Cyprus has taken a bold step forward in cementing its position as a credible fund jurisdiction with the adoption of the new Investment Fund Administrators (IFA) Law. Passed quietly in July 2024, this new framework may not have made international headlines, but it closes a longstanding gap in the country’s financial services ecosystem and signals a more mature, forward-looking approach to fund regulation.
In this article, we unpack what the law does, why it matters, and how it completes a puzzle that’s been slowly coming together over the past decade.
A Missing Piece in a Growing Industry
Over the decade, Cyprus has steadily earned a reputation as a flexible, business-friendly hub for investment funds. With regulated products like Alternative Investment Funds (AIFs), UCITS, and a growing pool of fund managers, the sector has seen consistent growth in both assets under management and international interest.
Yet until recently, one crucial element remained outside the regulatory framework: fund administration - the operational backbone of any investment structure.
Fund administrators handle everything from NAV calculations and investor reporting to transaction processing and anti-money laundering checks. In most leading jurisdictions, these functions fall under regulatory scrutiny. In Cyprus, until now, they didn’t.
The IFA Law changes that - and in doing so, brings Cyprus closer in line with jurisdictions like Luxembourg, Ireland, and Malta.
What the Law Does
The new law introduces a clear regulatory regime for fund administrators, including:
- Mandatory licensing by the Cyprus Securities and Exchange Commission (CySEC)
- Fit-and-proper requirements for shareholders and key personnel (Key function holders)
- Operational and governance standards, including internal controls and compliance structures
- AML/CTF responsibilities tied to onboarding, monitoring, and recordkeeping
- Defined scope of permitted activities and outsourcing rules
In short, it brings structure, accountability, and transparency to a previously unregulated part of the value chain.
Why It Matters - Structurally and Strategically
This development goes far beyond a simple compliance exercise. The IFA Law fills a regulatory gap that had started to weigh on Cyprus' credibility among institutional investors and international promoters.
Here’s why it matters:
- Completing the framework: Cyprus already had the legal vehicles (AIFs, UCITS) and licensed managers in place. What was missing was oversight of how those funds are actually operated. The IFA Law completes the picture.
- Strengthening investor protection: With administrators now supervised, there’s greater assurance around valuation, reporting, and data integrity - areas that can make or break investor trust.
- Supporting outsourcing resilience: As fund managers outsource more back-office functions, regulators across Europe are placing growing emphasis on how those services are monitored. Cyprus is now better equipped to meet that expectation.
- Boosting reputational capital: This move reinforces Cyprus’ narrative as a serious, EU-aligned jurisdiction - not a lightly regulated workaround.
Who’s Affected — and What’s Next
The most immediate impact will be felt by:
- Independent administrators, who must now apply for a licence, build internal governance frameworks, and invest in compliance.
- Fund managers, who need to ensure that their administrators - third-party - meet the new regulatory standards.
- Service providers, such as AML specialists, software vendors, and compliance consultants, who may see increased demand.
CySEC has kicked off the transitional period, with more detailed guidance expected shortly. Many firms will now be re-evaluating their operational models and outsourcing relationships through a regulatory lens.
While this law won’t transform Cyprus overnight —it sends a powerful signal: the country is strengthening its financial services infrastructure and actively responding to the expectations of investors and the market.
In an industry where perception often matters as much as performance, having a credible, well-supervised fund administration regime matters. Not just to regulators and lawyers — but to investors who want transparency, reliability, and control.
*By Alexandros Vacanas, Manager, Assurance Services, Grant Thornton Cyprus
