Legislation

1. What domestic legislation enables economic, financial and trade sanctions to be implemented in your jurisdiction?

Law No. 58(I) of 2016 on the Implementation of the Provisions of the Resolutions or Decisions of the United Nations Security Council (Sanctions) and the Decisions and Regulations of the Council of the European Union (Restrictive Measures) governs the implementation of sanctions in Cyprus. It also imposes penalties for breach of the applicable sanctions and restrictive measures.

Cyprus, as a member of the United Nations and an EU member state, has a duty to implement:

In addition, the European Union (and, consequently, Cyprus) implement UN sanctions by incorporating them into EU law through the adoption of relevant decisions and regulations within the framework of the CFSP. In any case, EU regulations are directly applicable in Cyprus.

Autonomous versus international regimes

2. Does the domestic legislation empower your government to implement an autonomous sanctions regime or are only those sanctions adopted by international institutions and organisations (eg, the United Nations and European Union) imposed?

Only sanctions and restrictive measures adopted by the United Nations and the European Union are applicable in Cyprus.

Types of sanction imposed

3. What types of sanction are imposed in your jurisdiction (eg, economic and financial (asset freezes), trade restrictions, arms embargoes and travel bans)?

In Cyprus, any type of sanctions or restrictive measures that might be adopted from time to time by the United Nations and the European Union are imposed (including, without limitation, financial restrictions including asset freezes, trade restrictions, embargoes and travel bans).

Countries subject to sanctions

4. Which countries are currently the subject of sanctions or embargoes in your jurisdiction? (Please provide a website address for the current list(s).)

Cyprus does not maintain a national list of sanctioned countries or countries subject to embargoes. The relevant lists applicable to EU and UN member states apply.

The European Union maintains a sanctions map that identifies countries that are the subject of sanctions or embargoes.

Non-country specific regimes

5. What other sanctions regimes are currently in force in your jurisdiction which are not country specific (eg, human rights, cybersecurity or crypto-related sanctions)?

The European Union sanctions map provides comprehensive information for all EU sanctions regimes and their corresponding legal acts, including regimes adopted by the UN Security Council and transposed at EU level. Currently, the following regimes that are not country specific are in force in Cyprus:

Counter-terrorism sanctions

6. What sanctions and prohibitions are imposed in your jurisdiction in relation to terrorist activities?

The UN Security Council introduced restrictive measures in relation to the Taliban through UN Security Council Resolution 1267 of 1999. On 16 January 2002, the measures were extended to cover the al-Qaeda organisation as well as other individuals, groups, undertakings and entities associated with them. In parallel, the European Union established a list of persons, groups and entities involved in terrorist acts and subject to restrictive measures, and issued Common Position 2001/931/CFSP, which lays down the criteria for listing persons, groups and entities as well as the restrictive measures to be applied.

Council Regulation (EC) No. 2580/2001 provides for the designation of persons and entities involved in terrorist activities. Designated persons and entities are subject to asset freezes, and prohibitions on making funds and economic resources available to them.

Furthermore, the European Union has adopted the following legal acts:

Cyprus, as an EU member state, enforces travel restrictions on persons listed in the annex to Council Decision (CFSP) 2016/1693 and on persons designated by the UN Security Council pursuant to UN Security Council Resolutions 1267 of 1999, 1333 of 2000 and 2253 of 2015 or by the UN Security Council’s ISIL (Da’esh), Al-Qaida Sanctions Committee.

Anti-boycott laws

7. Are any blocking or anti-boycott laws in place in your jurisdiction?

Council Regulation (EC) No. 2271/96 of 22 November 1996, as amended, protecting against the effects of the extraterritorial application of legislation adopted by a third country and actions based thereon or resulting therefrom applies in Cyprus. The European Union adopted this Regulation as a means to protect EU operators from the extraterritorial application of third-country laws and, in particular, to US extraterritorial legislation concerning restrictive measures in relation to Iran, Libya and Cuba.

