At its October 2021 Plenary, the FATF concluded that Mauritius would NO longer be subject to increased monitoring by the FATF, as Mauritius strengthened the effectiveness of its AML/CFT regime and addressed related technical deficiencies to meet the Action Plan’s commitments regarding the strategic deficiencies identified by FATF in February 2020. Mauritius will continue to work with the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to improve further its AML/CFT system. However, the FATF Plenary Decision can be considered a global acknowledgment for the Mauritius institutions in tackling effectively money laundering and terrorism finance.

Based on the Mauritius Ministry of Financial Services and Good Governance announcement dated 21 October 2021, all throughout the FATF International Co-Operation Review Group (ICRG), Mauritius has demonstrated its commitment to prioritise and fully implement the FATF Action Plan while ensuring the sustainability and effectiveness of the measures undertaken. Very important was also the role of both the public and private sectors that cooperated very effectively to ensure the Action Plan is finalised with success.

In addition, Mauritius has been cooperating closely with other international Groups that enhanced its technical knowledge such as, the ESAAMLG, the European Union through the EU AML/CFT Global Facility, the German Agency for International Cooperation, etc.

AML/CFT will remain one of the Mauritius Government’s top priorities and will continue its constant efforts to sustain the AML/CFT reforms and protect the integrity of its financial system.

The Cyprus Securities and Exchange Commission (“CySEC”) on September 13th, 2021, issued a Policy Statement on the Registration and Operations of Crypto Asset Services Providers (“CASP”), where it outlines the registration requirements and provides additional information about how to register as a CASP.

Q When was the concept of Crypto Asset Service Provider (CASP) initially introduced in Cyprus?

The concept of Crypto Asset Services Providers was initially introduced in Cyprus with the transposition of the Fifth Anti-Money Laundering Directive into national legislation. The amended AML legislation was introduced on 25 June 2021 and regulates the digital registry of CASP. CySEC that is the financial regulator in Cyprus, will be regulating the operation and supervision of the crypto-registry.

Q Do crypto assets qualify as financial instruments?

Depending on their structure, crypto-assets may, inter alia:

1. Qualify as financial instruments under the Investment Services and Activities and Regulated Markets Law, transposing MiFID II (the “Investment Services Law);
2. Qualify as Electronic Money under the Electronic Money Law, transposing EMD2 (the “E-Money Law”);
3. Be a digital representation of value that is neither issued nor guaranteed by a central bank or a public authority. It is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored, and traded electronically, and it does not qualify neither as fiat currency, nor as any of the instruments referred to in points (i) and (ii) above.

Q What should be the next steps of the crypto-asset providers?

CASPs that shall provide services in or from Cyprus must submit a duly completed application form, along with relevant questionnaires and any additional information and/or required evidence, in accordance with CySEC’s Announcements on the submission of applications and relevant correspondence, as amend[1]ed from time to time and also pay the corresponding fee. In addition to the above, an electronic version of the application form (i.e. Form 188-01) should be also submitted at caspregistrations@cysec.gov.cy.

CASPs established in the EEA that are registered with one or more EEA National Competent Authorities for AML/CFT purposes in relation to all services or activities undertaken or intended to be undertaken in Cyprus, must submit a notification form at  eeacasp@cysec.gov.cy.

Q When shall they register?

New businesses must register with CySEC before commencing their operations in or from Cyprus. Existing businesses that demonstrate a material existing crypto-asset activity will need to submit an application before the end of October 2021 and be fully compliant with the AML/CFT Law and the Directives issued pursuant to the AML/CFT Law.

Q What are the applicable CySEC fees?

CySEC registration charges are, as follows:

•  €10.000 for the examination of an application. Successful applicants will not be required to pay an additional fee for the first year of their registration.
•  €5.000 for the purposes of renewal of registration per year.

Q What are the requirements to apply for a crypto-asset licence?

Initially, to apply for the crypto-licence you need to have an entity incorporated in Cyprus and at least one fit and proper shareholder, as per the require[1]ments of CySEC. In addition, four directors will be required; two of them acting as executive and two as non-executive directors. At least three of them must be Cyprus residents. CySEC will perform an assess[1]ment of their knowledge and experience in order to evaluate whether they satisfy the ‘fit and proper’ test. It is further required for the crypto-provider to have a fully operational office located in Cyprus where local resident staff members need to be hired on a full-time basis to fulfil the key functions of the company. There is a minimum number of personnel that needs to be hired, based on the type of licence selected.

The application to become a crypto-asset service provider is expected to take approximately 6 months and there are currently three types of licences based on different capital requirements; the €50.000, the €125,000 licence and the €150,000 licence.

Based on the €50.000 licence, the crypto provider can provide investment advice services.

