News Local Moody's credits Cyprus positive on new anti-laundering practices

Moody’s credits Cyprus positive on new anti-laundering practices

Moody’s rating agency says that Cyprus Central Bank’s (CBC) new directive on shell companies is credit positive for Cypriot banks, because the specific definitions of shell companies will help eliminate suspicious transactions and further strengthen banks’ anti-money-laundering (AML) practices.

In its Credit Outlook published on Monday the agency quotes CBC head of banking supervision Yiangos Demetriou who on 5 November said that a new Central Bank of Cyprus circular that formally and narrowly defines what constitutes a shell company “…is more clear with specific directions regarding what banks should be doing” with respect to shell companies.

“The implementation of the circular, which was initially sent to the banks for consultation in June 2018, eliminates room for interpretation from individual banks regarding what constitutes a shell company, and establishes uniform practices across the Cypriot banking system”, says Moody’s.

It also points out that the circular defines a shell company as an entity that has no physical presence other than a mailing address, no established economic activity in the country of incorporation, or has little to no independent economic value. Not defined as shell companies are holding companies of entities engaged in legitimate businesses and that have identifiable ultimate beneficial owners.

According to Moody’s Cyprus’ framework and the banking system’s AML practices have been strengthening through the years following greater scrutiny from international and domestic financial authorities. As part of the country`s bailout programme, the Moneyval Committee of the European Commission and Deloitte Italy in 2013 conducted an assessment to establish Cypriot banks’ compliance with the legislative and regulatory framework for customer due diligence. Although these assessments did not have major findings, the authorities took certain actions to strengthen AML practices. The Moneyval Committee plans to conduct another assessment next year.

It is added that Cypriot banks continue to be scrutinized in the international press, mainly because of their international banking business centers, which cater to offshore entities registered in Cyprus for tax reasons. Given the low corporate tax rate of 12.5% and Cyprus’ double-tax    treaties with more than 60 countries, offshore entities benefit from lower taxes when they channel their investments to any of these 60 countries via Cyprus. Cyprus is one of the largest foreign direct investors in Russia, mainly because of these offshore companies.

Although reduced, says Moody’s, a large chunk of Cypriot banks’ funding continues to come from the transactional deposits of these offshore companies, which elevates funding risks for the banks given these deposits` short-term nature.

(Cyprus News Agency)

Top Stories

China trades sanctions with U.S. in row over Uighur Muslims

China announced "corresponding sanctions" against the United States on Monday after Washington penalised senior Chinese officials over the treatment of minority Uighur Muslims in...

Bahrain top court upholds death sentences against two activists

Bahrain's highest court upheld death sentences against two activists for bombing a convoy and killing a police officer, after convictions that human rights groups...

Cyprus has lowest projected old-age dependency ratio in EU-report

Under the baseline scenario of the latest population projections issued by Eurostat, the EU’s population will continue to grow older. This can be illustrated by the old-age dependency ratio,...

Cypriot Foreign Minister participates in crucial EU Foreign Affairs Council

Cyprus’ Minister of Foreign Affairs Nikos Christodoulides will be in Brussels on Monday to participate in the EU Foreign Affairs Council, which for the...

Koupes (cracked wheat pies) with mushrooms

Ingredients: For the dough: 1½ cup bulgur wheat 2 cups water 1 tsp. salt For the filling: 250gr. mushrooms, finely chopped ½ cup of olive oil 2 big onions, coarsely chopped 1...

Taste

Koupes (cracked wheat pies) with mushrooms

Ingredients: For the dough: 1½ cup bulgur wheat 2 cups water 1 tsp. salt For the filling: 250gr. mushrooms, finely chopped ½ cup of olive oil 2 big onions, coarsely chopped 1...

Fried zucchini balls with halloumi

Ingredients: 6 medium zucchinis (approximately 1kg) 1 small onion, grated 1 large halloumi (about 250gr.), grated ½ cup simple flour 2 tsps. fine lemon zest 2 big eggs 1 tbsp. fresh...

Rocket salad

Ingredients: 4 cups rocket leaves, rinsed and dried 1 cup cherry tomatoes 1 cup pomegranate seeds 1 red bell pepper ½ cup croutons 2-3 light cheese slices (grated) salt ½ of a...

Kolokasi (Taro Root)

Ingredients: (Serves 4) 1 kg kolokasi (taro) root ½ kg pork (lean belly pork or shoulder) cut into large cubes 6 tbsp olive oil 1 head of fresh celery,...