Moneyval praises Cyprus progress on AML, crypto regulation

3 mins read

“Vote of confidence” says CySEC

Cyprus has improved its measures for tackling money laundering and combating financing of terrorism, according to the latest Moneyval report, with the Securities and Exchange Commission saying this is a ‘vote of confidence’ in financial regulation, especially for cryptos.

The report found Cyprus to have improved its compliance with the Financial Action Task Force’s Recommendation 15 (new technologies). It also noted progress towards improving its level of compliance with Recommendation 8 (non-profit organisations).

CySEC welcomed the publication of the 3rd Enhanced Follow-up Report for the assessment of Cyprus’ technical compliance to counter money laundering and the financing of terrorism (AML/CFT).

“Moneyval’s upgrade is a clear vote of confidence in the effectiveness of financial regulation in Cyprus, particularly in relation to Crypto-Asset Services Providers,” said CySEC Chairman George Theocharides.

In its report, the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval), said that since November 2022, “Cyprus has improved the virtual asset service providers regime with only a few minor deficiencies remaining.

“In addition, several measures to assess terrorism financing risk exposure by the non-profit sector and strengthen oversight activities have been taken, although these have not yet been fully implemented.

“Whilst Recommendation 8 remains ‘partly compliant’, the country has been re-rated on Recommendation 15 from ‘partially compliant’ to ‘largely compliant’.”

Moneyval is a monitoring body of the Council of Europe entrusted with the task of assessing compliance with the principal international standards to counter money laundering, the financing of terrorism and the financing of proliferation of weapons of mass destruction, as well as the effectiveness of their implementation.

The report concluded that overall, Cyprus “has made progress in addressing most of the technical compliance shortcomings” identified in its 2019 Mutual Evaluation Report. Out of the 40 Recommendations, Cyprus currently has 16 recommendations rated compliant, 21 recommendations rated largely compliant, and 3 recommendations rated partially compliant.

Next report in May 2025

The task force added that, “Cyprus has reached the general expectation of having remedied most of the technical compliance deficiencies at the end of its third year of follow up. It is expected to report back by May 2025 to Moneyval on further progress made towards strengthening its anti-money laundering and combating financing of terrorism system.”

“CySEC put in place significant measures to assess and reduce risks in the field of crypto-assets and improve the level of compliance among providers,” explained Dr Theocharides.

“We continue to work with other authorities in Cyprus towards ensuring full compliance with the Financial Action Task Force Recommendation 15, reaffirming the Republic of Cyprus’s commitment to stepping up the effort against money laundering and terrorist financing. CySEC is also implementing the National Action Plan, based on recommendations arising from the National Risk Assessment to further strengthen Cyprus’s ML/CTF regime.”

In an announcement, CySEC said the Moneyval report demonstrates the progress the Republic of Cyprus has made in terms of technical compliance with the FATF Recommendations and especially in relation to Recommendation 15 (new technologies).

“The upgrade of the assessment for Recommendation 15, reflects the significant progress made and measures adopted by CySEC and the other authorities to prevent and suppress money laundering and terrorist financing in the field of crypto-assets.

FATF Recommendation 15 concerns the international standards based on which states must apply AML/CFT measures concerning new technologies and mainly in relation to Crypto-Asset Services Providers (the CASPs).

Clear progress

Moneyval states that Cyprus has made clear progress towards improving the key deficiencies in Recommendation 15, particularly by undertaking and adopting a National Action Plan (based on the National Risk Assessment with respect to Virtual Assets and Virtual Asset Service Providers) to address the risks of ML and TF, in relation to crypto-assets and CASPs, as well as the issuance by CySEC of a guidance on matters relating to the prevention and suppression of terrorist financing in the context of crypto-asset activities.

As a result of the upgrade, Cyprus has now achieved ‘compliance’ or ‘large compliance’ on 37 out of the 40 FATF Recommendations, CySEC said.

In particular, the report examined a series of legislative, regulatory and other measures in relation to CASPs. Both CySEC and other Cypriot authorities have taken further measures and actions, with the aim of improving the level of compliance of the sub-criteria of Recommendation 15. Among others, CySEC has taken measures to assess and reduce risks in the field of CASPs, using crypto-asset data analysis tools ‘blockchain analytical tools’ at the initial stage of applications for CASPs seeking registration, as well as at the stage of examining subsequent substantial changes and the supervision of CASPs.

The publication of Report follows the Parliament’s approval of Law 98(I)/2023, which amends the Prevention and Suppression of Money Laundering Activities Law of 2007 (L. 188(I)/2007), to bring the AML/CFT Law in alignment with the recommendations of the Moneyval Committee and FATF standards.

In addition, for this purpose, a relevant amendment was made to the CySEC Directive on the CASPs Register. These legislative changes are expected to be taken into account during the next evaluation of Recommendation 15.