During their Board meeting, the Cyprus Securities and Exchange Commission (“CySEC”) concluded to the replacement of Circular 256 by issuing Circular C534, regarding the provision of investment and ancillary services and/or performance of investment activities in third countries.

CySEC stated the need for CIFs of notifying CySEC via a letter for their intentions to provide investment and ancillary services and/or perform investment activities in third countries.

More specifically, the CIFs should perform the following actions:

1. i) Prior to providing/performing the said services/activities in third countries, CIFs need to acquire the necessary authorisation by the respective competent Authorities of the third countries, in accordance with their legislative framework.
2. ii) CIFs should provide CySEC with a certified copy of the authorisation for the provision of these services by the competent Authority of the third country.

• iii) In the case that the third country does not require such authorization, the CIF must provide CySEC a relevant certificate from the Competent Authority of the Third country, stating that the legislation does not require such authorisation for the services/activities to be carried out.

The main change with the issuance of the new Circular C534, refers to the point (iii) above – Please note that a legal opinion (issued by a qualified lawyer or legal firm) shall not suffice anymore, as the Commission shall require a certificate form the respective competent authority of the third country instead.

CIFs that are already operating in third countries should ensure that they continue to comply with the Legislative Framework applicable in the relevant Third Country.

Our dedicated team at FiveComply is constantly updating in the matter to offer to you the latest updates in the legal framework. We can assist you with your queries; contact us for more information!

On 22 November 2022, the European Court of Justice (ECJ) has decided that open public access to the registers of the beneficial owners (BO) of companies registered in EU member states is no longer valid, as it contravenes with Articles 7 (Respect for Private Life) and 8 (Protection of Personal Data) of the Charter of Fundamental Rights of the European Union.

In particular, the ECJ took the view that the unrestrained public access to the BO registers of EU Member States constitutes a serious interference with the aforementioned fundamental rights, enabling a potentially unlimited number of persons to have access, retain or disseminate information related to the material and financial situation of a beneficial owner.

Despite the fact that, the EU legislature by the introduction of the said measure seeks to prevent money laundering and terrorist financing, the Court considers that the said measure is disproportionate to the objective of general interest pursued and poses a more serious interference able to offset any benefits.

In the aftermath of the ECJ ruling, various EU Member States have suspended the open access to their BO registers. However, the impact of the decision remains to be seen, as one might consider that it might not only affect the European legislative framework, but might also influence jurisdictions on an international level, an example being the United Kingdom.

The official press release of the European Court of Justice can be found here.

The FiveComply team of experts shall remain vigilant and keep you updated in regards to all recent legislative and regulatory developments.

Contact us now for any questions you may have:
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While the crypto market is shaken by the failure of FTX, a digital asset settlement platform will be going live inside the financial system of United States (U.S.) for 12 weeks testing the regulatory framework existed in the United States as well as the adoption and collaboration of the broader U.S. banking community.

A group of banking institutions including HBSC, Mastercard, PNC Bank, SWIFT and TD bank among others will participate in this experimental project alongside the New York Federal Reserve Bank.

The project, that will be using Distributed Ledger Technology (DLT) (e.g., blockchain) and it will run exclusively on US dollars, has as a main scope the simulation of digital money issued by regulated entities in the U.S. context.

The pilot will test how banks using digital dollar tokens in a common database can help speed up payments. The banking group stated that they are not committed to further development of the project. Also, it is important to note that during this project only simulated data will be used. Despite that, there is potential for digital money to be used in multi-currency operations and regulated stablecoins.

FTX one of the biggest crypto-exchanges in the last few years has collapsed overnight and filed for bankruptcy last week, leaving many of its users unable to withdraw their funds and causing a chaos in the global crypto-scene.

The FTX case has highlighted once again a fundamental issue about the crypto-industry i.e.  never use a token you have created as collateral, unless you have the cash available behind it for withdrawals.

Different stakeholders should also take some lessons from this collapse, including regulators and investors.

Most importantly, regulators should be in a position to continuously assess the financial position of systemic financial firms like FTX and they should always allocate their resources efficiently, in order to proactively identify issues before they arise. FTX possesses multiple licenses from regulators worldwide that unfortunately failed to identify the issues and risks.

