2021 MLCO Report – Previous findings and Guidance

2021 MLCO Report – Previous findings and Guidance

February 23, 2022

As we enter into the reporting period, CX Financia’s  Compliance team has produced a helpful overview of the previous year’s reporting. This will help you prepare  for the upcoming reporting obligations.

As part of its supervision role, CySEC conducts an annual assessment of all the Annual Reports of the MLCO (the ‘Reports’). This assessment relates to Regulated Entities’ compliance with their obligations under the Prevention and Suppression of Money Laundering and Terrorist Financing (“ML/TF”) Law (the ‘Law’) and the CySEC Directive for the Prevention of ML/TF (the ‘Directive’).

In 2021, the AML/CFT Department carried out checks to evaluate the adequacy and appropriateness of procedures. In 2021, the organisation conducted on-site reviews into 60 supervised entities. It also received information from 431 supervised entities, based on Circular c416 , on the “Business relationship with persons who have acquired Cypriot citizenship under the Cyprus Investment Programme(CIP)”.

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Main weaknesses and deficiencies found in CySEC’s 2020 assessment

In the most recent assessment, CySEC found the following common and recurring weaknesses and deficiencies, to which Regulated Entities should apply corrective measures immediately:

  • On some occasions, there was not sufficient analysis of the specific method/way of conduct of the inspections and reviews performed by the MLCO. This is required in order to determine the degree of compliance of the Regulated Entity in relation to the prevention of ML/TF.
  • In addition, in various cases, the MLCO, did not make sufficient reference to information in relation to high risk customers.
  • The information about the systems and procedures for the ongoing monitoring of customers’ accounts and transactions that are compared with the data and information kept in their economic profile, was not always adequate.
  • The BOD minutes did not include the remediation of any weaknesses and/or deficiencies and the implementation timeframe for the remediation. This is required as per paragraph 10(3) of the Directive.
  • A number of Reports did not include comparative data with the previous year of Internal Suspicion Reports to MOKAS.
  • In a number of Reports we noted that because the entities concerned were not operational, no information was available.

For a detailed analysis of the weaknesses that CySEC identified please refer to circular C437

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Mitigating actions for addressing the MLCO Report’s findings

Regulated Entities should ensure the following obligations are in accordance with the Law and the Directive:

  • The correct preparation of the Annual Report and the sufficient assessment of compliance in relation to the prevention of AML/CFT
  • The sufficient assessment and approval of the Annual Report. Furthermore, the BoD should ensure the remediation of any weaknesses and/or deficiencies and the implementation timeframe for the remediation.
  • The implementation of the Law and Directive requirements to ensure that appropriate systems and controls are in place. This will help entities to achieve the abovementioned requirements in relation to the prevention of AML/CFT

In general, all CySEC regulated entities should consider the issues raised in circulars and thematic reviews, in order to enhance their policies and arrangements and to ensure compliance with the applicable legislation. Entities shall prepare in advance for inspections by CySEC, especially on the topics mentioned in the regulator’s supervisory review.

MLCOs should assess the degree of AML compliance and share their results on the Report.

Furthermore CySEC regulated entities should have in mind the restrictive measures imposed to Russia. Please refer to our previous article here

The CySEC remains committed to continue providing guidance to the regulated entities in order to achieve high level of compliance.

This guidance and support by CySEC comes through the issuance of:

  • Circulars, where CySEC provides guidance and Q&As to assist firms in complying with the applicable legislation.
  • Thematic reviews, where CySEC provides findings and weaknesses identified from inspections, as well as best practices that are considered acceptable.

How can CX Financia help you?

CX Financia is always looking at ways to assist fellow Compliance and AML professionals. If you need assistance with your AML Report and preparing for the upcoming compliance reports, please do contact us to see how we can support you before, during and after your annual reporting obligations.

C.X Financia can help your organization design and execute an effective approach to AML/CFT. Through tailored training programs for employees, we can:

  • Help design an effective AML/CFT Program in order to support your organization’s compliance and regulatory obligations
  • Offer support in preparation during a AML/CFT onsite inspection in order to ensure a successful outcome
  • Help you understand best practices and guidelines designed in order to mitigate AML/CFT  issues.

CX Financia is ready to help your AML department address modern challenges in today’s technology and regulatory climate. Contact us today to arrange your personalized training

Contact us and find out more about our services at [email protected]

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