Scope of application

8. Who must comply with sanctions imposed in your jurisdiction? Do sanctions have extra-territorial effect?

EU restrictive measures and UN Security Council sanctions, which the EU incorporates into the European legal order within the framework of the CFSP are binding legal acts in their entirety in Cyprus.

EU sanctions apply:

The European Union refrains from adopting sanctions with extraterritorial application.

Competent sanctions authorities

9. Which government authorities in your jurisdiction are responsible for implementing and administering sanctions? (Please provide website references.)

Ministry of Foreign Affairs

The Ministry of Foreign Affairs represents Cyprus in the decision-making process regarding the enforcement of restrictive measures at the EU level, and informs the national authorities and relevant departments when UN sanctions or EU restrictive measures are adopted or amended. The competence of the Ministry of Foreign Affairs is limited to cooperation and communication between Cyprus and the competent UN sanctions committees and European institutions.

Ministry of Finance

Law No. 58(I) of 2016 on the Implementation of the Provisions of the Resolutions or Decisions of the United Nations Security Council (Sanctions) and the Decisions and Regulations of the Council of the European Union (Restrictive Measures) governs the implementation of UN sanctions and EU restrictive measures in Cyprus. The Ministry of Finance (MOF) is the designated competent authority in Cyprus responsible for the implementation and enforcement of EU sanctions. Two separate units and committees have been established within the MOF in relation to the implementation of sanctions in Cyprus.

The Unit for the Implementation of Sanctions (MEK) was established for the purposes of examining requests and applications submitted by interested parties (including, among others, Cyprus citizens, companies, law firms and audit firms) regarding the authorisation and approval processes provided by the relevant resolutions contained in UN and EU regulations. Essentially, the MEK examines applications and provides clearances and licences allowed under the derogations of the applicable regulations.

The Financial Sanctions Advisory Committee (SEOK) is chaired by the Minister of Finance, and was established to examine requests and applications for the release of frozen funds and financial resources, which fall under the derogations provided for by EU decisions and regulations (restrictive measures) and UN decisions or resolutions. The competence of the SEOK relates primarily to the granting of authorisations relating to payments and transfers of funds, the provision of services to sanctioned persons or the examination of cases regarding wrongful freezing of assets.

Business compliance

10. Are businesses in your jurisdiction required to put in place any systems or controls in order to ensure compliance with sanctions? (If no such systems or controls are required by law, which are advised in practice?)

The Cyprus supervisory authorities, as defined in the Prevention and Suppression of Money Laundering and Terrorist Financing Law, issue directives and circulars to relevant obliged entities under their supervision. Such supervisory authorities include the Cyprus Securities and Exchange Commission (CySEC), the Institute of Certified Public Accountants (ICPAC) and the Cyprus Bar Association.

ICPAC has issued a directive for compliance with the provisions of UN Security Council resolutions (sanctions) and EU restrictive measures, which includes an overview of the applicable sanction regimes; provides for the development and implementation of a sanction compliance programme for all members of ICPAC (primarily accountants and auditors, but also administrative service providers); and offers guidance on the effective implementation of sanctions and restrictive measures.

The Cyprus Bar Association has issued a manual that provides for the development and adoption of a sanction compliance programme for Cyprus advocates and administrative service providers regulated thereby, as well as the application of a risk assessment approach.

CySEC has issued several circulars to inform obliged entities under its supervision in relation to any amendments to the relevant regulations and their obligations to report the existence of business relationships with persons or entities that are subject to the EU restrictive measures against Russia to CySEC.

CySEC further requires the obliged entities to assess or reassess money laundering and financing of terrorism risks in all business relationships with persons subject to sanctions or restrictive measures and to avoid the commencement of any further business relationship with such persons. In the case of a person that is an existing customer of an obliged entity and is subject to sanctions or restrictive measures, regulated entities are expected to examine the actions or measures that must be implemented in accordance with the relevant EU regulations.

