CySEC Finds AML/CFT Lapses in Regulated Firms’ Operations

The regulator did not reveal the name of any non-compliant company.

Cyprus Securities and Exchange Commission, popularly known as CySEC, has issued a circular on Wednesday pointing at various regulatory lapses by the regulated financial services companies with mandatory due diligence measures, AML/CFT risk assessments, and transaction monitoring.

The findings of the regulator were based on its several onsite inspections performed in 2019 and 2020. CySEC’s primary focus was to assess regulatory firms’ compliance with mandatory laws to curb money laundering and terror financing.

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“On a number of occasions, it was observed that the AML/CFT risk assessments were not reviewed to evaluate whether they needed adjustment upon subsequent changes of the customers’ risk profiles,” the regulator noted. This led to an outdated assessment of customers’ money laundering and terror financing risks.

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Additionally, the regulator highlighted several weaknesses on the part of the regulated companies with their customers’ due diligence measures. 

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According to CySEC, many companies are not properly maintaining customers’ economic profile, which includes size and source of income, expected turnover and the source of funds. Additionally, it found weaknesses in the risk-based approach processes to verify the collected customer data and information.

Moreover, the regulator found that many financial services providers have submitted insufficient and inaccurate information about the customers’ main business activities and operations. It further found lapses in the calibration of transaction monitoring based on customers’ business models.

The latest circular on AML lapses followed another similar circular that pointed out several other regulatory shortcomings in CIF operations.

However, CySEC did not reveal the name of any entities where it found the lapses. The regulator is now likely to impose penalties on these companies.

“Regulated entities need to be making constant and continuous efforts to ensure processes to prevent ML/TF are adequate. The consequences of failing to manage risks associated with ML/TF are serious and cause damage not only to Regulated Entities but to the financial system as a whole,” CySEC Chairwoman, Demetra Kalogerou, noted.

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