MONEYVAL: Cyprus has some money laundering shortcomings

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Cyprus made some progress in improving its compliance with Financial Action Task Force (FATF) standards on combatting money laundering and the financing of terrorism, but moderate shortcomings remain.

This is the conclusion of the Council of Europe’s Committee of Experts on Money Laundering and Terrorist Financing (MONEYVAL).

Moveyval issued its second enhanced follow-up report (FUR) on Friday, said Cypriot authorities took further measures to improve compliance with the FATF Recommendations concerning non-profit organisations, virtual asset services providers (VASPs) and powers of investigative and law enforcement authorities.

“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 partial compliance (PC) rating.”

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 second follow-up report examined a range of legislative, regulatory and institutional measures taken by 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, and virtual assets related services and supervision.

“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 Cyprus has made substantive progress in the implementation of its VASP regime, but there is no national action plan to address risks identified in the VASP sector and some technical deficiencies remain in the implementation of preventive measures, including the so-called “travel rule.”

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

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