Guidance

11. Has your government issued any guidance on compliance with the sanctions framework in your jurisdiction? (Please include website references.)

The MOF and the supervisory authorities in Cyprus publish, on a regular basis, guidelines, announcements and circulars on the effective implementation of sanctions and restrictive measures. This includes, among others:

Economic and financial sanctions

Asset freezes

12. In what circumstances may a person become subject to asset freeze provisions in your jurisdiction? What dealings do asset freeze provisions generally restrict in your jurisdiction?

Restrictive measures are adopted by the European Union when necessary to prevent conflict, or in response to emerging or actual crises. Often, the restrictive measures are in the form of assets freezes and prohibitions on making funds and economic resources available to certain persons listed in the applicable EU regulations. The terms ‘economic resources’ and ‘funds’ have been defined by relevant regulations.

The term ‘economic resources’ includes assets of every kind – whether tangible or intangible, movable or immovable – that are not funds but may be used to obtain funds, goods or services. The term ‘funds’ means financial assets and economic benefits of every kind, including but not limited to:

Council Regulation (EU) No. 269/2014 of 17 March 2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine, as amended (Regulation 269), imposes financial sanctions (asset freezes) on specific individuals and entities listed in Annex I thereto. The prohibition included in article 2 of Regulation 269 provides that all funds and economic resources belonging to, owned, held or controlled by any persons listed in Annex I shall be frozen and no funds or economic resources shall be made available directly or indirectly to such designated persons.

General carve-outs and exemptions

13. Are there any general carve-outs or exemptions to the asset freeze provisions in your jurisdiction?

EU regulations provide limited carve-outs or exemptions to the asset freeze provisions. They mainly provide for some derogations allowing the competent authorities of EU member states to authorise the release of frozen funds or economic recourses when certain conditions are met.

In particular, Regulation 269 provides for limited derogations relating to the prohibitions it introduces, such as for the payment of legal fees or the provision of basic needs of listed persons and their family members (eg, food, rent and medical expenses), or where the relevant funds or economic resources are subject to a judicial, arbitral or administrative decision issued in the European Union, subject to specific conditions.

List of targeted individuals and entities

14. Do the competent sanctions authorities in your jurisdiction maintain a list of individuals and entities blocked under asset freeze restrictions? (Please include the website reference to the list.)

Other than UN and EU lists, Cyprus has no national list of sanctions.

Other restrictions

15. What other restrictions apply under the economic and financial sanctions regime in your jurisdiction (eg, sectoral sanctions)? (For example, UK sanctions in respect of the situation in Ukraine include prohibitions on dealing in transferrable securities issued by particular companies and on providing loans to those companies.)

Economic and financial sanctions enacted by the European Union against Syria, North Korea, Russia and Belarus apply in Cyprus. These are identified on the EU-maintained sanctions map.

In light of Russia’s 2022 invasion of Ukraine, the Council of the European Union adopted further restrictive measures by virtue of Council Regulation (EU) No. 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia’s actions to destabilise the situation in Ukraine, as amended (Regulation 833), including prohibitions against:

Regulation 833 introduced both specific prohibitions affecting persons listed in its annexes and more general prohibitions affecting Russian nationals, Russian residents and Russia-established legal entities or bodies. The more general prohibitions include prohibition against:

Exemption licensing – scope

16. Are the competent sanctions authorities in your jurisdiction empowered to issue a licence to permit activities which would otherwise violate economic and financial sanctions? If so, what is the extent of their licensing powers and in what circumstances will they issue a licence? (Please provide examples.)

The Ministry of Finance (MOF) is the national competent authority responsible for the implementation of sanctions and restrictive measures. As such, the MOF is able to grant authorisations and licences to permit any activity under the derogations available pursuant to the applicable EU regulations, provided that the relevant conditions set thereby are met. The actual procedure for the granting of licences under the applicable sanctions and restrictive measures is conducted either through the Unit for the Implementation of Sanctions (MEK) or the Financial Sanctions Advisory Committee (SEOK), depending on the subject matter of the relevant application. Pursuant to Regulation 833 and Regulation 269, the MOF (and subsequently the SEOK and MEK) as the national competent authority has the right to apply any general or specific conditions it deems appropriate and may authorise, under such conditions, the release of certain frozen funds or economic resources.

