Despite the fact that tax-evasion is already a predicate offence for money-laundering in Cyprus, the Cyprus Securities and Exchange Commission is asking regulated firms to treat it as such, prompting suspicions that they are not doing so at present.

Despite the fact that tax-evasion is already a predicate offence for money-laundering in Cyprus, the Cyprus Securities and Exchange Commission is asking regulated firms to treat it as such, prompting suspicions that they are not doing so at present.

Section 51A of the Assessment and Collection of Taxes Law, as amended in December 2012, states that a fraudulent non-payer is guilty of a criminal offence punishable with imprisonment of at least one year. Meanwhile, section 5 of the Prevention and Suppression of Money Laundering and Terrorist Financing Laws of 2007–2013, states that predicate offences are all acquisitive criminal offences punishable with imprisonment exceeding one year.

The maximum prison sentence for money-laundering in Cyprus, as in the UK, is 14 years. It does not matter whether the predicate offence is subject to the jurisdiction of the Cypriot courts or not.

The CSEC is telling regulated entities that they must take a risk-based approach to:

i implementing adequate and appropriate systems and processes to detect, prevent and deter money laundering arising from serious tax offences;
ii ensuring that they do not knowingly aid or abet 'clients of prospects' in the commission of tax offences;
iii when applying 'client due diligence' measures, to screen clients against databases or third-party checks for adverse tax-related news; and
iv to keep monitoring the business relationships they have and to ensure that the actual amounts of funds that their clients deposit are consistent with the amounts indicated during the account-opening process and with the clients' economic profiles.

Regulated entities are not expected to find out whether their clients are fully compliant with their tax-related obligations all around the world. They are, however, expected to determine whether there are reasonable grounds to suspect that client accounts contain proceeds derived from serious tax offences.

Rather irrelevantly, the regulator also notes that the European Union is planning to make it a legal obligation for financial firms in all its member-states to treat tax-evasion as a predicate crime.