CySEC Warns Regulated Entities of Lapses Against AML Regulations

The Cyprus Securities and Exchange Commission (CySEC​) has issued a circular to warn regulated entities of the common and recurring weaknesses and deficiencies it found in its annual assessment of all the Compliance Officers' Annual Reports and Internal Audit Reports submitted to CySEC in 2020. The assessment reviewed and evaluated regulated entities' compliance with the requirements set out in CySEC's Directive for the Prevention of Money Laundering and Terrorist Financing.

CySEC has found the following common and recurring weaknesses and deficiencies, to which regulated entities should apply corrective measures immediately:

Weaknesses and deficiencies in relation to the content of the Compliance Officers' Annual Reports on the prevention of money laundering and terrorist financing and the relevant Board of Directors (BoD) minutes submitted by CIFs, ASPs, Internally Managed Investment Funds and External Investment Fund Managers, include:

· On some occasions, there was not sufficient analysis of the specific method/way of conduct of the inspections and reviews performed by the Compliance Officer to determine the degree of compliance of the Regulated Entity in the policy, practices, measures, procedures and controls applied for the prevention of ML/TF.

· In a number of cases, the Compliance Officers did not make sufficient reference to information on the policy, measures, practices, procedures and controls applied in relation to high risk customers.  

· The information provided in the Compliance Officers' Annual Reports about the systems and procedures applied by the Regulated Entities for the ongoing monitoring of customers' accounts and transactions that are compared with the data and information kept in their economic profile, was not always adequate.

· In relation to the content of the relevant BoD minutes accompanying the Compliance Officers' Annual Reports, the said minutes did not always include specific measures decided for the correction of all the weaknesses and/or deficiencies identified in the said Reports and the implementation timeframe of these measures.

· The Compliance Officers' Annual Reports submitted by a number of Internally Managed Investment Funds and External Investment Fund Manager did not always include comparative data with the previous year of Internal Suspicion Reports and Compliance Officer's Reports to MOKAS.

· The Compliance Officers' Annual Reports submitted by a number of Internally Managed Investment Funds and External Investment Fund Managers stated that due to the fact that they were not operational during the assessed period, no information was provided in the said reports. However, it should be reminded that "the CySEC expects that the reports, even if they relate to a period during which the Regulated Entities were not operational, will contain the minimum required information requested by the CySEC and/or the European Regulation."

The Cypriot watchdog warned that regulated entities must note that the most common and recurring weaknesses and deficiencies identified will be the subject of subsequent compliance checks by CySEC.

CySEC expects that all regulated entities take into account the above-mentioned findings when preparing the Reports for the year 2021 and onwards, in order to ensure full compliance with the Prevention and Suppression of Money Laundering and Terrorist Financing Law and the CySEC's Directive for the Prevention of Money Laundering and Terrorist Financing.