Published by Georgia Papa Manager
On 18 of February 2021, the Republic of Cyprus implemented the 5th AML Directive into national law (the “New Law”), a much-anticipated amendment to the Prevention and Suppression of Money Laundering and Terrorist Financing Law (the “AML Law”) and the aim of the New Law is to make the necessary adaptations to ensure the adequate implementation of the 5th AML Directive and that Cyprus is in compliance with FATF standards.
The key amendments brought forward by the New Law are the following:
1. The New Law extends the definition of “Obliged Entities”
(a) Εlectronic custodian wallet providers and providers engaged in exchange services between virtual currencies , cryptocurrencies and fiat currencies are now included in the group of obliged entities along with any other person whose supervision is assigned to the Cyprus Securities and Exchange Commission ( “CySec”). The New Law also provides that service providers of cryptoassets must now be registered with CySec.
(b) Apart from auditors, accountants and tax advisors now any person shall be regarded as an obliged entity under the New Law when it undertakes to provide – directly or by means of other persons to which that person is related – material aid, assistance or advice on tax matters as principal business or professional activity.
(c) The art trade sector (e.g., art traders, art mediators, art galleries or auction houses) is explicitly covered by the New Law, in case the value of a transaction or a series of related transactions amounts to EUR 10,000 and also persons that own or operate warehouses providing storage services for works of art if the value of the transaction or a series of linked transactions are now considered to be covered by the New Law.
(d) The New Law expands the definition of obliged entities to include real estate agents in the context of leasing real estate, with the restriction that the respective mediated transaction amounts to a monthly rent of EUR 10,000 or more.
2. Establishment of Beneficial Owners Registers
The New Law provides for the establishment of the following beneficial owners registers:
The Companies’ Register
(a) A beneficial ownership register is established under the New Law for all companies established under the laws of Cyprus which shall be maintained by the Registrar of Companies and Official Receiver and information relating to the beneficial owners of such companies will be stored on the Companies’ Register and the relevant supervisory authorities ( as defined in section 59 of the AML Law) , the Anti-Money Laundering Unit of Cyprus ( MOKAS) , the Customs’ and Excise Department , the Police and the Tax Authorities shall have immediate access to all available information included in the Register.
The Companies’ Register will be open to the public, but the public will have access only to the name of the beneficial owner, the month and year of birth, to the nationality and the country of residence of the beneficial owner as well as to the type and extent of rights of the beneficial owner in the Cyprus company.
The Registrar of Companies and Official Receiver will issue a Directive as to the establishment, characteristics and operation of the Companies’ Register as well as to the procedure for accessing the information available on the Companies’ Register.
In exceptional cases, which shall be clarified in the Directive to be issued by the Registrar of Companies and Official Receiver , access to the information available on the Companies’ Registry may be restricted in cases where access to such information would expose the beneficial owner to the danger of becoming a victim of fraud, kidnapping, extortion, blackmailing, harassment, violence or coercion or in cases where the beneficial owner is a minor or lucks legal capacity.
The Companies’ Register will be interconnected through the European central platform (Business Registers Interconnection System - BRIS), established by the directive relating to certain aspects of company law (EU Directive 2017/1132) of June 14, 2017.
Other Legal Entities Register
(b) The New Law also provides for the establishment of a Register for Other Legal Entities such as, clubs, foundations, federations and unions where information on the beneficial owners of such legal entities will be kept and the General Commissioner will be responsible for the operation of the Register.
Again , the same authorities as for the Companies’ Register will have unlimited access to the Register whereas the general public will have access only to the name of the beneficial owner, the month and year of birth, to the nationality and the country of residence of the beneficial owner as well as to the type and extent of rights of the beneficial owner in the legal entity, if applicable except , where it would be disproportionate to the safety of the beneficial owner to reveal such information .
This Register will also be interconnected through BRIS and the General Commissioner will issue a Directive as to the details of its operation and procedures to be followed for gaining access to the information available on the Register.
Express Trust Register
(c) The New Law also provides that an Express Trust Register is also created where information on the Settlor, the Trustees, the Protector, the Beneficiaries ( or class of beneficiaries) or on any other person exercising control over the Express Trust will be held.
CySec will be responsible for maintaining the Express Trust Register and will issue a Directive as to the operation of the Register as well as to what constitutes an Express Trust.
Express Trusts where the Trustee is residing in Cyprus or where the Trustee is residing outside of EU but is transacting or acquiring immovable property on behalf of the Express Trust in Cyprus should be registered with the Express Trust Register. An exemption from registration will apply in certain cases where the Express Trust may be registered in another Member State.
The information on the Express Trust Register will not be available to the general public but only to persons that have a legitimate interest which of course will need to be linked to anti-money laundering. CySec will issue more details as to what may constitute a legitimate interest in its relevant Directive and how the information available on the Register may be accessed.
The Register will also be interconnected through BRIS.
3. Electronic Register of Bank Accounts, Payment Accounts and Safe Boxes
The New Law provides for the creation of a central electronic registry which will allow the timely identification of any natural or legal person holding or controlling bank or savings accounts and safe deposit boxes. This information will be directly accessible by the Police and by MOKAS as well as by the Customs and Excise Department and by the Tax Authorities.
The Central Bank will be responsible for the creation of the Register and its operation.
4. Service Providers of Cryptoassets Register
Under the provisions of the New Law, a Register of Service Providers of Cryptoassets will be created and will be maintained by CySec. Registration will be obligatory for Service Providers of Cryptoassets who provide services or have activities in Cyprus irrespective of whether they are registered in another Member State for the services they provide and for Service Providers of Cryptoassets who provide services or have activities in Cyprus and are not registered with a corresponding register in another Member State.
CySec may decline or approve such an application for registration and will issue a Directive on the requirements for registering and the obligations of Service Providers of Cryptoassets.
5. Thresholds for Prepaid Cards and electronic money transactions
The New Law lowers the threshold for identifying holders of prepaid cards from 250 Euro to 150 Euro. The threshold for electronic money online transactions with prepaid cards is now lowered to a maximum of 50 Euro.
6. High-risk third countries
The EU has produce a list of high-risk third countries where obligated entities, in accordance with the New Law, will have to carry out Enhanced Due Diligence (EDD) when dealing with or transacting with the said high – risk third countries.
7. PEPs (Politically Exposed Persons)
Under the New Law, Cyprus will be required to outline a list of offices and functions that qualify as politically exposed (PEP) on the national level and including nationally registered international organizations; the EU will draft a corresponding list on EU level, consolidate the national lists from member states and publish the result.