NEW LAW REGULATING FIDUCIARY SERVICES IN CYPRUS
The new Fiduciary Law (Law Regarding the Regulation of Businesses Providing Fiduciary Services and Related Matters, N.196(I)/2012) (the “Law”) came into force on 21st December 2012 when it was published on the Cyprus Government gazette. We are waiting the Cyprus Securities & Exchange Commission (CySEC) as the Regulatory Authority to inform us on whether an official English translation will be prepared.
The Law purports to regulate the provision of management and administration services to corporate entities and trusts, the provision of nominee and protector services for corporate entities and trusts. The provision of registered office in Cyprus, the opening and administration of bank accounts shall also be deemed as regulated activity.
As per the new Law, existing fiduciary firms need to:
1. Send a notification letter to CySEC informing them of their presence, as well as of their intention to submit or not an application for licensing. This letter should be sent to CySEC within two (2) months from the date of the Law enforcement, i.e. by the 20th of February 2013. According to the Law, the letter should include the following information:
- The name of the company
- The company’s shareholders
- The company’s directors
- Short description of the company’s activities.
2. Submit an application for licensing along with all relevant documentation as required by the Law, within four (4) months from the date of the notification letter. Please note that relevant application forms have not yet been prepared by CySEC.
3. Comply immediately with the provisions of the Law.
The most important requirements for a successful application are the following:
(a) The Head Offices of the licensee must be based in Cyprus.
(b) The licensee must have at least two (2) qualified “Principals”, who are fit and proper with adequate experience in the field, academic background and professional skills which will enable them to ensure the correct and prudent management of the licensee.
(c) The licensee must employee an in-house lawyer or alternatively work with an outside lawyer on an annual basis.
(d) The licensee must employee a compliance officer which has to be firstly approved by CySEC.
The law excludes registered legal firms, auditors and banks from its scope unless they opt to be regulated under it. Both the Cyprus Bar Association and the Institute of Certified Public Accountants of Cyprus will be regulating their members since they have their own rigorous regulatory arrangements.
Those who provide Fiduciary Services and have been either rejected by CySEC or they did not apply for the license or they do not comply with the provisions of the Law, may be held liable for a criminal offence and/or civil liability for an administrative fine of up to €1 million and or 5 years imprisonment.
The main regulatory focus will be the prevention of money laundering. CySEC will not publish authorisations but will maintain a register of approved service providers.