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Moneyval: Cyprus has made improvements but moderate shortcomings still remain

25/11/2022 11:19

Cyprus has made some progress in improving its level of compliance with Financial Action Task Force (FATF) standards on combatting money laundering and the financing of terrorism, but moderate shortcomings remain, Council of Europe’s Committee of Experts on Money Laundering and Terrorist Financing (MONEYVAL) has said.

Moveyval, which issued on Friday its second enhanced follow-up report (FUR), said the Cypriot authorities took further measures aimed at improving the level of compliance with the FATF Recommendations concerning non-profit organisations, virtual asset services providers (VASPs) and powers of investigative and law enforcement authorities, however, moderate shortcomings still remain.

The report said that overall, whilst Cyprus has made some progress in addressing the technical compliance deficiencies identified in its mutual evaluation report (MER) and first enhanced FUR, it has not been re-rated on any of the FATF Recommendations for which it has a partially compliance (PC) rating.

According to the report further steps have been taken to improve compliance with R.8, R.15 and R.31 since adoption of the first enhanced FUR, but some gaps remain.

As a result, Cyprus remains “compliant” with 16 of the 40 FATF Recommendations, “largely compliant” with 20 Recommendations and “partially compliant” with four Recommendations namely non-profit organisations, correspondent banking, new technologies, and powers of law enforcement and investigative authorities.

Cyprus has no “non-compliant” ratings, Moneyval said.

“Cyprus is encouraged to continue its efforts to address the remaining deficiencies,” the report added.

The second follow-up report examined a range of legislative, regulatory and institutional measures taken by the Cypriot authorities concerning risk assessment and monitoring of its non-profit sector, the powers available to investigative authorities to intercept communications and apply controlled delivery techniques to cash and bearer negotiable instruments, as well as virtual assets related services and supervision thereof. 

The authorities have taken several measures to assess terrorism financing (TF) risk exposure by the non-profit sector and strengthen its oversight activities, “however, these measures have not yet been fully implemented.”

Moneyval also noted that substantive progress has been made by Cyprus in the implementation of its VASP regime, however, among other things, that there is no national action plan to address risks identified in the VASP sector and some technical deficiencies remain in implementation of preventive measures, including the so called “travel rule.”

In addition, moderate shortcomings remain relating to the absence of powers to intercept the content of communication concerning the investigation of money laundering (ML), TF and some other associated predicate offences.

According to Moneyval, the interception of content of communications covers only some ML predicate offences, namely murder or manslaughter, human trafficking, drug dealing, some corruption offences and offences related to counterfeiting currency.

“Nevertheless, the scope is limited as court orders allowing for the actual interception of the content of communication do not extend to the investigation of ML, TF and other predicate offences not mentioned above, such as, for example, sexual exploitation, including of children, participation in an organised criminal group, fraud, theft, arms trafficking, corruption offences that are punishable for less than five years of imprisonment and tax crimes, among others,” Moneyval added. 

In line with MONEYVAL procedures, the follow-up report examines formal changes to Cyprus’ legislative, regulatory and institutional framework but does not assess the degree to which these reforms have been effectively implemented in practice.