Recent legal disputes in Cyprus highlight growing concerns among companies penalised by the Registrar of Companies for failing to update their beneficial ownership details. The fines, some reaching millions of euros, have sparked significant backlash, with legal experts arguing that the imposition of these penalties may be flawed due to procedural issues. The first court hearing to address these concerns is scheduled for 2 August 2024.
Prominent legal figures have criticised these punitive measures, pointing out problems such as inadequate due process and excessively high fines. They advocate for legislative reforms to create fairer compliance mechanisms. According to Politis newspaper, the Cyprus Bar Association and various Members of Parliament (MPs) are actively engaged in addressing these issues, pushing for a more balanced approach that ensures compliance without imposing disproportionate financial burdens on businesses.
A notable development is the announcement of a new legislative proposal by an MP. This proposal seeks to amend The Prevention and Suppression of Money Laundering Activities Law No. 188(I)/2007, with two key provisions. Firstly, the proposal includes the suspension of penalties for up to two years for very small businesses (defined as those with fewer than 10 employees and an annual turnover or balance sheet total not exceeding €2 million) that have had the same beneficial owner for the past five years. This suspension would apply if these businesses submit their UBO details within 90 days of the compliance deadline. Secondly, the proposal suggests that the Registrar could cancel the fine if the company complies with the UBO requirements within the two-year suspension period.
Additionally, a proposal to reduce daily fines from €100 to €30 and total fines from €20,000 to €5,000 is under discussion. This proposal, supported by various legal and business organisations, is currently being debated, with some resistance from the Registrar of Companies and other financial institutions.
There is also ongoing discussion regarding dormant companies. Members of the Commerce Committee have requested detailed statistics on companies, particularly those inactive for years, established before 1974, or located in occupied areas.
The outcome of these legal challenges and proposed reforms could significantly impact the current regulatory landscape.
In case you require any clarification or assistance in submitting the required information in the Register of Beneficial Owners of the Department of Registrar of Companies and Intellectual Property, as welI as the Cyprus Trusts Beneficial Owners Registry overseen by the Cyprus Securities and Exchange Commission, please contact us at info@compliancemk.com.