As a result, one might expect increased regulatory scrutiny resulting from the FTX collapse including stricter requirements by the regulators before and after issuing any crypto-related licenses. In Europe, it now becoming even more essential for the EU Proposed Regulation on Markets in Crypto Assets (MiCA) to enter into force. EU lawmakers are expected to vote on the Markets in Crypto-Assets regulation bill (MiCA) by February 2023, however, the FTX case might create further delays. Furthermore, we might see enhanced and/or new crypto-regulations in other jurisdictions as well.

Last but not least, let’s hope that investors have now learned their own lesson; that is investing in only what they can understand.

The FiveComply team is consisted of a team of experts on regulatory compliance matters and can provide you with the latest updates about existing and upcoming crypto-related regulations worldwide.

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.

On 1^st of September 2022, the Financial Services Authority (FSA) of Seychelles has issued its final Business Continuity Plan (‘BCP’) guidelines aiming to provide guidance to the regulated entities and licensees in creating and submitting their BCP to the FSA, as and when required.

The BCP guidelines are applicable to all licensees listed below and as per their respective legislation:

• All licensees under the International Corporate Service Providers Act, 2003
• Insurance Companies under the Insurance Act, 2008
• Insurance Brokers under the Insurance Act, 2008
• All licensees under the Securities Act, 2007
• Fund Administrator under the Mutual Fund and Hedge Fund Act, 2008

The FSA notes that licensees should incorporate business continuity considerations into their business process development to proactively mitigate the risk of service disruptions. In creating an effective BCP, the licensees should assume a reduced demand for services during any disruption and identify means to counteract the identified items or any other situations that may arise.

In addition, the FSA understands that each firm has its own organisational and legal structure thus, significant differences might arise when considering the nature and scope of the business activities conducted. In this respect, the FSA notes that the licensees might be impacted differently depending on their location and nature of their business, hence, there could be various approaches to business continuity planning. Furthermore, the implementation and practical aspect may evolve over time depending on various situations that may arise.

Further to the above, the FSA considers the below as key points in business continuity planning for the consideration of the licensees:

• Planning, testing, and reviewing;
• Focusing on critical operations;
• Considering special circumstance under large scale disruptions;
• Coordinating business continuity planning with outside parties;
• Exerting strong leadership.

The BCP Guidelines include amongst others, guidance on the structure and components of the BCP, risk assessment, business impact analysis, responsibilities of the board of directors / senior management and relevant appendices advising on the key components to be included in the BCP and other important considerations.

Our team of experts can assist you in implementing and updating your Business Continuity Plan according to the latest regulatory updates.

The Seychelles Cabinet of Ministers has endorsed the National Risk Assessment (NRA) Report on Virtual Assets (VA) and Virtual Assets Service Providers (VASPs) during a scheduled cabinet meeting on August 24th, 2022, permitting the National Anti-Money Laundering and Countering the Financing of Terrorism Committee (NAC) to proceed with the adoption and publication of the Report.

The endorsement is an important milestone, given that the popularity and public adoption of VAs have grown in Seychelles in recent years, and consequently, the increasing ML/TF threats associated with them.

NAC will subsequently be proceeding with the preparation of a policy framework, guided by the findings, and aligned with anti-money laundering (AML) and countering the financing of terrorism (CFT) international best practices, and have committed to the Cabinet that the same will be presented within three months.

FiveComply will continue to keep you updated with regards to further developments.

The Financial Services Authority (FSA) of Seychelles advised on the 16^th of August, 2022 that the National Risk Assessment (NRA) Report pertaining to the NRA on Virtual Assets (VA) and Virtual Assets Service Providers (VASPs), which was conducted by Mr. Danny Sanhye of BDS Forensics with the assistance of a Working Group of technicians, is currently undergoing due process for approval and is expected to be finalised for distribution by end of August 2022. This comes following a press release by the Ministry of Finance, National Panning and Trade which was published on Friday 15^th July, 2022.

The primary objective of the VA/VASP NRA was to aid the FSA and other relevant competent authorities within the National AML/CFT Committee (NAC) to assess the Money Laundering (ML) and Terrorist Financing (TF) risks, feasibility and drawbacks associated with having a VA/VASP regime in Seychelles, and to provide an action plan for consideration.

