Filenews 27 March 2022 - by Eleftheria Paizanos
Professional sectors in Cyprus, cooperating with Russian businessmen, follow to the letter the guidelines of the Working Group of the Ministry of Finance in relation to the sanctions imposed on Moscow. Lawyers and accountants have been greatly affected, as they have had several clients, both from Russia and Ukraine.
The latest announcements issued by the competent Ministry of Finance respond to ambiguities involving some of the restrictive measures. At the same time, they provide clarifications on how they will specifically handle their Russian customers, the services they can provide to them and the payments they can make. It is also expected that the European Commission (EU) will guide them on how to manage their customers from Russia.
In addition to the instructions from the executive, the institutions of lawyers and accountants issued relevant circulars. It should be noted that usually the cooperation of Cypriot lawyers with Russians focuses on the provision of legal advice and administrative services. It is recalled that, at the beginning of the month, both lawyers and accountants, in a letter to the Ministers of Finance and Foreign Affairs, had called on the state to proceed with the adoption of measures and actions, since, as they had argued, they were facing many difficulties from the restrictive measures and their implementation.
The Cyprus Bar Association in a circular states that the restrictive measures are binding legal acts for the EU member states and their citizens, with direct application in their domestic legal order. It clarifies that the restrictive measures adopted by the US, the UK or other states, although they are not binding legal acts for EU Member States, should be taken into account and taken into account in the general compliance policy of the obliged entities, as they are part of the broader international sanctions framework.
As is made clear, the regime of financial penalties prevents obliged entities (law firms) from operating or acting on behalf of individuals or legal entities subject to sanctions. Obliged entities should check the financial penalty lists before offering services or executing transactions for clients. "If a natural and/or legal person is included in the sanctions list and/or is subject to an asset freeze, natural or legal persons or customers cannot do business with such funds or allocate resources to that person, who may also be a third party doing business with a client," the circular added.
The actions of lawyers
The circular of the Department of Supervision and Compliance invites the obliged entities, i.e. law firms (natural and legal persons) that are under the supervision of the Bar Association, to proceed to five actions. In particular, lawyers are required to take the appropriate steps to adopt and implement a framework of sanctions compliance procedures (Sanctions Compliance Program) and to make a thorough and continuous risk assessment of their clients, either with a separate manual or by their inclusion in the existing manual on Anti-Money Laundering Activities (AML Manual).
In addition, they should immediately take the appropriate steps to strictly apply the sanctions to legal entities and natural persons falling under the sanctions lists of the Council of the European Union.
In the meantime, by the end of the month they will have to inform the Supervisory Department whether they are providing services to legal entities or natural persons who fall under the sanctions lists of the Council of the European Union. In this case, they should state their names, the type of asset that has been frozen (e.g. real estate, cash, financial instruments) as well as their total value. The same obligation shall apply where additional measures and or sanctions are imposed. In fact, it is noted that, in case of additional restrictive measures, the Bar Association should be informed within ten days. At the same time, they are urged to be informed frequently about the sanctions, while for the re-evaluation of the risk of their clients they should take into account the sanctions list of the US Foreign Asset Control Office and the announcements of the Cypriot Ministry of Finance.
Those who do not comply will be prosecuted
As specified in the circular, the violation of sanctions may lead to criminal prosecution or prosecution by the Board of Directors of the Bar Association. In addition, it is stressed that the regime of financial penalties prevents obliged entities from operating or operating in specific business activities and industries that are included in the sanctions. It is also indicated that natural or legal persons or customers cannot trade in sanctioned business activities and industries. Violation of penalties may lead to criminal prosecution or sanctions by the Board of Directors of Lawyers.
Concluding, it is noted that "in addition to the institutional criminal consequences, lawyers in general, as a high-risk profession, may be characterized as "professional enablers" of malicious and/or abusive actions of a natural or legal person included in the sanctions list and/or subject to a freeze of assets, aimed at avoiding sanctions, with all the risks that lurk and arise from it, both for the lawyers themselves, as well as for the wider service sector, but also for the country in general."
And accountants
Moreover, the Association of Certified Public Accountants (ICPAC) with continuous announcements informs its members about the positions of the Ministry of Finance on sanctions. It also refers them to specific EU websites to receive immediate notifications of penalties. At the same time, he cited two publications concerning the briefing of European accountants on the Russian invasion and the impact on the Union's financial markets. As stated by the competent authority of Europe's accountants, accountants should be particularly careful in relation to the fight against money laundering, cybersecurity, accounting, auditing and reporting. In view of the situation, they are told that they should receive legal advice. It is worth noting that, with the outbreak of the war, ICPAC had expressed its concerns about the impact on the Cypriot economy and especially on the professional services sector. In fact, they had said that tourism, investment, services, trade and financial transactions may be affected, as Cyprus has close economic relations with both countries involved.
