Identity of customer rules tightened in wake of massive leak

Written by on April 7, 2016 in News with 0 Comments

Indentity leakATHENS (Reuters) – Cyprus is enhancing requirements on commercial banks and intermediaries to know the identity of their customers, days after a massive data leak detailing how the world’s rich skipped through loopholes to park cash in low-tax jurisdictions.

Tighter regulations forcing banks and intermediaries to know their clients, as well as suspending account transactions for non-compliance, came into effect on Thursday, the Central Bank of Cyprus said in a statement.

The east Mediterranean island is home to thousands of offshore companies, many of them Russian.

Britain’s Guardian newspaper reported on Sunday a network of secret offshore deals and loans helped people close to Russian President Vladimir Putin get rich, identifying some firms based in Cyprus. One bank named, Cyprus-based RCB, denied any wrongdoing.

The disclosures were part of a leak of documents from Panamanian law firm Mossack Fonseca on the financial arrangements of prominent figures worldwide, from Putin’s circle of friends to relatives of British Prime Minister David Cameron.

Cypriot legislation allows the creation of companies with a “nominee” structure whose beneficiaries are not listed in company filings, but authorities say they impose a “know your customer” regulation on banks and intermediaries.

Tighter requirements were applicable immediately, the Central Bank said in a circular to commercial banks on Thursday.

It included a raft of new provisions stipulating that banks have personal contact to verify identities of beneficiaries and their risk profile, in addition to the verification process from intermediaries.

It also imposes a suspension of bank account transactions if that verification is not carried out within a three-month period.

“Today’s amendment is part of a continuous effort to further boost the regulatory framework, always with the aim of zero tolerance to deficiencies or weaknesses which could possibly lead to opportunities of money laundering, or terrorist financing,” the Central Bank said in a statement.

The OECD said in October 2015 that Cyprus was largely compliant with its exchange of information standards, along with Luxembourg and the Seychelles.

(By Michele Kambas; Editing by David Holmes)

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