INSIGHTS


Revised definition of “Shell Companies” by the Central Bank of Cyprus and Practical Solutions to Effective Banking

On the 02 November 2018 the Central Bank of Cyprus issued a circular to all credit institutions under its supervision revising the definition of “shell companies” and the corresponding treatment of such companies under their earlier circular this year dated 14 June 2018.  The rationale and objective of the original circular, said to be orchestrated by foreign correspondent banks, was to combat money laundering and tax evasion facilitated by the use offshore entities. While the underlying objective of the said circular is valid and justifiable, its practical application was viewed by many as a case of destroying  the entire garden for killing some weed.  The arbitrary definition set, ignorant of commercial realities, in combination with extremely risk averse, “check list” approach adopted by Cyprus banks and individual bankers has in practice led to classifying legitimate businesses as “shell companies”  thus treating legitimate, high caliber businessmen as common criminals. This has an extremely adverse effect on Cyprus as an international business center, and basically unwinds what the stakeholders of the professional services industry have for decades tried to achieve, including the government and the banks. This new circular could be said to allow somewhat more flexibility for common sense, without prejudice of course to existing obligations under the anti-money laundering legal and regulatory framework. (...)

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Relaunch of Fast Track Application Process for Cyprus Investment Firms

On the 12th September 2018, The Cyprus Securities and Exchange Commission (“Cysec”) announced its decision to recommence the fast track process for applicants wishing to obtain a licence for Cyprus Investment Firm (“CIF”) in accordance with Investment Services and Activities and Regulated Markets Law of 2017 (Law 87 (I)/2017). 

In accordance with the applicable Announcement issued by Cysec on the 2nd November 2015, the indicative time frame for Cysec to respond to all fast track CIF applications is 8 weeks.

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Cyprus Funds made easy! Alterations in the legal framework regulating the Cyprus Funds Industry.

After ratification from the House of Representatives’ plenary session on Tuesday on the 10th of July, the legal and regulatory framework for collective investment funds is remodelled and upgraded, while investors’ rights are protected at the same time. More specifically, the new bills regarding alternative investment funds will boost the fund industry in Cyprus, as new ways for registration of different kind and types of funds in Cyprus which did not exist so far is introduced now providing investors a range of options.

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Vital Verification Steps Before Buying a Property in Cyprus

This article describes the necessary legal research requirements, also known as the “due diligence” exercise that must be undertaken on behalf of an intended purchaser in connection with the potential purchase of property in Cyprus.  It is imperative for intended purchasers and their advisers to do the following checks before purchasing a property or even commit to purchasing a property by paying a reservation fee or deposit.

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Battling with the uncertainties of CFDs and Cryptocurrency in 2018

In the new age of virtual currency trading, reports indicate that the global value of the cryptocurrency market surpasses $600 billion. Although the markets have seen a spiral momentum, the large businesses continue to thrive, leaving the midsize/small investment brokerage firms under struggle with the harsh impositions that are continually enacted by Cyprus Securities and Exchange Commission (“Cysec”) and The European Securities and Markets Authority (ESMA). The below information evaluates and explores the current restrictions that Cyprus Investment Firms (“CIFs”) are currently facing regarding Contracts for Differences (“CFDs”) and CFDs relating to Virtual Currencies

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Obligations of Cyprus Investment Firms to Ensure the Safeguarding and Segregation of Client Funds

The below information is based on Law 114 (I)/2007 which provides for the Provision of Investment Services, the Exercise of Investment Activities, the Operation of Regulated Markets and other Activities (as amended) (“Law”) and further material provided by the Cyprus Securities & Exchange Commission (“Cysec") which fully explains and evaluates the necessary requirements of a Cyprus Investment Firm (“CIF”) for the safeguarding of client funds.

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The Legal Aspects of Issuing Cryptocurrency

Dominating in today’s business media is the matter of cryptocurrencies, “Bitcoin”, “Litecoin”, “Ethereum”, rollercoaster price fluctuations and the constant new issuances of cryptocurrencies all around the world, now becoming a very popular phaenomenon. There were a number of issuances of cryptocurrency through what is called an “Initial Coin Offerings” or “ICO” which managed to raise great amounts of capital without dealing with any of the legal or regulatory constraints applicable to the customary Initial Public Offerings (IPO) of securities or complying with any other capital-raising restrictions.  The popularity of the issue seems to stem from the excitement around the abrupt appreciation in value, caused by the forces of limited supply and increased demand, however there could be substantial underlying merit in being able to raise funds through cryptocurrency without facing the usual regulatory constrains, making cryptocurrencies an extremely appealing fundraising method, both for businesses and investors. The problem, however, is that cryptocurrencies involve a great deal of uncertainty and also impose a great number of risks somewhat attributable to the lack of specific legislation regulating their nature and operation. The present publication is concerned with the current legal aspects that must be taken into account in connection to issuing a cryptocurrency in or from Cyprus.

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Key Changes under the 4th Anti-Money Laundering Directive

The EU Commission, with a view to combat money laundering and terrorist financing and further strengthen the currently applicable anti-money laundering legislation making it at the same time more effective, has introduced in May 2015 the fourth Anti-Money Laundering Directive. The 4th AML Directive was expected to be implemented by the Member States by the 26th of June 2017, however, only a very small number of Member States have fully implemented the new AML Directive so far (more specifically UK, Germany and Denmark).  In anticipation of the imminent amendments to the currently applicable Cyprus legal and regulatory framework, the purpose of the present publication, is to briefly present an overview of the key changes the 4th AML Directive is about to bring, the challenges on Members States for its implementation and the expected, quite burdensome, requirements on obliged entities.

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Key Changes Under the New Markets in Financial Instruments Directive (MIFID II)

Following the serious economic crisis of 2008, the European Commission (EC) considered as being necessary the recast of MIFID I and the introduction of an amended version of it, the MIFID II. The MIFID II along with the Markets in Financial Instruments Regulation (MIFIR) constitutes the new legislative framework regulating the trading of financial instruments across the EU and the operation of financial institutions providing financial services within the European Union (EU). MIFID II will be implemented from 3 January, 2018 and its main objectives are the attainment of a greater degree of harmonisation by establishing “a single rulebook applicable to all financial institutions within the internal market”; the significant increase of investor protection; the minimisation of the risks of a disorderly market; the increased efficiency of financial markets and the decrease of superfluous costs for the participants. Moreover, the new MIFID II aspires to encourage competition across the EU financial markets and introduce reinforced supervisory authorities ensuring compliance with the relevant legislative regulations. The purpose of the present publication is to briefly explain what are the key changes MIFID II is about to bring and how these changes will contribute to the realisation of its objectives.

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Obtaining a Legal Entity Identifier (LEI) in compliance with MiFID II

In light of the implementation of the Markets in Financial Instruments Directive 2014/65/EU (MiFID II) and the accompanying Markets in Financial Instruments Regulations 600/2014/EU (MiFIR), in an effort to achieve further transparency and improvement of the functioning of the internal market of the European Union, all entities that must comply with the transaction reporting obligations under MiFID II should apply and acquire their own Legal Entity Identifier (LEI). Such obligation is paramount for the relevant entities, as the reporting of reference data of the transactions under MiFID has already begun and entities who do not obtain their LEI will not be able to trade on behalf of their clients and/or otherwise transact with relevant parties as of the 3rd of January 2018. This publication provides further information on the nature of the LEI, its purpose and effect, the reported information, details on who must obtain a LEI and information on obtaining a LEI by Cypriot entities.  

 

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