Financial Crime World

Cyprus Banks Must Ensure Strict Know Your Customer Requirements

The Cyprus financial industry is under pressure to ensure that the relevant information is collected and evaluated in accordance with Client Due Diligence (CDD) procedures and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) legislations.

Importance of Know Your Customer (KYC) Process

The KYC process plays a crucial role in preventing Money Laundering and Terrorist Financing. Financial institutions and obliged entities are required to identify and verify the identity of their clients, assess corporate structures, and validate registration credentials.

Key Aspects of the KYC Process:

  • Identify and verify the identity of natural persons and legal entities (Know Your Business - KYB)
  • Assess corporate structures
  • Validate registration credentials

Objective of the KYC Process

The objective of the KYC process is to comprehend the financial background and business activities of a client, enabling institutions to understand, mitigate, and manage Money Laundering and Terrorist Financing risks associated with clients and their transactions.

Ongoing Monitoring:

  • Conduct ongoing monitoring to confirm the validity of information gathered during initial CDD and KYC checks
  • Review transactions exceeding €10K

Responsibility for Conducting KYC Procedures

The responsibility for conducting and maintaining KYC procedures falls on officially assigned Compliance Officers. EU framework applies to financial services institutions, such as:

Types of Institutions Subject to the EU Framework:

  • Credit institutions
  • Banks
  • Insurance companies
  • Investment firms
  • Notaries
  • Auditors
  • External accountants
  • Tax advisers
  • Fiduciary services providers
  • Gambling services
  • Estate agents

General Guidelines for KYC

The general guidelines for the KYC globally require presenting documentation confirming:

Documentation Required for Natural Persons:

  • Confirmation of identity
  • Date of birth
  • Current residence
  • Occupation
  • Educational background
  • Bank reference
  • Source of wealth
  • Full set of corporate documents
  • Confirmation of good standing
  • Business address
  • Bank reference
  • Tax residency
  • Financial records
  • Supporting documents for Ultimate Beneficial Owners (UBOs) and all natural persons in the corporate structure

Applying the Risk-Based Approach (RBA)

Institutions are required to classify their clients according to an independent analysis of ML/TF risk. This classification determines the appropriate due diligence and monitoring processes, with three categories:

RBA Categories:

  • Low Risk
  • Normal Risk
  • High Risk

Conducting Sanctions Screening and PEP Lists Checks

Financial institutions and obliged entities are also required to conduct sanctions screening and PEP lists checks to prevent dealings with sanctioned countries, regimes, groups, companies, or individuals.

Meeting Minimum KYC Requirements is No Longer Sufficient

Additional clarifications, documentation, and information are encouraged to be submitted voluntarily in an ongoing pursuit of transparency.

Know Your Customer’s Customer (KYCC)

The Know Your Customer’s Customer (KYCC) has become highly recommended under the scope of AML/CFT compliance.