Cyprus Updates Money Laundering Measures to Supervise Crypto Platforms

Cyprus reshaped its anti-money laundering measures by amending the “Prevention and Suppression of Money Laundering Law” to adequately supervise crypto services and enforce fines on illegal digital assets platforms. 

The  Cyprus government, after enforcing hefty fines on the illegally operated crypto service providers, is amending the AML prevention laws to regulate the cryptocurrency industry. These amendments comply with the Financial Action Task (FATF) international standards and requirements. Furthermore, the amendments are designed to ensure crypto service providers comply with CFT and AML requirements. Additionally, the Cyprus government is introducing stricter regulations for crypto exchanges, including requirements for registration, due diligence checks, and effective know your customer KYC process.

The proposed amendments enforce that the crypto trading firms and service providers must register under the national financial regulatory authority Cyprus Securities and Exchange Commission (CySEC). The illegal crypto operating platforms face fines of up to €350,000 and imprisonment for a maximum of 5 years or both. The Cyprus government stated implementation of these rigorous regulations and penalties is compulsory to prevent the country from money laundering and terrorism financing. To strengthen its anti-money laundering legal framework and enhance its cyber security capabilities, the government will also launch a public awareness and education campaign to inform citizens about the risks of engaging in illegal cryptocurrency-related activities.

Cyprus is not solely implementing strict obligations to regulate the crypto industry. Malta has also increased the fines of up to €15 million against non-compliance crypto organisations and punishment of 6 years in prison or both. Along with these, France and Ireland have also implemented rigorous regulations and various penalties against illegal crypto platforms to combat money laundering and safeguard the country’s financial ecosystem.

These amendments in the AML laws are essential for Cyprus, but the country’s bar association also raises concerns about the impact of these strict regulations on the legal operating business. They urge that a rigorous approach against money and terrorism financing is needed, but it should not damage the country’s reputation as a business-friendly environment. They stated that the penalties should be implemented only on illegal operating businesses and not demotivate legitimate enterprises from working in Cyprus. 

The Cyprus Bar Association also questioned the law’s scope and why crypto service providers registered in other EU member states must register in Cyprus, considering that they are already governed by the laws of their state of origin. The finance minister replied by claiming that the new Cyprus rules align with the EU’s single market obligations. They emphasised that even though crypto organisations are registered in other EU member states, they have to comply with CySEC measures to operate in Cyprus.

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