On 10 October 2022, the European Securities and Markets Authority (ESMA) has officially announced and published its strategic priorities for the next 5 years (2023-2028). The Strategy takes into account the key priorities of the European Union (EU) in the area of financial services and aims to address the most significant risks linked to EU financial markets.

ESMA ensures that the retail clients’ protection and the stability of the financial markets remain always its top priorities. Therefore, in order to further focus on these priorities, ESMA has set up the following strategic goals for the next 5 years:

• Fostering effective markets and financial stability.
• Strengthening supervision of EU financial markets.
• Enhancing protection of retail investors.
• Enabling sustainable finance.
• Facilitating technological innovation and effective use of data.

One of the most important goals for ESMA is the enhancing protection of retail investors. Based on that, ESMA and the NCAs will ensure that investors are effectively protected, with a particular focus on the protection of retail investors. ESMA will further develop retail investor trend monitoring and analysis. It will concentrate its efforts on risks posed among others by new and innovative products or services (e.g., crypto assets or non-fungible tokens) and products with strong retail investor demand (e.g., ESG). ESMA will also assess risks to retail investors that may stem from distribution of complex products, alternative marketing and distribution channels, such as e.g., social media advertising.

ESMA will reinforce its convergence work, particularly with regards to the supervision of cross-border activities, aiming to prevent significant consumer detriment by fostering a common supervisory culture and consistent supervisory outcomes for investors. ESMA will fully use its convergence toolkit in this area, including product intervention, where appropriate. New initiatives on ensuring effective supervision of cross border services will aim to facilitate:

• effective information exchange between the home and host authorities;
• joint supervisory measures to support effective supervision and enforcement such as joint supervisory work, supervisory colleges or the use of delegation.

ESMA will also enhance supervision and convergence through common supervisory exercises for example CSAs and mystery shopping, to be performed by all or a significant number of NCAs.

ESMA ensures that it will further strengthen its role as data and information hub in the EU and contribute to extending the effective use of data in financial market supervision.

For further information about the Strategy, you can read the ESMA Strategy here.

The Cyprus Securities and Exchange Commission (CySEC) has issued Circular C487 (‘the Circular’) informing Cyprus Investment Firms (‘CIFs’) on the revised threshold criteria that determine a ‘significant CIF’ for the purposes of the Investment Services and Activities and Regulated Markets Law of 2017, as amended, (‘the Investment Services Law’) in light of a new prudential framework for investment firms (IFR/IFD). It should be noted that, Circular C487 updates and replaces Circular C228 that was issued on 26 July 2017, in relation to the matter.

According to the Circular, a CIF should be considered a ‘significant CIF’ where its on and off-balance sheet assets are on average, greater than EUR 100 million over the four‐year period immediately preceding the given financial year (‘the threshold’).

CIFs should assess/decide within four months from the end of each of their financial year, whether they meet the threshold to become a ‘significant CIF’ for the purposes of the Investment Services Law and for the purposes of sections 22(4) and 27 of the Prudential Law. This assessment is considered as valid, until the next assessment is made for the following year. Where a CIF has been in business for less than four years, for the purposes of the above assessment it shall use its on and off-balance sheet assets for the periods available.

CIFs that after the abovementioned assessment are qualified as ‘significant CIFs’ must make arrangements to establish and have in place sound, effective and comprehensive strategies, processes and systems to achieve compliance with the following requirements:

You can contact our firm for more information and guidance.

The Financial Intelligence Unit (FIU) of Seychelles has issued Guidelines for Suspicious Transaction Reporting (STR) in an effort to provide practical assistance and comprehensive approach to reporting entities by enabling them to recognise suspicious transactions and meet their reporting obligation under Section 48 of the AML/CFT Act 2020 to the FIU.

More specifically, the issued Guidelines, explain reporting timelines, the information that must be included in the Suspicious Transaction Report (STR) and the procedure for submitting reports electronically to the FIU.

It is also important for reporting entities, to differentiate their STR reporting obligations from the currency transaction threshold reporting obligations (i.e., the Cash Transaction Threshold Report (CTTR) and Wire Transfer Threshold Report (WTTR). The difference is that, CTTR and WTTR are merely threshold reports and such transaction(s) shall not necessarily involve criminal behaviour.