The conclusion of the NRA was that the overall exposure of Seychelles to ML and TF risks arising from VA and VASPs is “Very High” and that this is largely attributed to certain unregulated activities occurring predominantly through the use of Seychelles incorporated legal persons.

The NRA Report is expected to provide some guidance and clarity on the national position and strategy on the matter of VA and VASPs, however, NAC highlighted that this is only the first step towards the development of legislation in line with the established policy position that will allow Seychelles to meet its obligations in regards to Recommendation 15 (REC 15) of the Financial Action Task Force (FATF) Standards, and as such, a wider country NRA is also scheduled to be conducted towards the end of 2022.

The Cyprus Securities and Exchange Commission through the issuance of Circular C518, has informed all CIF regulated entities of the new Prudential Supervision Forms:

1. Prudential Form 165-03 ‘Prudential Supervision Information’

   The Prudential Form 165-03 updates and replaces the Form 144-14-11, the purpose of which is to collect relevant information by the CIFs in order to facilitate CySEC’s supervisory role in the areas of:

   1. the assessment of Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP),
   2. the assessment of audited financial statements,
   3. the safeguarding of clients’ money.

In this respect, Form 165-03 has been updated to incorporate the changes that have taken place following the introduction of the new prudential framework for investment firms (IFR/IFD).

Form 165-03 should be considered as an annual reporting obligation for all the CIF regulated entities and it should be submitted to CySEC through the Transaction Reporting System (TRS), by the 30^th of June, annually. Exceptionally for this year end i.e., 31/12/2021, the said from should be submitted via TRS on 30^th of July 2022.

FiveComply wishes to remind CIF regulated entities that the deadline to submit the Form 165-03 for the year ended 31/12/2021 is no later than the 30^th of July 2022.

1. Prudential Form 165-04 ‘Application Form for prudential permissions’

   The ad-hoc Prudential Form 165-04 aims to facilitate the CIFs when requesting CySEC’s permission, with reference to the Regulation (EU) 2019/2033 (‘IFR’), Regulation (EU) 575/2013 (‘CRR’) and Law L.165(I)/2021, where applicable, in the following areas:

   1. Application for interim profit recognition,
   2. Application for liquidity reduction.

   Therefore, the CIFs that wish to request CySEC’s permission, for any of the areas mentioned above, should complete only the relevant Section(s) of the Form 165-04 for which the permission is requested and submit it to CySEC via TRS. The remaining sections, not applicable for the CIF, should be left empty.

Our team of FiveComply experts can assist you in complying and submitting in a proper and timely manner the regulatory reports/forms imposed by CySEC. Contact us now for any questions you may have!

The FSC Mauritius has issued the FSC Rules to be implemented in connection to the Virtual Asset and Initial Token Offering Services (VAITOS) Act 2021; the FSC Rules have been open to the public for their comments, feedback and suggestions until the 15 of June 2022.

Based on the results of the Consultation, the FSC Mauritius shall issue the final FSC Rules that shall be applicable in regards to the VAITOS Act 2021.

The FSC Rules shall apply to all virtual asset service providers that carry out business in Mauritius and provide guidance on the fees applicable, minimum capital requirements, cybersecurity, advertisements, etc.

More specifically, the FSC has issued the following FSC Rules:

• Virtual Asset and Initial Token Offering Services (Capital and Other Financial Requirements) Rules 2022
• Virtual Asset and Initial Token Offering Services (Client Disclosure) Rules 2022
• Virtual Asset and Initial Token Offering Services (Custody of Client Assets) Rules 2022
• Virtual Asset and Initial Token Offering Services (Cybersecurity) Rules 2022
• Virtual Asset and Initial Token Offering Services (Publication of Advertisements) Rules
• Virtual Asset and Initial Token Offering Services (Risk Management) Rules 2022
• Virtual Asset and Initial Token Offering Services (Statutory Returns) Rules 2022

The abovementioned Rules, are not yet applicable and may be revised in light of the views and comments received, during the consultation exercise.

FiveComply remains vigilant shall keep you posted in regards to any updates on the matter.