With the €125,000 licence, the crypto provider will be able to provide (a) Reception & Transmission of client orders; (b) Execution of orders on behalf of clients; (c) Exchange between crypto-assets and fiat currency; (d) Investment advice; (e) Exchange between crypto[1]assets; (g) Participation and/or provision of financial services related to the distribution, offering and/or sale of crypto-assets, including the initial offering; (h) Placement of crypto-assets without firm commit[1]ment; (i) portfolio management

With the €150,000 licence, the crypto provider will be able to offer all the above along with (i) administra[1]tion, transfer of ownership, transfer of site, holding, and/or safekeeping, including custody, of crypto-as[1]sets or cryptographic keys or means enabling control over crypto-assets; (j) underwriting and/or placement of crypto-assets with firm commitment; (k) opera[1]tion of a multilateral system, which brings together multiple third-party buying and selling interests in crypto-assets in a way that results in a transaction.

We can see that CySEC has provided different options in order for each crypto-provider to be able to choose, according to his business model.

Q How can FiveComply team help potential applicants to acquire a crypto-licence?

Given the new CySEC policy and regulatory requirements for the acquisition of a crypto-licence, our team’s expertise and knowledge in the field can play a vital role in maximising efficiency, minimis[1]ing administrative time & costs and yielding positive results with your CySEC application.

Our team of experts, always works closely with FiveComply clients, in order to understand their business and develop a customised “application package”. We always aim to give priority to each client’s individuality and needs by providing tailored-made advice.

You can contact our team for a free consultation session on how to register with CySEC as a Crypto Asset Service Provider (CASP).

The Cyprus Securities and Exchange Commission (the ‘CySEC’) is the regulator which authorises and supervises amongst others, Cyprus Investment Firms / Forex (CFDs) Brokerages / Traditional Brokerages in Cyprus. Cyprus is part of the European Union, thus, a CySEC licensed investment firm can provide its services to all European Economic Area countries.

To obtain a CySEC licence and be authorised as an Investment Firm/ Forex (CFDs) Brokerage / Traditional Brokerage, the following requirements must be fulfilled:

1) Fit and Proper Shareholder(s) based on EU regulations (e.g. be able to justify proof and source of funds);

2) Fit and Proper Directors (2 executive & 2 non-executives);

3) Fully completed application forms and questionnaires;

4) Detailed Business Plan including amongst others, three years of financial projections;

5) Detailed Procedures/ Manuals.

Our team consists of high-calibre personnel with hands on experience in the investment services sector that are able to guide you from the beginning of your application until the granting of your licence by CySEC. Our Company obtained a significant number of Investment Firms / Forex (CFDs) Brokerages / Traditional Brokerages CySEC licences during the last years.

You can contact us to meet our team and ask for any questions you may have!

CySEC issued Circular C462 to inform the CIFs that is amending Circular C417 regarding the prudential treatment of crypto assets. Therefore, the prudential treatment of crypto assets will be as follows:

A. Calculation of own funds and capital adequacy ratio (Pillar I)
 

1. Direct investment in crypto assets on a non-speculative basis (banking book exposure)
   When a CIF invests directly in crypto assets on a non- speculative basis (banking book exposure), it should deduct this from its own funds.
2. Direct investment in crypto assets on a speculative basis (trading book exposure)
   When a CIF invests directly in crypto assets on a speculative basis, it should treat these as investments in a derivative product subject to both of the following risks:
   i. Counterparty Credit Risk (“CCR”) calculated in accordance with Section 1 ‘Trading counterparty default’ of the IFR and the CIF should apply a 32% potential future exposure percentage (PFCE) per Art. 29(7) of IFR
   ii. Market Commodity Risk is calculated according to Articles 355 to 361 of the CRR.
3. Direct investment of CIFs’ clients in crypto assets and/or in financial instruments relating to crypto assets with the CIF acting as the counterparty to these transactions

When a CIF acts as the counterparty to its clients’ trades by taking the opposite position to each client’s transaction in crypto assets, and/or in financial instruments on crypto assets, the CIF is subject to Counterparty Credit risk and Market Commodity Risk, in accordance with the methodologies set out in point 2 above, as the CIF is acting as a market maker for its clients.

B. Internal Capital Adequacy Assessment Process (‘ICAAP’) (Pillar II)

CIFs should assess the risks emanated from trading in crypto assets, and/or in financial instruments relating to crypto assets, for their own account or for their clients within the Internal Capital Adequacy Assessment Process (ICAAP). The assessment and discussion of the risks associated with the activity in crypto assets should be included together with a sensitivity analysis that shows how the risks identified affect the CIFs’ projections. In addition, any mitigations should also be discussed, stating any additional capital that should be held in relation to the identified risks.

