Cyprus continues to strengthen its legal and institutional infrastructure to combat money laundering (AML) and terrorist financing (CFT).
This is evident in a new, expanded report published on Wednesday, June 18, by the Council of Europe's Moneyval committee.
Following the latest assessment, Cyprus has addressed several gaps and deficiencies, achieving “largely compliant” status with the FATF's (Financial Action Task Force on Money Laundering) international standards. The report highlights improvements related to correspondent banking relationships, an important element of the international financial system. According to FATF standards, Cyprus has eliminated several shortcomings in this area, improving its compliance rating.
The document states that Cyprus has demonstrated improvements in its legislative framework and the practical application of control measures, particularly in the banking sector. This is key for Cyprus as an international financial center. However, the report also identified the insufficient effectiveness of control mechanisms in the nonprofit sector (NPOs). Despite steps taken, including completing a risk assessment and publishing a report in November 2024, the level of compliance in this area is assessed as "partial compliance."
The risk analysis covered aspects such as organizational accountability and transparency, governance quality, and control over financial flows.
Data from law enforcement agencies, reports on suspicious transactions, open sources, and intelligence were used. Currently, Cyprus is fully compliant with 16 of the 40 FATF recommendations, largely compliant with 22, and partially compliant with two. No recommendations are rated as “non-compliant.”
This is significant progress compared to previous monitoring cycles. However, Cyprus remains under enhanced supervision and must submit a new report within two years describing steps to further strengthen its AML/CFT system. Improving the rating not only has political and image implications, but also has real implications for the country's investment attractiveness and international reputation.
This progress is particularly important given the global community's growing focus on financial transparency, especially in offshore jurisdictions.
The Council of Europe expects Cyprus to take further concrete action, especially to improve supervision of charitable organizations and enhance the effectiveness of law enforcement.