The FIU emphasises that, any reporting entity that suspects that any service or transaction may be related to criminal conduct, including an offence of money laundering or terrorist financing activities, it shall submit an STR to the FIU, in line with the requirements under section 48 of the AML/ CFT Act and related Regulations.

Our specialised team can assist you to be compliant; contact us now for any information you need.  

On 24 September 2020, the European Commission published its proposal on the Regulation on Markets in Crypto Assets (‘MiCA Regulation’), which shall form part of a wider set of publications on Europe’s Digital Finance Strategy. On 24 November 2021, the European Council published a significantly expanded proposed MiCA Regulation (available here).

The objectives of MiCA Regulation are the following: 

• To provide legal certainty for crypto-assets not covered by existing EU financial services legislation;
• To establish uniform rules for crypto-asset service providers and issuers at an EU level; and
• To establish specific rules for the so-called ‘stablecoins’, including when these are e-money.

The proposed MiCA Regulation aims to enhance consumer protection, transparency and governance standards, given the fact that, the AML risks related to cryptos were addressed with the introduction of the 5^th EU Anti-Money Laundering Directive.

It is expected that, the MiCA Regulation will be formalised within 2022 and EU competent authorities shall need to comply with the provisions of the Regulation which shall be directly applicable in all EU Member States.

Our FiveComply team is always vigilant to provide you with the latest updates on the matter.

The European Commission via its Commission Delegated Regulation of 07/01/2022, amending Delegated Regulation (EU) 2016/1675, has deleted the Mauritius from the EU list of high-risk countries. Along with Mauritius, the Bahamas, Botswana, Ghana and Iraq were also removed.

For all the above-mentioned countries, it was concluded that, the strategic deficiencies in their AML/CFT regimes have been rectified, they have strengthened the effectiveness of their AML/CFT regimes and addressed related technical deficiencies to meet the commitments in their action plan regarding the strategic deficiencies that the FATF identified and the additional benchmarks or preliminary concerns set by the EU Commission.

These developments are of paramount importance for Mauritius which can now be considered as a jurisdiction with an enhanced AML/CFT system equivalent to European and international AML standards.

You can contact us now to find out why Mauritius is considered a great choice for establishing your business!

CySEC has issued Circular C478 on 21 December 2021, informing Regulated Entities (i.e., CIFs, ASPs, UCITS, AIFMs, AIFs, AIFLNPs, CASPs, etc.) on the result of the National Risk Assessment (‘the NRA’) on Money Laundering and Terrorist Financing (‘ML/TF’) risks of Virtual Assets (‘VA’) Activities and Virtual Asset Service Providers (‘VASPs’), which was published by the Ministry of Finance of the Republic of Cyprus.

The NRA Report focuses on the ML/TF risks imposed by VA and VASPs, by identifying and assessing the risks that may arise through the use of these new technologies. In addition, it includes recommendations and other appropriate measures in order to manage and mitigate those risks, as required by the relevant FATF’s Recommendations.

CySEC considers the NRA Report to be of assistance to the Regulated Entities engaging or seeking to engage in VA activities, in understanding their AML/CFT risks and obligations and how they can effectively comply with these obligations. Therefore, CySEC expects that all Regulated Entities study the Report in depth, as its contents should be taken into account when assessing AML/CFT risks, thereby, improving the effectiveness of the measures and procedures applied.

CySEC has already commenced the implementation of measures/actions in order to address the identified risks by issuing:

1. the Policy Statement PS-01-2021 (available here) to outline its approach on the registration and operations CASPs under the AML/CFT Law,
2. the CySEC Directive for registration of CASPs (available here), and
3. the Circular C476 (available here) relating to the FATF’s Guidance on Risk-based Approach for VA and VASPs.

Lastly, CySEC is in the process of amending its Directive for the Prevention and Suppression of Money Laundering and Terrorist Financing, to accommodate the FATF Recommendation regarding virtual asset transfers.

Our team shall keep you updated on future updates!

In case you have any queries that you would like to discuss, feel free to contact us.

The European Securities and Markets Authority (ESMA) has updated its Question and Answers (available here), relating to the application of the Alternative Investment Fund Managers Directive (AIFMD), Directive 2011/61/EU.

