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Cyprus banks overdid it with risk prevention tactics
May 07, 2019
Cyprus is experiencing an uncontrolled mass termination of registered companies and certain reduction of applications for new registration. According to the president of the Cyprus Fiduciary Association (CFA), Michael Christos, this presents a great concern for local business sectors.
The mass outflow of companies operating in Cyprus and their establishment in other jurisdictions will have a domino effect for the local economy, as anticipated by the president of CFA. The very foundation of International Business in Cyprus is now at risk.
Recent directives of the Central Bank of Cyprus, in addition to worldwide new measures against money laundering and tax evasion, have put local banks under great pressure to close client’s accounts. This has already led to the closure of a lot of companies, most of which are not ‘shell companies’.
As noted by Michael Christos, it is an absolute must to terminate shell companies. But Cyprus has now gone to the extreme of being far too devoted to the implementation of anti-money laundering regulations.
The risk prevention strategy of Cyprus banks basically is also influencing companies which are operating a legal business. As a result of these actions, they either close their accounts and leave the island of their own accord, or they are forced to do so, even if there are no reasons for this type of actions.
Simply put, commercial banks of Cyprus are so dedicated to fulfil Central Bank instructions, that they have proceeded with the closure of both ‘bad’ and ‘good’ companies, so as not to take any risks at all.
Consequently, Cyprus’ corporate services provision model has drastically changed, without any strategy in place. This presents a direct risk to the country's economy since both, state tax revenue and employment will be affected.
According to the Web Portal of the Republic of Cyprus, there was a 23% reduction in the number of applications for registration of new companies within the country: 1,105 applications by end of March 2019, compared to 1,436 by end of March 2018.
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