CySEC instructs brokers to crack down on tax offenders

Regulatory pressure on Cypriot companies firming up, this time its about tax dodging

Cypriot financial regulatory authority CySEC has released a press release today detailing information regarding an upcoming proposal by the European Commission that is aimed to fight terrorist financing and money laundering activities. CIFs by no means are expected to determine whether their clients are paying the appropriate amount of taxes.

However regulated entities are most certainly obliged to assess whether their clients transactions are in any way aimed at dodging taxes or money laundering. As soon as any company has grounds to believe a client of theirs might be engaging in tax evasion or money laundering activities the corresponding authorities have to be notified in a timely manner.

According to CySEC all regulated companies have to implement adequate systems to identify, prevent and deter suspicious transaction activity. The companies are also expected to apply due diligence measures to ensure that their clients are screened against databases or some third party checks related to tax-related news.

The second part of the press release raises a lot of questions: according to CySEC regulated entities have to monitor their relationship with their clients to ensure that deposited amounts in the account are similar to the ones that the client has indicated during account opening and the economic profile of the customer.

Considering the fact that usually clients themselves are filling the forms used to obtain such information by financial services companies, this procedure is not guaranteed to accomplish anything. We are not of the opinion that companies have to be completely ignorant about what the client declares, however it would take an excessive amount of effort to obtain relevant information about every customer especially for countries outside the EU.

For the full press release visit CySEC’s website.

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