The International Federation of Accountants defines money laundering as ‘The funnelling of cash or other funds generated from illegal activities through legitimate financial institutions and businesses to conceal the source of the funds.’
It is therefore imperative that legislation and regulations, both domestic and international accompanied by professional ethics serve as the tools of society against Money Laundering.
Following the ratification of International Conventions and implementing EU Directives into domestic legislation, Cyprus has imposed strict anti-money laundering regulations.
The Prevention and Suppression of Money Laundering Activities Law of 2007, implements the EU Third Money Laundering Directive (2005/60/EC) which accordingly regulates the activities of “sensitive professionals” who attain a high risk of being involved in such activities due to their profession or business. Examples include, Real Estate Agents, Accountants and Insurance Companies.
The provisions provided by the Law aim to facilitate the recognition of transactions and to be able to identify any transactions of a suspicious nature. Furthermore, the law aims to ensure the stern administration of the “Know Your Client” procedure (hereinafter “KYC”).
Requirements
Under the law, certain requirements are expected from persons performing financial or other business related activities in order to facilitate the prevention of money laundering. They are obliged to apply adequate and appropriate systems and procedures in relation to the following (as set out in Section 58 of the aforementioned law):
- Customer identification and customer due diligence measures must be taken on new and existing customers when carrying out occasional transactions amounting to €15,000 in a single operation or in several operations which appear to be linked
- Record-keeping
- Internal reporting and reporting to MOKAS [Unit for Combating Money Laundering]
- A detailed examination of each transaction which by its nature may be considered to be particularly vulnerable to be associated with money laundering offences/terrorist financing and particularly complex or unusually large transactions or patterns of transactions with no apparent economic or visible lawful purpose
This article however, will only examine the detailed requirements of customer identification and customer due diligence.
For verification of customer identification information (legal entities and individuals), the high level requirements are as follows:
Individuals:
- Documentary evidence of their full name, date of birth, address, profession/occupation and a specimen signature. It is imperative that the current permanent address is verified by proof of a utility bill, authority tax bill, bank or co-operative society statement
- An official document with a photograph of the individual clearly bearing should be obtained
Legal Entities:
- Documentary evidence of full name and registration address
- Copies of the latest report and accounts and the certificate of incorporation/certificate of trade or the equivalent
- Copies of the company’s Memorandum of Association and Articles of Association and any other relevant certificates registered by the Registrar of Companies
- A copy of the structure of the company identifying the individuals who control over 10% of the company’s voting rights and shares and the name of its directors (N.B The identification of directors and shareholders is in line with the identification for individual clients as previously stated)
All copies must be certified true copies of the originals.
As your lawyers in Cyprus, we will advise you what documents are required by the banks as part of the know your clients procedures. We do not make the legislation, but we must adhere to them, to ensure your property investment is safe.
For more information please contact G KOUZALIS LLC.