Cyprus Securities and Exchange Commission (the “CySEC”) from time to time performs onsite inspections to its Regulated Entities to assess their compliance with the Prevention and Suppression of Money Laundering and Terrorist Financing Law (‘the Law’) and the CySEC’s Directive for the Prevention and Suppression of Money Laundering and Terrorist Financing (‘the Directive’). Although CySEC has identified some good practices applied by Regulated Entities, some common weaknesses/deficiencies were also observed across Regulated Entities.
The main weaknesses found by CySEC in the last inspection are summed up below:
- Inadequate CDD measures
- Inadequate review of AML/CFT Risk Assessments
- Insufficient calibration of transaction monitoring systems
For more info, please refer to Circular C437.
As an authorization prerequisite, CySEC requires Regulated Entities to have Heads of Compliance and Money Laundering Compliance Officers (MLCOs) who are suitably competent and capable of effectively performing the roles. Firms should carefully consider how the appointed individuals can demonstrate these qualities ahead of seeking regulatory approval.
Heads of Compliance and MLCOs are important roles within Regulated Entities. They need to have the necessary skills and knowledge, from training and experience, to be effective. The level of those skills and knowledge should be in line with the size of the firm and its risk of harm.
CX Financia’s Compliance team provides to Compliance officers some important tips in order for them to ensure that they stay up to date and have the necessary knowledge and experience required to carry out their duties effectively.
Training of Compliance Officers
Appointed Compliance officers need to:
- Attend on a frequent basis, training courses tailored or relevant to the type of firm’s operations. Furthermore, they need to have attended recent and up-to-date training to provide relevant knowledge of the current regulatory rules and expectations.
- Attend training courses with sufficient length and depth to gain knowledge to carry out their appointed roles. Very short ‘introductory’ training courses, alone, do not provide sufficient coverage or depth to be useful for a Head of Compliance or MLCO, even in the smallest firms.
- Individuals holding the positions of Head of Compliance and MLCO are required to have the CySEC Certifications. Please see “Certification Directive” paragraph below for more information.
On 4th of September 2020, CySEC issued the updated Certification Directive concerning all persons who shall attain the CySEC Certifications and are registered in the CySEC public register.
The Directive provides clarification of who is required to hold a CySEC basic certificate, or a CySEC advanced certificate and/or CySEC AML examination, along with the annual CPD requirements for each certification.
CySEC Basic Certification is the minimum certification for persons who perform the investment services/activities of
- reception and transmission of orders,
- execution of orders,
- marketing of UCITS or AIF units.
CySEC Advanced Certification is the certification for persons who perform the above-mentioned services or perform the following investment services/activities
- dealing on own account,
- portfolio management,
- investment advice,
- underwriting or placing of financial instruments with or without firm commitment basis,
- operation of an MTF or OTF,
- UCITS or AIF investment management
- portfolio management and risk management of the AIFM,
- the representatives of an internally managed AIF, AIFLNP.
CySEC AML Certification is the certification which is suitable for individuals responsible for AML activities:
- AML Compliance Officer (AMLCO)
- assistant AML Compliance Officer
Continuous Professional Development (CPDs)
CySEC requires all persons holding the CySEC Certifications to attend seminars related to the relevant legislative framework, annually and before their annual renewal.
Specifically, holders of
- Basic Certification must complete 10 CPD hours
- Advanced Certification must complete 15 CPD hours
- AML Certification must complete 10 CPD hours, related to the AML framework.
- Basic and AML Certifications must complete 5 CPD hours relevant to the legislative framework and 10 CPD hours related to the AML framework.
- Advanced and AML Certifications must complete 10 CPD hours relevant to the legislative framework and 10 CPD hours related to the AML framework.
While relevant experience to demonstrate competency and capability may come in many forms, we note that:
- Individuals that have previously held the same or similar approved positions may demonstrate that they are suitable for the role. However, that does not mean that CySEC will automatically approve an applicant.
- Successful applications for Heads of Compliance and MLCOs have a range of backgrounds and experience. This includes individuals in compliance and legal teams, lawyers, accountants, and consultants. The experience of an applicant who has only previously worked in a front-line role (and in the absence of other training or experience) is often insufficient to demonstrate that they have the necessary skills and knowledge to establish and operate a compliance function.
- In some smaller firms, it may be appropriate and proportionate for the owner and/or chief executive to hold these functions themselves. However, we still expect those individuals to have relevant training and experience to ensure their business will comply with the relevant rules and regulations for their firm.
How can CX Financia Help You?
If you are looking for a way to strengthen and organize your Company’s compliance mechanism and provide your employees with the necessary training to help them protect your entity from hefty fines you should reach us. We look forward to being of value in covering your needs on your compliance program or personnel training.
C.X. Financia offers a wide range of support services that will help your organization design and execute an effective approach to AML. Through tailored training programs for employees, we can:
- Help design an effective Anti-Money Laundering Program to support your organization’s compliance and regulatory obligations
- Offer support in preparation during a Regulatory AML onsite inspection in order to ensure a successful outcome
- Help you understand best practices and guidelines designed to detect, investigate, report, escalate and resolve red flags, money laundering, and terrorist financing issues.
Our experienced team 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