Insider Economy New CBC Governor warns over delays in due diligence checks on foreign...

New CBC Governor warns over delays in due diligence checks on foreign transactions

Constantinos Herodotou, the new Governor of the Central Bank of Cyprus (CBC), called on Cypriot banks to invest in technology and staff training to speed up due diligence checks on lawful transactions for anti-money laundering (AML).

Noting that there are many examples where businessmen opt to carry out their lawful transactions in other countries due to delays in the Cyprus banking system, Herodotou said the Cypriot banks take more time to carry out due diligence checks compared with their EU peers, although AML directives are the same for all member-states.

“The banks should invest on staff training and technology for more effective combating of money laundering, reducing negative impact on lawful activities at the same time,” he said, addressing an event organised by the Cyprus Chamber of Commerce and Industry (CCCI).

Herodotou added that the CBC will collaborate with the commercial banks and at a later stage with affected stakeholders with a view to finding ways to tackle the issue in an efficient manner.

Christodoulos Angastiniotis, President of the Cyprus Chamber of Commerce and Industry, also voiced concerns by businesspeople that the banks decline money transfers especially by former Soviet Union states and recently from China due to AML compliance reasons, noting that businesspeople are forced to look for banks abroad in a bid to carry out their activities.

Responding, Herodotou said that the AML directives do not focus on where the money comes from but on whether the activities are lawful or not, adding that the CBC is ready to examine any ambiguities in the AML laws.

However, Herodotou said that Cyprus has adequate correspondent banks, noting that the CBC will continue the work to improve Cyprus’ image abroad that would provide the banks with more options concerning correspondent banking.

On the broader combating of money laundering, Herodotou said that there has been progress, noting that the efforts to improve Cyprus’ AML framework should continue “as there will always be efforts to beat the system.”

Turning to the Cyprus banking system, the CBC Governor referred to the progress in the efforts to reduce non-performing loans which declined from the peak of €28 billion to €11 billion following the sale of an NPL package amounting to €2.8 billion by Bank of Cyprus, the island’s largest lender.

But he added that efforts should continue as the banking system NPL rate remain at high levels.

As he noted, following amendments to the legal framework in the summer of 2018, the banks for the first time have all the tools at their disposal to effectively tackle NPLs.

Herodotou also said that the CBC in its capacity to maintain financial stability, is mindful of Cyprus’ high private debt which is declining at a slower pace, as banks sell NPLs portfolios which are offloaded from the banking system but remain in the economy.

“Therefore, the banks and NPL management platforms should not focus solely on (NPL) sales, correct loan restructurings is a very important factor both for the economy but for households and small and medium enterprises as well,” he said.

On the Cypriot economy, Herodotou said GDP will continue to expand with strong momentum above the EU average, albeit at a slower pace, noting that the fact that growth is broad based and is not dependent on one sector is satisfactory.

But he referred to challenges to growth both in the EU and the US, manifested through the increase in volatility and the looming fund manager’s preference on bonds.

(Cyprus News Agency)

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