New Law in Cyprus according to AML

Makhmud Efendi -

A new law has been passed in Cyprus in line with the 5th Directive of the European Union on AML (the “Law”), in accordance with which Cyprus entities must obtain and hold adequate, accurate and current information on their beneficial ownership, including details of the beneficial interests held. The Law also provides for the establishment of a central beneficial owner register of Cyprus entities and, in compliance with such provision, the Cyprus Registrar of Companies, which is the designated authority for these purposes, has announced its formation.

For the purposes of the Law, beneficial owner is any natural person(s) who ultimately owns or controls the entity and/or the natural person(s) on whose behalf a transaction or activity is being conducted and includes at least in the case of Cyprus companies:

  1. The natural person(s) who ultimately owns or controls the Cyprus company through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity, including through bearer shareholdings, or through control via other means, other than a company listed on a regulated market that is subject to disclosure requirements consistent with Union law or subject to equivalent international standards which ensure adequate transparency of ownership information. A shareholding of 25 % plus one share or an ownership interest of more than 25 % in the Cyprus company held by a natural person shall be an indication of direct ownership.  A shareholding of 25 % plus one share or an ownership interest of more than 25 % in the Cyprus company held by a corporate entity, which is under the control of a natural person(s), or by multiple corporate entities, which are under the control of the same natural person(s), shall be an indication of indirect ownership. This applies without prejudice to the right of Member States to decide that a lower percentage may be an indication of ownership or control. Control through other means may include shareholder’s agreement, the exercise of dominant influence, influence through family links or other types of connection with decision-makers, the holding of negotiable shares or convertible stock, and the power to appoint senior management or any other way.
  2. If, after having exhausted all possible means and provided there are no grounds for suspicion, no person under point (a) is identified, or if there is any doubt that the person(s) identified are the beneficial owner(s), the natural person(s) who hold the position of senior managing official(s).

In case where a final shareholder is a trust administered in Cyprus, merely the name, the registration number (if any) and the country of jurisdiction is notified to the Registrar of Companies. However, in this instance a separate registry is kept by the Cyprus Securities and Exchange Commission, to which the details of (i) the settlor; (ii) the trustee(s);  (iii) the protector, if any;  (iv) the beneficiaries and (v) any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means should be notified, as such persons are considered for the purposes of the Law as the ultimate beneficial owners. Having said the above, it appears that beneficial ownership through nominees is not treated as a trust and therefore the details of the physical person/beneficial owners should be notified to the Registrar of Companies.

There will no longer be a requirement to demonstrate legitimate interest. Banks are obligated to report discrepancies between the information contained on public registers and beneficial ownership information obtained through CDD.

The Cyprus Registrar of Companies has issued a directive in accordance with which, for every Cyprus Company incorporated before the 16th March 2021, within 6 months of the effective date of the directive, i.e. by the 15th September 2021, and, for every Cyprus Company incorporated after the 16th March 2021, within 30 days of its incorporation date, the following details in respect of their beneficial owners are required to be filed with the Registrar, namely:

  1. Name, surname, date of birth, nationality and residential address;
  2. The type and extent of the ultimate ownership;
  3. The type of document pursuant to which he is identified, number and country of issue;
  4. The date on which he became the beneficial owner;

Any changes to the notified details should also be notified within 15 days of such change.

Such information shall be kept by the Registrar in the said registers, to which, primarily- for the first six months, i.e. until 15th September 2021, Cyprus authorities, such as anti-money laundering, tax and police authorities shall have unlimited access and, which authorities on their part shall be in a position to make available to respective authorities of other Member States upon request, whilst at a later stage, i.e. after 15th September 2021, subject to a payment of a nominal fee, any person from the wider public shall also have access to the name, month and year of birth, the nationality and country of residence of the beneficiaries, as well as the type and extent of the interest held. The information shall be kept by the Registrar for ten years following the deregistration of the relevant Cyprus Company.

Following the initial filing, during the period 1st to 31stDecember of each calendar year, the information filed in respect of beneficial owners should be electronically confirmed to the Registrar by the relevant Cyprus Company.