The chairwoman of the Cyprus Securities and Exchange Commission Demetra Kalogerou said that her agency will utilise the new powers given it from the transposition of European directives into law, which include stricter anti money laundering rules, to clamp down on supervised financial offenders.
“Those who seek to break the law, they have no place in Cyprus,” she told delegates at the annual conference of the Association of Cyprus International Investment Firms on Friday in Limassol. “Our message is clear: we accept nothing short of full compliance”.
CySEC, as her agency is widely known, which supervises 574 financial service providers and corporations, including 216 Cyprus-based investment firms, 164 administrative service providers, the Cyprus Stock Exchange and the listed companies, plus alternative investment funds and fund managers, imposed in the past two years fines totalling €3.5m, the largest amount of fines it has ever imposed, suspended the authorisation of 16 firms, while three others had their licence revoked, Kalogerou said. In one out of three cases where CySEC fined companies, it also fined executives “for the first time” and slapped them with a five-year professional ban.
Increased activity in the financial sector, which helped Cyprus’s economy return to growth earlier than anticipated, is reflected in the increase of the number of clients of supervised companies, which increased from 1.1m in 2014 to 1.7m last year. In addition, their number of employees rose to 4,891 last year from 4,544 the year before.
CySEC’s risk-based supervision approach has identified that most deficits are in the conduct of supervised firms when dealing with customers, and to a lesser degree other areas such as capital adequacy, implementation of anti-money laundering rules, or governance, Kalogerou said.
Cyprus already introduced, earlier this year, the market abuse law, which allows fines of up to €5m on individuals and €15m on legal entities, includes clauses for the protection of whistleblowers and the supervision of multilateral trading facilities and organised trading facilities for market abuse purposes, she said. In addition to administrative sanctions, offenders may also face criminal sanctions.
The new anti-money laundering legislation, based on the European Union’s fourth AML directive, which aims at providing increased transparency and more instruments to supervisors and law enforcement agencies is based on a “risk-based approach” which includes identification of risks and the implementation of preventive measures.
Under the fourth AML directive, which also applies to gambling service providers, member states will have to establish national registers of beneficial owners of corporate and other legal entities and express trusts, which should be unrestrictedly accessible to financial intelligence units and “obliged entities,” she said.
“The persons trading in goods that make or receive payments in cash in an amount of €10,000 or more are under the scope of the fourth AML directive,” she said.
The Limassol-based financial consultant George Markides, also a keynote speaker at the event, said that reduction of the cash limit from a current €15,000 to €10,000, will affect sellers of high-value goods such as antique dealers, car traders or jewellers who will not be able to accept cash without carrying out due diligence. In addition, financial firms accepting funds that are the product of a “tax crime” would be engaging in money laundering, he added.
Cyprus, which has to transpose the fourth AML directive by July, is also preparing to for the introduction of the new Markets in Financial Instruments Directive II (MiFID II) which comes in response to changes in the financial environment and the introduction of new technologies, limiting over-the-counter transactions, she said. The new directive, which is scheduled to be transposed to law by January 2018, introduces a “new trading venue category for non-equity financial instruments,” such as derivatives and bonds.
Regulators will receive under MiFID II new monitoring and intervention powers, including prohibiting the marketing, distribution, and sale of financial instruments which cause concerns related to consumer protection, such as derivatives on foreign exchange or binaries, Kalogerou said.