The derogations generally allow the release of frozen funds that are necessary to satisfy the basic needs of a person or entity for the payment of legal fees, humanitarian purposes and health emergencies. Also, the release of frozen funds may be allowed pursuant to an agreement, arrangement or contract concluded prior to the inclusion of the designated person on the sanctions list. Pursuant to an announcement from the MOF on 27 May 2022, the release of frozen funds by a credit institution for the payment of amounts due to public authorities (ie, taxes, social insurance contributions, fees payable to the Cyprus Registrar of Companies and public utilities charges) is deemed authorised and no authorisation by the Cyprus competent authority is required.

Exemption licensing – application process

17. What is the application process for an exemption licence? What is the typical timeline for a licence to be granted?

The MEK examines requests submitted by interested persons regarding approvals and clearances for a particular activity or transaction allowed under a derogation included in the applicable regulations.

The SEOK examines requests for the release of funds and economic resources, which fall under the exceptions or derogations provided for by the applicable decisions or regulations. Also, applications submitted to the SEOK include applications for provision of services to sanctioned persons, applications for derogations under article 5b of Regulation 833 (accepting any deposits from Russian nationals or natural persons residing in Russia, or legal persons established in Russia, of more than €100,000) and article 1u of Council Regulation (EC) No. 765/2006 concerning restrictive measures against President Lukashenko and certain officials of Belarus and applications for wrongful freezing of assets. The applicants are required to disclose certain information to support the application, indicate the regulation under which the relevant person is sanctioned and provide an explanation as to why the derogation is needed. The applicants should also enclose supporting documents to the application.

There is no time frame prescribed by law for a licence to be granted. The timeline depends on the complexity of the application. However, in practice, the MOF requires three to four months to review an application submitted for a derogation under the applicable regulations.

Approaching the authorities

18. To what extent is it possible to engage with the competent sanctions authorities to discuss licence applications or queries on economic and financial sanctions compliance?

The announcements, circulars and general guidance issued by the MOF on the applicable procedure relating to licence applications do not provide for formal discussions or meetings with the competent authorities. The relevant guidance provides that the MOF (including the MEK and SEOK) is not able to provide any legal opinions on any matter relating to sanctions and restrictive measures, and is only entitled to review applications for licences filed pursuant to a specific derogation as such derogations are included in the applicable regulations. In practice, however, clarifications can be obtained from the MOF, primarily via email.

Reporting requirements

19. What reporting requirements apply to businesses who hold assets frozen under sanctions?

Article 9 of Regulation 269 imposes an obligation on natural or legal persons listed in Annex I to report, within six weeks of the date of listing in Annex I, funds or economic resources within the jurisdiction of an EU member state belonging to, owned, held or controlled by them to the competent authority of the member state where such funds or economic resources are located, and cooperate with the competent authority in any verification of such information. The MOF, as the national competent authority in Cyprus, issued an announcement on the relevant procedure on 9 August 2022.

Article 8 of Regulation 269 requires natural and legal persons, entities and bodies to supply the national competent authorities with any information that would facilitate compliance with Regulation 269 or information held about funds and economic resources within EU territory subject to an asset freeze under Regulation 269 and that should have, but have not been, treated as frozen by the person subject to the obligation to do so, or were subject to any move, transfer, alteration, use of, access to or dealing.

Further, pursuant to the Prevention and Suppression of Money Laundering and Terrorist Financing Law, all obliged entities (including but not limited to credit institutions, financial institutions, investment firms, audit firms, law firms, legal professionals and administrative services providers) are required to apply anti-money laundering and countering the financing of terrorism measures, including carrying out due diligence checks on clients to verify whether they hold funds or economic resources owned or controlled by persons or entities listed in EU regulations.

