The ban on the maintenance of Shell-companies in Cyprus

The Central Bank (CB), being the Financial Regulator of Cyprus, has established a ban on the service of shell companies (dummy companies).

The Directive "On the prevention of money laundering and financing of terrorism" (Prevention of Money Laundering and Terrorist Financing Directive, February 2019) issued by the Central Bank of Cyprus provides a definition of shell company that may be recognized as a limited liability entity or other business entity that does not have physical and economic presence in the country of incorporation/registration and organization, not engaged in economic activity in the territory of country is incorporation/registration.

At the same time, the Central Bank gives direct instructions to banking organizations and obliges them not to establish business relations with shell-companies in cases:

• The company is registered in a jurisdiction in which organizations are not required to submit to the public authorities financial statements in respect of which an independent audit has been conducted, or does not prepare audited financial statements on a voluntary basis by independent qualified auditors or accountants;

• The company is a tax resident of a jurisdiction included in the EU list of non-tax collaborators, or in the list Of the OECD global forum on transparency and exchange of tax information, or in the list of harmful tax regimes of another recognized organization, or does not have any tax residency at all.

This Directive is a mandatory regulation and applies to all credit institutions. Thus, if attributes of shell companies are detected, credit institutions will be obliged to refuse to cooperate with such organizations.

On materials of the following website: https://www.centralbank.cy/images/media/redirectfile/AML/5th-CBC-DIRECTIVE-FEB%202019-ENG.pdf