ESMA added a new question under Section XI of the Q&As which clarifies whether managers of undertakings investing in crypto assets are or not subject to the AIFMD. According to ESMA, this should be assessed on a case-by-case basis, while market participants and national competent authorities (NCAs) should pay attention to the guidance provided in the ESMA Guidelines on key concepts of the AIFMD.

In particular, collective investment undertakings raising capital from a number of investors to invest in crypto assets in accordance with a defined investment policy for the benefit of those investors
will qualify as ‘AIF’ in accordance with Article 4(1)(a) of the AIFMD.

As the AIFMD does not provide a list of eligible or non-eligible assets, AIFs may in principle invest in any traditional or alternative assets, as long as, the AIFM can ensure compliance with the AIFMD. However, more specific investment and risk diversification requirements for AIFs investing in crypto assets, as well as, limitations regarding the target investors of such AIFs may exist at national level.

Lastly, ESMA via its updated Q&As reminded market participants and investors of the high risks involved in investments in crypto-assets (relevant is also the joint ESMA, EBA and EIOPA warning dated February 2018 (accessible here).

In case you have any queries that you would like to discuss, feel free to contact us.

CySEC has issued a Policy Statement (available here), relating to its decision to further amend Directive 87-04, in an effort to ensure the smooth transition of  UK groups / firms operating under the Temporary Permissions Regime (TPR), until they establish physical presence in Cyprus.

CySEC introduced TPR, so that UK firms can continue to provide investment services without physical presence in Cyprus, under the condition that they only offer their services to eligible counterparties and/or professional clients based in Cyprus.

In this respect, CySEC amended Directive DI87-04, allowing companies to continue operating under the TPR regime, until their application to establish a branch or a new CIF or acquire stakes including qualifying stakes in an existing CIF (i.e. physical presence in Cyprus), is reviewed by CySEC. In case of a successful assessment of such an application, a period of additional six (6) months will be granted by CySEC, in order to ensure smooth and compliant onboarding of clients and for such physical establishments to become fully operational.

The TPR entities that will be eligible to continue operating under the TPR after 31^st of December 2021, will be listed in a bespoke section on CySEC’s website. The rest of the TPR entities must cease their actively solicited operations in Cyprus by 1^st of January 2022.

Considering the ongoing impact of the Covid-19 pandemic, the Financial Services Commission, Mauritius (the “FSC”) via the issuance of a regulatory relief is granting an extension of deadlines for some balance sheet dates to FSC licensees, which are unable to comply, in a timely manner, with their filing obligations under the relevant Acts.

Administrative penalties will not be levied provided that FSC licensees comply with their filing obligations within the extended timeline granted by the FSC, as indicated in tables A to C below.

Failure to comply with the extended time, as applicable, will trigger the imposition of administrative penalties pursuant to the Financial Services (Administrative Penalties) Rules 2013.

The FSC has stated that, no further request for extension will be granted in relation to the below reporting deadlines.

The table below highlights usual reporting deadlines, as well as, the extension granted to the
FSC Licensees:

A. Financial Statements

B. Statutory Returns

C. RMF Returns

Our team of FiveComply experts can assist you in complying and submitting in a proper and timely manner the regulatory reports imposed by the FSC.

CySEC via the issuance of its Circular C476 has informed Regulated Entities (CIFs, CASPs, ASPs, AIFMs, etc.) that the Financial Action Task Force (FATF) has updated its 2019 Guidance for a Risk-Based Approach to Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs). Special consideration, shall be attributed by CySEC Crypto Asset Service Providers (CASPs) to the FATF Guidance.

The revised Guidance shall form part of the FATF’s ongoing monitoring on VAs and VASP sector.

In summary, the Guidance covers, inter alia, the following:

• explains how the FATF Recommendations should apply to VA activities and VASPs;
• provides relevant examples and types of activities covered and/or excluded by the VASP definition;
• identifies obstacles to applying mitigating measures to the dangers deriving and associated with VA activities and VASPs;
• and offers potential solutions;
• more detailed definitions of virtual asset and VASP;
• examines a non-exhaustive list of elements that need to be considered by VASPs to determine how best to mitigate the relevant ML/CFT risks.

Our team at FiveComply can assist you to understand and comply with the imposed AML/CFT requirements, by identifying, assessing, and determining how to mitigate efficiently the ML/CFT risks associated with VA activities and the provision of VASP products or services.