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ESMA admonished CySEC as ‘Partially Compliant’ with new reporting rules


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The European Securities and Markets Authority (ESMA) recently conducted a peer review of compliance by the national oversight authorities of thirty member states with new rules regarding suspicious transaction detection and reporting. These rules have been in force since 2017. Eight member organizations were rated as “Partially Compliant”, its lowest category. CySEC, which has spent the last three years upgrading its entire oversight process, based upon an earlier ESMA report, was included in this group of eight. CySEC has objected to the findings.

ESMA and CySEC have been at odds with one another for a number of years. Last year, ForexFraud.com reported:

For the first few months of this year and last, CySEC had been responding to heavy-handed pressure from ESMA, demanding that they get more demonstrative about the apparently poor business practices of their licensees. A flurry of rule changes, guidelines, and procedural revisions soon hit the island of Cyprus, ostensibly to tighten the screws on island offenders that were under the impression that regulatory oversight was lax and absent.

The appraisal continued:

However, it is one thing to issue new pronouncements, and quite another to monitor compliance, ferret out the bad guys, and levy fines and penalties. There have been a few minor fines assessed, but the jury is still out as to whether CySEC has changed its spots.

According to a report from CySEC, issued this past March, the agency has done a yeoman’s task in implementing new rules and regulations, investigating firms on the island, and taking on an expanded role. Demetra Kalogerou, chairwoman of CySEC, told In-Cyprus.com at the time:

The expanding number and types of regulated entities, their increasing size as well as their increasing complicated structures and activities, have led to an increase in the workload of the Cyprus Securities and Exchange Commission (CySEC).

Kalogerou also noted that €25.5 million in fines had been assessed over the past six years and that the agency had gone a long way “to establishing good corporate governance practices and an ethical culture in regulated entities, reflecting the core principles of integrity, transparency and accountability”. With this progress as a backdrop, CySEC objected to ESMA’s findings, stressing that:

The Report had failed to take into consideration the market’s characteristics.

Nonetheless, as reported by In-Cyprus:

The Report sees a significant increase in suspicious transaction and order reporting and finds that national supervisors can do more to ensure all financial participants play their part in combating market abuse. Nine national competent authorities were assessed as fully compliant, another 13 as broadly compliant and eight – including Cyprus – as partially compliant.

In its defense, CySEC officials noted these additional items:

  • The agency conducts a substantial umber of audits in Cyprus over online transactions;
  • Several investment companies also issue a number of financial instruments that do not fall within the auspices of the “Market Abuse Regulation” rules;
  • ESMA failed to note in its report that CySEC had identified during its audits a number of instances of “non-reporting or low quality reporting of suspicious transactions”; and
  • CySEC continues to work diligently with other national Authorities to follow up on all cross-border transactions of a suspicious nature, as defined by ESMA rules.

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ESMA admonished CySEC as ‘Partially Compliant’ with new reporting rules

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