Trade sanctions

General restrictions

20. What restrictions apply in relation to the trade (whether import, export or movement) of goods, technology and services (eg, restrictions on military equipment and dual-use items)? (Please include references to website lists of restrictions.)

Cyprus is a member of the Nuclear Suppliers Group and the Australia Group, and is a signatory to the Biological Weapons Convention, the Chemical Weapons Convention and other relevant international treaties. Cyprus is also a member of the Organisation for the Prohibition of Chemical Weapons.

Cyprus, as an EU member state, is subject to the European Union’s export control regime and implements the measures adopted by the European Union.

Council Regulation (EC) No. 428/2009, as amended, set up the European Community regime for the control of exports, transfer, brokering and transit of dual-use items. In article 2, ‘dual-use items’ are defined as items including software and technology that can be used for both civil and military purposes, and include all goods that can be used for both non-explosive uses and assist in any way the manufacture of weapons of mass destruction. For the export and re-export of dual use goods, an export licence, issued by the Exports Licencing Section of the Ministry of Energy, Commerce, Industry and Tourism is needed, while the transit of non-EU goods may be prohibited if there is information that the goods are, or may be, destined for uses related to weapons of mass destruction or for military use in an embargoed country.

Further, exports of military equipment are controlled by Council Common Position 2008/944 under the Common Foreign and Security Policy of 8 December 2008, which defines common rules governing the control of exports of military technology and equipment. Cyprus transposed this into national law. The list of controlled military equipment is maintained by the European Union.

Directive 2009/43/EC of the European Parliament and of the Council of 6 May 2009, as amended, simplifies the terms and conditions of transfers of defence-related products within the European Community and was also transposed into national law. Exports, re-exports and transit of military equipment require an export licence issued by the Exports Licencing Section of the Ministry of Energy, Commerce, Industry and Tourism. Additionally, the provision of brokering services and technical assistance related to military equipment require a licence.

The competent authorities responsible for enforcing and executing export controls in Cyprus are the Ministry of Energy, Commerce, Industry and Tourism, and the Ministry of Finance. Further restrictions have also been imposed by Council Regulation (EU) No. 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia’s actions to destabilise the situation in Ukraine, as amended.

General exemptions

21. Do any exemptions apply to the general trade restrictions?

Derogations apply under the relevant regulations and are subject to the approval of the national competent authorities indicated in each regulation. Nevertheless, the applicable regulations also provide for exclusions that do not require approval in limited situations.

Targeted restrictions

22. Have the authorities in your jurisdiction imposed any trade sanctions against dealing with any particular individuals or entities? (For example, the US government prohibits US persons from trading with certain entities such as Huawei.)

The European Union maintains a consolidated financial sanctions list of persons, groups and entities subject to EU sanctions. EU legal and natural persons, or persons residing or doing business within the European Union, are prohibited from dealing with persons, group and entities subject to asset-freezing measures.

Exemption licensing – scope

23. In what circumstances may the competent sanctions authorities in your jurisdiction issue a licence to trade in goods, technology and products that are subject to restrictions?

The competent authority responsible for providing export authorisations for dual-use goods, arms and military equipment in Cyprus is the Exports Licencing Section of the Ministry of Energy, Commerce, Industry and Tourism.

Exemption licensing – application process

24. What is the application process for a licence? What is the typical timeline for a licence to be granted?

Applications for issuing export licences in Cyprus is submitted through the Stratlink electronic system and must include, among others:

The relevant laws do not determine the period within which an application shall be processed.

Approaching the authorities

25. To what extent is it possible to engage with the competent sanctions authorities to discuss licence applications or queries on trade sanctions compliance?

The relevant local framework does not provide for formal discussion or meetings with the competent authorities. In practice, however, clarifications can be obtained on an informal basis from the authorities, usually via email or other forms of written communication.

