The Republic of Cyprus continues to upgrade its established anti-money laundering legal framework, according to the US State Department’s Anti-Money Laundering (AML) report released this week.
In fact, Cypriot authorities convicted 26 persons for money laundering offences in 2018, added the report which is interpreted as the most positive one up-to-date.
“As a regional financial and corporate services centre, Cyprus has a significant number of nonresident businesses,” it said.
“However, the total number of companies has declined from 272,157 in 2013 to 216,239 at the end of 2018 as ROC authorities have stepped up enforcement with registration rules, including the annual submission of accounting reports,” it added.
The report also noted that closures of old companies contributed to the decline as well, even though more than 10,000 new companies have been registered every year since 2013.
By law, all companies registered in Cyprus must disclose their ultimate beneficial owners to authorities, it said.
However, the report which also refers to the state of play in the breakaway Turkish-held northern part lists laundering methodologies and vulnerabilities – especially in the gaming sector and in the citizenship by investment plan.
Criminals have reportedly used ROC banks in the past to launder proceeds, particularly from Russian and Ukrainian illicit activity, it said.
The gaming sector may be vulnerable to abuse. In 2018, the government awarded a multi-year, exclusive casino license to Hong Kong-based Melco International, it added.
Melco is building a multi-million euro casino resort expected to open in 2021. Until then, Melco has been authorised to open five “pop up” casinos throughout the country.
Cyprus authorities are just beginning to develop the capacity to supervise casino-based activity, it also said. The authorities established a gaming authority and is working with international gaming consultants to conduct due diligence on clients, to train staff, and to establish mechanisms to report illicit activity.
Another emerging concern is the rise of virtual banking and use of virtual currency, it said.
“The ROC’s citizenship-by-investment (CBI) program allows foreign investors to apply for Cyprus (and thus EU) citizenship after investing more than $2.2 million in business, infrastructure, or development, subject to several conditions,” it said.
“This program generated significant investment in the Republic, some $7.3 billion from 2013 to the end of 2018. Prior to 2018, eligibility requirements were not stringent and due diligence checks were lax,” it added.
But following pressure from the EU and United States, Cyprus tightened eligibility criteria and oversight in 2018 and 2019.
On November 6, 2019, the ROC announced its intention to revoke the citizenship of 26 unnamed CBI beneficiaries.
“But it is not yet clear whether there is a clear legal path for revocation,” it said.