Companies are waiting three to four months, and even more to open bank accounts in Cyprus, entrepreneurs and professional service firms told the Cyprus Mail in a series of interviews.
Banks are not the only ones to blame, however, as some financial sources say that the Cyprus Central Bank guidance has not been sufficient to enable evaluation of potential account holders. Other bankers say that it’s extremely difficult for them to apply the vastly increased amount of compliance regulations.
“Nonetheless, there is a definite need for improvement, as clients are giving up and going elsewhere because they can’t arrange their finances here,” comments Chris Boreham, group head of Business Development at the Nicosia-based Highworth. “It is possible that with more staff in the compliance departments, or more training for them, the situation would improve.”
“We have lost a significant number of clients due to the long wait for accounts,” agrees the head of a business setup firm in Limassol. “We have also lost a large number of clients because banks here are closing down accounts without any sufficient reason – asserting compliance issues without specifying which are not being observed.”
“There is a real sense that banks need direction, and they are not getting it from the central bank,” she concludes.
The danger to the Cyprus economy, at this critical time, is significant. New businesses, both from local and foreign sources, are badly needed to create new jobs and earn revenue.
Bankers cite the enormous and growing complexity of regulations, and that is fair. “If you have a company with branches in several countries, consider how many compliance issues must be checked before we can issue an account,” a local banker told the Cyprus Mail. “Sanctions alone are in place from authorities here, in Brussels, in the US, and more. Determining whether an activity is real commerce, or illicit takes time.”
The banker also points out that Cyprus is being judged for its ability to assure good corporate governance. “So we take our time, and we are very conservative,” the banker insists.
Would further guidance from the central bank help?
A spokesperson for the bank told the Cyprus Mail it would not: “Kindly note that customer onboarding from the compliance point of view is governed by the Prevention and Suppression of Money Laundering and Terrorist Financing Law which, inter-alia, transposes the requirements of the relevant European Directives. The Central Bank of Cyprus has issued a directive to banks for the purpose of aiding adherence to the provisions of the law. Legal and regulatory provisions are clear and require institutions to assess risks before accepting a new customer and also during the development of the business relationship with the customer, using a number of factors. Each institution’s reasoned risk assessment is key to the effective adherence to the legal and regulatory provisions.”
Professional associations in Cyprus are currently weighing the best way to overcome this impasse. We will be following their actions in the near future.