C. Pillar III disclosures

CIFs should disclose within their Pillar III disclosures any material crypto-asset holdings and include information on:

• the exposure amounts of different crypto-asset exposures,
• the capital requirement for such exposures and
• the accounting treatment of such exposures

D. Enhancement of risks management procedures associated with crypto assets

CIFs, which trade in crypto assets, and/or in financial instruments relating to crypto assets, should revisit their risk management procedures and strategies and ensure that all risks associated with this product are duly taken into consideration.

We can help our clients set up and develop their business model in the most cost efficient and compliant way thus minimizing expenses and achieving the best compliance results.

Get in touch with us to come closer to the compliance results of your desire!

Crypto asset service providers is a new concept that was introduced in Cyprus with the transposition of the Fifth Anti-Money Laundering Directive into national legislation. The amended AML legislation was introduced on 25 June 2021 and regulates the digital registry of crypto asset service providers. The Cyprus Securities and Exchange Commission (CySEC) that is the financial regulator in Cyprus, will be regulating the operation and supervision of the crypto-registry as well.

How is this new legislation important for cryptos?

This recent regulatory development is considered of paramount importance because, licensed crypto-asset providers will be able to provide amongst others, regulated cryptocurrency exchange services. This is a very positive step for Cyprus in becoming a key jurisdiction for crypto service providers. We believe that, this development will attract crypto service providers from all over the world, as registered crypto-providers in Cyprus will be considered credible institutions.

So far in Cyprus and in Europe in general, the lack of regulations and guidelines in the crypto-field has imposed legal and regulatory risks for investors, due to inadequate AML/CFT policies adopted in relation to cryptos. The regulation of cryptos marks the beginning of a new era towards the acceptance of digital cryptocurrencies in Cyprus. This will play a critical role on the way Cyprus banks treat cryptos as well.

What are the requirements to apply for a crypto-asset licence?

Initially, to apply for the crypto-licence you need to have an entity incorporated in Cyprus.  In addition, four directors will be required; two of them acting as executive and two as non-executive directors. At least three of them must be Cyprus residents. CySEC will perform an assessment of their knowledgment and experience in order to evaluate whether they satisfy the ‘fit and proper’ test. It is further required for the crypto-provider to have a fully operational office located in Cyprus where local resident staff members need to be hired on a full-time basis to fulfil the key functions of the company. There is a minimum number of personnel that needs to be hired, based on the type of licence selected.

The application to become a crypto-asset service provider is expected to take approximately 6 months and there are currently two options of licences based on different capital requirements; the €125,000 licence and the €150,000 licence.

Based on the €125,000 licence, the crypto provider will be able to provide (a) Reception & Transmission; (b) Execution of orders on behalf of clients; (c) Portfolio management; (d) Investment advice; (e) Exchange between cryptocurrencies and fiat money; (f) Cryptocurrency asset exchange; (g) Participation and / or provision of financial services on distribution, supply and / or sale of cryptocurrencies, including the initial offering; (h) Placing of crypto-assets without a firm commitment basis.

With the €150,000 licence, the crypto provider will be able to offer all the above along with (i) management, transfer, retention, and / or safekeeping, including the depositary of cryptocurrency assets or cryptographic keys or means that allow control over cryptocurrencies; (j) Underwriting and/or placing of crypto-assets on a firm commitment basis; (k) operation of a multilateral trading facility in which interested parties for buying and selling crypto assets may interact in a way that results in a transaction.

We can see that CySEC has provided different options in order for the crypto-provider to be able to choose according to his business model.

Can you currently apply to become a crypto-asset provider?

CySEC is yet to announce the official procedure for applying to become a licensed Crypto Asset Provider but based on CySEC’s press release in March regarding the Cyprus Capital Market, this is expected within 2021.

What do crypto-asset providers need to have in mind in terms of legislative obligations, once they register?

We need to remember that, the rationale of the competent authorities for including cryptos under the European AML framework is to mitigate and prevent the risks that arise from cryptocurrencies, especially in relation to ML. Hence, the crypto-registry will oblige the crypto-providers to adhere to the AML rules and procedures that apply to traditional financial institutions i.e. apply due diligence procedures, monitor and report suspicious transactions, provide ownership transparency, etc.

What do you believe about the future of cryptocurrencies and blockchain technology?

In my opinion cryptos are here to stay. As a technology — blockchain and its lubricating cryptocurrencies will transform finance and the internet towards centralisation. Blockchain and cryptocurrency will be a major platform of innovative disruption in the upcoming decades.

However, the valuations in the crypto market are determined by demand and supply and if any overreaction in the market occurs, will be corrected in the long term.

