InsiderEconomyESMA wants more effective Cyprus supervision on suspicious transactions

ESMA wants more effective Cyprus supervision on suspicious transactions

A peer review report by the European Securities and Markets Authority (ESMA) on how national competent authorities handle suspicious transactions and order reports has found Cyprus, Norway and Romania as non-compliant in their supervision.

The recently-published report also finds Cyprus and Liechtenstein non-compliant in their response to poor-quality or suspected non-reporting of suspicious transactions and associated enforcement actions.

The island’s competent authority is the Cyprus Securities and Exchange Commission (CSEC) which has objected to the Report’s conclusions. In fact, the CSEC stressed that the Report had failed to take into consideration the market’s characteristics.

Nonetheless, the Report sees a significant increase in suspicious transaction and order reporting and finds that national supervisors can do more to ensure all financial participants play their part in combating market abuse.

2017 was the first full year of the application of the suspicious transactions and order reports framework.

The peer review observed some good engagement by national competent authorities, both reactive and proactive, with trading venues/investment firms operating market venues/regulated markets.

Key recommendations for full compliance concern formalising supervisory procedures and increased engagement, including on-site visits, making sure that trading venues report suspicious transactions and order reports.

Although in some cases the areas for improvement seem similar in a Broadly Compliant or Partially Compliant mark, the differences were based on the severity of the cases and the number of entities under supervision as well as their impact.

Nine national competent authorities were assessed as fully compliant, another 13 as broadly compliant and eight – including Cyprus – as partially compliant.

In its response, the CSEC also said that Cyprus has substantial online audits over transactions in the regulated market.

And that investment companies offer financial instruments that do not fall under the “Market Abuse Regulation” rules, even though this was the case last year.

At the same time, the CSEC added that during audits it had identified cases of non-reporting or low quality reporting of suspicious transactions, something that  ESMA did not include in the Report.

The CSEC underlined that it follows all cross-border reports with other national Authorities for the exchange of suspicious transactions as defined by European rules.

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