Enforcement and penalties

Reporting violations

26. Is there a requirement to report violations to the authorities (either to self-report or to report others)? If reporting is not obligatory, is it encouraged in any event?

Sanctions violations are encouraged and can be reported through the EU sanctions whistle-blower tool in addition to the obligation under article 8 of Council Regulation (EU) No. 269/2014 of 17 March 2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine, as amended (Regulation 269). Article 8 requires natural and legal persons, entities and bodies to supply the national competent authorities with any information that would facilitate compliance with Regulation 269 or information held about funds and economic resources within EU territory subject to an asset freeze under Regulation 269 and that should have, but have not been, treated as frozen by the person subject to the obligation to do so, or were subject to any move, transfer, alteration, use of, access to or dealing.

Investigations

27. Which authorities are responsible for investigating sanctions violations? What is the extent of their investigatory powers?

According to section 3 of Law No. 58(I) of 2016 on the Implementation of the Provisions of the Resolutions or Decisions of the United Nations Security Council (Sanctions) and the Decisions and Regulations of the Council of the European Union (Restrictive Measures), each ministry or its department, independent office, supervisory authority (defined in accordance with the provisions of section 59 of the Prevention and Suppression of Money Laundering and Terrorist Financing Law) have competence to secure the implementation of the provisions of UN resolutions and decisions on sanctions and EU decisions and regulations on restrictive measures in sectors for which they have competence.

Where a competent authority ascertains that a person has committed a sanctions violation, it must report the violation to the Cyprus police for investigation.

Penalties

28. What are the potential penalties for violation of sanctions? (Please comment on criminal and administrative outcomes.)

The restrictive measures imposed by the European Union and the United Nations do not create criminal offences; each EU member state must introduce criminal offences while implementing the relevant sanctions in their national legal systems. EU member states must lay down the rules on penalties applicable to infringements of the provisions of these regulations and take all measures necessary to ensure that they are implemented.

Law No. 58(I) of 2016 on the Implementation of the Provisions of the Resolutions or Decisions of the United Nations Security Council (Sanctions) and the Decisions and Regulations of the Council of the European Union (Restrictive Measures) introduced specific measures and penalties for the breach of or non-compliance with EU and UN sanctions or restrictive measures.

In Cyprus, the penalties for breaching or circumventing the applicable sanctions or restrictive measures are:

Recent enforcement actions

29. Have there been any significant recent enforcement cases? What lessons can be learned from these cases?

Not applicable.

Update and trends

Emerging trends and hot topics

30. Are there any emerging trends or hot topics in sanctions law and policy in your jurisdiction?

Since March 2014, the European Union has progressively imposed restrictive measures against Russia, including individual and economic sanctions. In light of Russia’s 2022 invasion of Ukraine, the European Union adopted in 28 February 2022 the third package of sanctions against Russia. Between February 2022 and February 2023, the European Union adopted an additional seven packages of restrictive measures due to Russian aggression in Ukraine. We anticipate that further packages will be introduced by the European Union.

The European Union has also adopted sanctions against Belarus in response to its involvement in the invasion of Ukraine, and against Iran in relation to the manufacture and supply of drones.

The restrictive measures imposed by Council Regulation (EU) No. 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia’s actions to destabilise the situation in Ukraine, as amended, and Council Regulation (EU) No. 269/2014 of 17 March 2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine, as amended, have resulted in the filing of numerous applications to the Cyprus competent authorities for licences under the applicable derogations. As the implementation of restrictive measures on the local level is a fairly new exercise (both by interested parties and authorities), we anticipate that greater clarity will be provided by the Cyprus competent authorities during the coming months on how Cyprus interprets and enforces the prohibitions or derogations pursuant to the above-mentioned EU regulations, along with more detailed guidance on the local level.

Law stated date

Correct on

31. Give the date on which the above content is accurate.

20 March 2023.