Whatever the case, its acceptance by the government authorities is implied among others, by the issuance of relevants laws and by the fact that several countries have already launched their own cryptocurrencies.

How can FiveComply assist crypto-service providers?

Our team can provide you with full support, guidance and assistance in applying for a crypto-licence. As this is a newly-established regulatory area, we believe that our expertise and knowledge in the field can play an important role in yielding positive results with your CySEC application. We can also provide continuous support after acquisition of your licence, in order for your firm to remain compliant and up-to-date according to the latest legislative and regulatory provisions.

We understand that questions might be raised concerning the crypto-field and we are more than happy to discuss with interested parties about their options and any questions they might have about the crypto-licences. We always aim to give priority to each client’s individuality and needs by providing tailored-made advice.

FiveComply has attended today CySEC’s digital event “CySEC 25 Years: The Past, Present and Future of Financial Development and Innovation” which discussed various interesting topics relating to the growth and expansion of CySEC and the evolvement of the financial industry in Cyprus throughout the years.

One of the most important remarks of today’s event, was the Chairwoman’s, Ms. Demetra’s Kalogerou statement relating to crypto asset service providers and the fact that, CySEC will prepare the relevant applications for registration by September 2021.

As always, our team will keep you updated!

Following its June 2021 plenary meeting, the Financial Action Task Force (‘FATF’) has confirmed that an onsite inspection will be conducted in Mauritius in order to assess the implemented AML/CFT measures / reforms and the progress made in order to decide whether Mauritius shall be removed from the FATF Grey list. When FATF places a jurisdiction under increased monitoring (i.e. on the FATF Grey list), it means that this country is committed to resolve any identified strategic deficiencies within an agreed timeframe.

The FATF announcement is considered as a very positive step towards the removal of Mauritius from the FATF Grey list, as the on-site inspection is considered as one of the final stages taken by FATF in its decision-making process.

For Mauritius, the removal from the FATF list, means the initiation of the procedure to exit the European Commission high-risk third countries’ list for AML/CFT, as well. If successful, Mauritius bank account opening will be made easier and credibility for financial institutions and companies will be regained.

Our team at FiveComply will keep you updated and remains at your disposal for any matters you would like to discuss.

Further to the issuance of Circular C451, the Cyprus Securities and Exchange Commission (‘CySEC’) wishes to inform CIFs that, a new version of the Form RBSF-CIF Version 4 (‘the Form’) needs to be completed for the annual collection of various statistical information. The Form must be successfully submitted electronically via the CySEC’s Transaction Reporting System (‘TRS’) by 15:00 hrs, Friday, June 18, 2021, at the latest.

The Form must be completed, and successfully submitted to CySEC, by all CIFs that were authorised by December 31, 2020. In this respect, CIFs that were authorised by December 31, 2020, but have not made use of their authorisation must also submit the Form.

In summary, Form RBSF-CIF Version 4 requires additional information, as per the following sections:

• Section F – Governance and Ownership (two additional questions have been added under points 7.1 and 7.2);
• Section K – Products, Services and Transactions (amendments in Questions 1.1, 1.2, 2.1 – 2.4 and 3.1 and Questions 2.5 and 2.6);
• Section L – Countries and Geographical Areas (amendments in Questions 1.1 – 1.4);
• Section M – Customer Analysis (this is an entirely new section);
• Section N – Internal Policies and Procedures (this is an entirely new section);
• Section O – Geographical Analysis (this is an entirely new section).

In addition, CIFs should have in mind the following, when completing and submitting the Form:

• The Form should be named in the following format ‘Username_yyyymmdd_RBSF-CIF’. The username to be used is the CIF’s TRS credentials. The yyyymmdd in this case, will be 20201231. Future forms will have different reporting periods.
• CIFs are required to report data in Euro, rounded to the nearest unit.
• Before submitting the Form, please ensure that all validation tests that are contained in the Form (Sections A, B, C, D, E, F, G, H, I, J, K, L, M, N, O) at the bottom of the page and Validation Tests Worksheet) are TRUE (Green Colour).
• Please use the latest version of the Form i.e. Version 4.
• Instructions on the completion of the Form can be found in the ‘Instructions’ Worksheet of the Form.

Our Team at FiveComply remains at your disposal for any assistance that you may require in relation to the above.

The Cyprus Securities and Exchange Commission (‘CySEC’) has issued Circular C445 to inform CIFs that, due to the COVID-19 situation, the deadlines for submission of the following to CYSEC are extended:

In regards to Pillar III Disclosures, CySEC stated that, in case their publication is delayed, the CIF needs to inform the market participants for that delay, the reasons of delay and, to the extent possible, their estimated publication date.

Our Team remains at your disposal for any assistance you may require in regards to the above.