Cyprus Banking Sector More Effective in Anti-Money Laundering – Moneyval assessment

By Costas Christoforou, CEO of the CPM Group

The trustworthiness and credibility of the Cyprus banking and wider financial system can be a tremendous asset, which in turn plays a pivotal role supporting the island’s economic growth.

Along with the financial system’s integrity and for many other reasons, it is greatly satisfying and reassuring that MONEYVAL’s 2020 report shows progress made by the Cypriot authorities to fight money laundering.

MONEYVAL reports directly to the EU’s Council of Ministers and is responsible for auditing compliance measures taken by national authorities in combating money laundering and the financing of terrorism.

Much of the credit for the improvement in local compliance measures goes to the Central Bank of Cyprus (CBC). The banking authority’s improved and sound supervisory practices received approval in MONEYVAL’s latest report.

Compliance in the banking sector has also improved in line with the CBC, meaning that money-laundering risks are reduced. This translates into increased security for the overall system.  

A rise in trust and credibility likely means an increase in authentic investment in Cyprus, along with a possible increase in direct foreign investment and bank deposits. This is positive for the economy and financial system, which has more than enough expertise to rival global financial centres of its size and regulatory environment.

Additionally, Cypriot authorities have carried out a number of anti-terrorism financing investigations and are more aware of the risks, says MONEYVAL.

Some weaknesses remain, however. Improvement is needed in pursuing money laundering from criminal proceeds generated outside of Cyprus and this poses the highest threat to the financial system. Also, a formal assessment of risks posed by legal persons is still pending, and once this is effected and implemented, it would increase awareness and transparency about the threats in this sector.

The headway made so far does not mean that Cyprus can be complacent. On the contrary, it is time to redouble our efforts to foster a trustworthy financial and banking ecosystem.

It appears that more resources and specialised expertise is needed in order for the authorities to more effectively trace and seize assets belonging to terrorist groups. This would likely mean additional investment in the authorities’ infrastructure and capacity to investigate complex overseas cases.

MONEYVAL clearly calls on Cyprus to be more aggressive in pursuing anti-money laundering measures from criminal activities outside the island. Cyprus also needs to be more proactive in freezing and confiscating foreign proceeds of crime. Plus, MONEYVAL points to the need for more awareness of the threats of terrorist financing.

Overall, however, the risks in Cyprus’ banking and financial sector are more easily managed and transparent for bona fide companies and investors, meaning a significant rise in reputation and better future prospects for the island’s services sector and wider economy.