Our CEO Gabriel Styllas provides his expertise on global licensing, compliance and operations in his interview in the recent edition of GameChangersMagazine below:

On 21^st of February 2022,  the European Commission has published in its official journal (‘OJ’) the revised list of High-Risk Third Countries. The Commission Delegated Regulation (EU) 2022/229 (‘the Delegated Regulation’), amends Delegated Regulation (EU) 2016/1675 on the list of high-risk third countries with strategic anti-money laundering (AML) and counter-terrorist financing (CTF) deficiencies under the Fourth Money Laundering Directive ((EU) 2015/849) (MLD4).

The Delegated Regulation makes the following changes to Delegated Regulation (EU) 2016/1675:

• Burkina Faso, Cayman Islands, Morocco, Senegal, Haiti, the Philippines, South Sudan, Jordan and Mali are added to the list of third countries that are identified as having strategic AML and CTF deficiencies.
• Ghana, Botswana, Mauritius, the Bahamas and Iraq are removed from the list of countries identified as not having strategic AML and CTF deficiencies. The Bahamas, Botswana, Ghana, Iraq and Mauritius have strengthened the effectiveness of their AML/CFT regime.

Therefore, in the Annex to Delegated Regulation (EU) 2016/1675, the table under point ‘I. High-risk third countries which have provided a written high-level political commitment to address the identified deficiencies and have developed an action plan with FATF’ is replaced by the following:

The Delegated Regulation enters into force twenty (20) days following its publication in the OJ (i.e., 13 March 2022).

You can contact our firm for more information and guidance.

The Cyprus Securities and Exchange Commission (CySEC) has issued Circular C483 on January 18^th, 2022, to remind Cyprus Investment Firms (CIFs) of the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) revised joint Guidelines on the assessment of the suitability of members of the management body and key function holders (the ‘Guidelines’).

CySEC has adopted the Guidelines by incorporating them into its supervisory practices and regulatory approach. The Guidelines are applicable from 31 December 2021 and have updated and repealed the previous versions of the other relevant Joint Guidelines.

The amendments in the Guidelines, took into consideration the revised Capital Requirements Directive (CRD V) and the Investment Firms Directive (IFD), in particular with regards to money laundering and financing terrorism risks, gender diversity, as well as, the new legislative framework for investment firms adopted in 2019 by the Investment Firms Regulation (IFR).

The purpose of the Guidelines is to specify the requirements regarding the suitability of the members of the management body, in particular, the notions of sufficient time commitment, honesty, integrity and independence of mind of a member of the management body, adequate collective knowledge, skills and experience of the management body and adequate human and financial resources devoted to the induction and training of such members. They further specify that, the notion of diversity shall be taken into account for the selection of members of the management.

The Guidelines also specify elements regarding the suitability of the heads of internal control functions and the Chief Financial Officer (CFO), where they are not part of the management body, including the principle of independence applicable to certain members of the management body in its supervisory function. If a relevant institution’s assessment concludes that a key function holder is not suitable, then the relevant institution should either not appoint the individual or take appropriate measures to ensure the appropriate functioning of this position.

You can contact our firm for more information and guidance.

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.

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.