New CBC directive enhances money laundering compliance framework

The new Directive of the Central Bank of Cyprus (CBC) on the prevention of money laundering and terrorist financing, which will enter into force on 2 June, 2025, aims to introduce a modern and enhanced compliance framework for banks and other obliged entities, while assisting citizens and businesses in their relations with the financial sector, the CBC has said in a statement.

Announcing the new directive, which was published in the Official Gazette of the Republic on 2 May, 2025, the CBC states that "the strictness of the Directive remains unchanged" and emphasises that "it remains committed to its objective of safeguarding and further enhancing the reputation of the country's financial system, as this remains inextricably linked to ensuring financial stability."

Despite its efforts to simplify procedures, this does not in any way translate into a relaxation of the regulatory framework, the CBC states, adding that "the strict requirements of our country's regulatory framework remain in place."

It is also stated that the new directive "simplifies procedures, makes life easier for citizens and businesses, and benefits the economy as a whole."

At the same time, it is stated that the new Directive requires banks and other obliged entities to implement policies to avoid unjustified denial or delay of legitimate access to financial services, at least citizens whom they assess as having a low probability of being involved in money laundering.

For example, the CBC states that banks may classify pensioners who have no income other than their pension as low risk and "accordingly, the information they request from them should be proportionate to that low risk."

More specifically, according to the CBC, among other things, the Directive, always based on the estimated risk for each customer, allows business relationships to be updated at a frequency commensurate with the risk of each customer and does not specify a minimum frequency for updating business relationships for customers with a low probability of involvement in money laundering.

It is also stated that, when updating customer information, the new directive on the prevention of money laundering and terrorist financing allows the use of copies of identity documents (instead of originals), making the process quicker and easier, while also allowing the use of information obtained during the business relationship, which means that citizens will be required to provide less information when updating their details.

According to the CBC, the new directive makes it possible to use alternative evidence for citizens who are unable to comply due to health or physical incapacity, showing sensitivity towards our citizens facing such problems and allowing flexibility regarding proof of residence, such as verification through the use of government documents or electronic utility bills.

Furthermore, it allows for the verification of documents by third parties (e.g., government agencies) and the use of electronic documents so that, by expanding the verification options, better customer service can be achieved, the CBC adds.

Concluding, the CBC encourages citizens to submit suggestions regarding justified problems they encounter when establishing or renewing a business relationship with banks or other obligated entities using the following link cbcinfo@centralbank.cy or by calling 22714100.

(Source: CNA)