US urges tighter oversight of Cypriot service providers to combat financial crime

Cypriot accountants and lawyers are under pressure from U.S. authorities to align with banking standards in combating financial crime. While U.S. officials have praised Cypriot banks for their robust policies and progress in this area, concerns linger over administrative service providers.

According to Dorita Ioannou's article published in Kathimerini Cyprus in Greek, in recent meetings between U.S. and Cypriot officials, it was acknowledged that Cypriot banks are performing well in fighting financial crime and money laundering. The meetings, part of a delegation visit by the Association of Banks of Cyprus to Washington, highlighted the strength of Cyprus' banking sector in adhering to international standards. Marios Skandalis, head of compliance at Bank of Cyprus, noted that for the first time, the U.S. approach was not critical. In fact, officials acknowledged Cyprus' banks as leaders among European institutions in financial crime prevention.

However, U.S. authorities stressed the need for broader adherence across the financial services sector, particularly among companies offering specialized services such as corporate management, accounting, and legal support. The establishment of an independent supervisory authority, set to begin operations in 2025, was emphasized as key to ensuring these sectors follow strict anti-financial crime measures. This new body, endorsed by the Cypriot government and approved by the Cabinet earlier this year, will oversee administrative service providers, with joint audits conducted by the Cyprus Securities and Exchange Commission, the Bar Association, and the Institute of Certified Public Accountants of Cyprus (ICPAC).

Despite these advancements, some resistance has been noted, particularly from legal professionals who fear the country may become exposed under the new framework. Meanwhile, ICPAC has expressed support for the new supervisory authority.

The U.S. also urged Cyprus to enhance the framework for sanction enforcement, recommending that the new authority be empowered to issue sanctions independently, including those from non-EU countries like the U.S. and the UK. Skandalis underscored the importance of moving from words to actions, warning that Cyprus risks losing credibility if these reforms are not implemented.

In parallel, a new bill titled “The Implementing Agreement Between the Government of the Republic of Cyprus and the Government of the United States on Strengthening Cooperation in the Prevention and Fight Against Serious Crime” has been submitted to Cyprus’ parliament. The bill, expected to be debated on October 8, 2024, solidifies the cooperation between the two nations in combating serious crime. It is likely to pass with support from major political parties, though some opposition may come from the left-wing AKEL party.

If passed, the bill will reinforce efforts to tackle financial crime and improve Cyprus' standing as a trusted international financial hub.