According to a follow-up report released on Thursday by the Council of Europe Committee of Experts on Money, Cyprus has made some progress in improving compliance with the standards of the Financial Action Task Force (FATF) to Combat Money Laundering and Terrorist Financing (MONEYVAL).
According to a press release accompanying the report, the Cypriot authorities took some of the compliance improvements too late for MONEYVAL to assess them in a follow-up procedure, while other deficiencies have yet to be addressed.
It is worth recalling that in its 2019 Initial Mutual Evaluation Report (ERR), MONEYVAL concluded that Cyprus had implemented or substantially implemented 37 of the 40 FATF recommendations. MONEYVAL has asked the Cypriot authorities to report under the enhanced follow-up procedure on progress in addressing the remaining shortcomings of the three FATF Recommendations that rated Cyprus as “partially compliant”.
A follow-up report, published on Wednesday, two years after the publication of the IAR, examines a range of legislative, regulatory and institutional measures taken by the Cypriot authorities in relation to risk assessment and monitoring of its non-profit sector, as well as assessment by correspondent banks of the response. It also assesses the powers of investigating authorities to intercept communications and apply controlled delivery methods to cash and bearer negotiable instruments. The follow-up report also assesses the implementation of the new international requirements for virtual asset service providers set out in the revised FATF Recommendation. Cyprus’ rating on the implementation of this revised recommendation has been downgraded from ‘mostly compliant’ to ‘partially compliant’.
The authorities have taken a number of steps to comply with these new FATF requirements, including the publication in December 2021 of an assessment of the money laundering and terrorist financing risks associated with virtual assets and related service providers. However, these measures were taken too late to be assessed in a subsequent report.
As a result, Cyprus is “compliant” with 16 of the forty FATF Recommendations, “substantially compliant” with 20 Recommendations, and “partially compliant” with four Recommendations (Non-Profit Institutions, Correspondent Banking, New Technologies and Law Enforcement and Investigative Powers).
Cyprus does not currently have a “not compliant” rating, the press release notes.
In accordance with MONEYVAL procedures, the subsequent report examines formal changes to the legal, regulatory and institutional framework in Cyprus, but does not assess the extent to which these reforms have been effective in practice.
Overall, MONEYVAL expects countries to address most, if not all, deficiencies by the end of the third year following the adoption of their CSRs. Accordingly, Cyprus is expected to report to MONEYVAL on further progress on the remaining recommendations within one year.