EU warns Cyprus over failure on anti-money laundering directive

The European Commission has opened infringement proceedings against Cyprus for the latter’s failure to correctly transpose the 5th Anti-Money Laundering Directive.

The letter of formal notice to Cyprus is part of the European Commission’s July package of infringement decisions.

According to a press release, whereas Cyprus had notified a complete transposition of the AML directive, the European Commission “has identified several instances of incorrect transposition, mainly related to the functioning of the national beneficial ownership register (the register that indicates who actually owns what).

“For instance, Cyprus suspended the application of sanctions in case incorrect information is included, has not communicated any enforcement measures that guarantee the completeness of the register and has not set up yet a beneficial ownership register on companies.”

Brussels noted that anti-money laundering rules are instrumental in the fight against money laundering and terrorism financing.

“Legislative gaps occurring in one member state have an impact on the EU as a whole. In addition, as regards sanctions imposed by the EU following Russia’s invasion of Ukraine, it is imperative that the beneficial owners of sanctioned firms are identified,” read the press release.

“It is of utmost importance that EU rules are implemented and supervised efficiently in order to combat crime, protect our financial system and ensure EU sanctions enforcement. Without a satisfactory response from Cyprus within two months, the Commission may decide to send a reasoned opinion.”

Reasoned opinions are the last step before the Commission could decide to refer a member state to the Court of Justice of the EU over an infringement of EU law or over the incomplete transposition of EU law.

Back in April, the United States and the United Kingdom included a handful of Cypriot nationals and Cyprus-registered companies on a list of ‘enablers’ helping Russian oligarchs skirt sanctions.

The two countries included Cypriot lawyers, businessmen and companies on a list targeting a “sanctions evasion network” supporting Russian billionaires Alisher Usmanov and Roman Abramovich in 20 countries.

The news sent Nicosia scrambling to shore up a tattered reputation, offering assurances that the country was now firmly on the straight and narrow in the wake of the dubious citizenship-for-investment scheme that generated billions by handing Cypriot passports to hundreds of wealthy Russians and others.