, associations and unions will be held under a registry kept by the General Commissioner. This will be open to the general public and the relevant information set out in the New Law will be accessible.

2.Extending the Scope

The 5AMLD extends AML/CFT obligations to new assets being managed such as:

Virtual Currencies: increasing the scrutiny on virtual currencies and extending the scope of AML/CTF controls in the 4MLD to virtual currency providers, to notably prevent anonymity. Anonymous safe deposit boxes will also no longer be allowed.
Art Traders: When dealing with high-value artwork that results in a transaction of €10,000 or more, art traders will have to report suspicious activity and perform checks on customers when necessary.

3.Politically Exposed Persons (“PEPs”) Clarification

The Member States must issue a list of specific functions which qualify as “prominent public functions” to make sure individuals who are potential PEPs are identified for monitoring. The EU will then consolidate the lists from the Member States and publish the results keeping the individual’s identities anonymous.

4.Enhanced Due Diligence for High-Risk Third Countries

The EU currently maintains a list of High-Risk third countries, and when doing business with clients within these countries, parties are required to undertake enhanced due diligence measures. One of the new updates that the 5AMLD brings, is that any client that is based in a High-Risk country is now subject to compulsory enhanced due diligence measures, of which the ‘relevant person’ must undertake. These include obtaining information on the source of funds, background checks and beneficial ownership to name just a few. Member States may also prevent firms from opening branches or subsidiaries in high-risk third countries and prevent the opening of a branch or subsidiary of a firm based in a high-risk third country.

This change aims to harmonise the rules concerning high-risk jurisdictions across the Member States. The EU hopes to ensure greater coordination and encouragement of firms to limit relationships with these countries.

5.Prepaid Cards -Electronic Money Payments

The threshold for prepaid instruments (e-money & prepaid cards) subject to due diligence has been lowered from €250 to €150.

The exemption from customer identification and identity verification no longer applies if the redemption or cash withdrawal of the monetary value of the electronic money exceeds EUR 50 or in the case of remote (online) payment transactions. The threshold was €100 and reduced to €50.

Andersen in Cyprus