CYPRUS Law and Practice Contributed by: Angelina Fitoz, Svetlana Remezova, Darya Averyanova and Sude Dogan, Lawitt Buro
2.15 Financial Action Task Force (FATF) Standards Cyprus maintains a high level of technical compliance with FATF standards and is assessed by MONEYVAL under the FATF 40 Recommendations. Current Status (2025–26) In June 2025, MONEYVAL upgraded Cyprus’s rating for Recommendation 13 (Correspondent Banking) to “Largely Compliant”. Cyprus is no longer under enhanced follow-up, is not on the FATF grey list, and its next full evaluation is scheduled for October 2028. 2.16 Reverse Solicitation Under reverse solicitation, a third-country firm may serve a Cyprus client without local authorisation only where the service is provided at the client’s exclusive initiative. The exemption exists under MiFID II, PSD2 and MiCA but is interpreted strictly. It applies only to the specific service requested; any cross-selling, ongoing marketing or indirect targeting (including white-labelling or EU intermediaries) removes protec - tion. CySEC and the Central Bank presume solicitation where firms have an accessible digital presence, unless clear evidence of an unsolicited, client-initiated request is maintained. In practice, reverse solicitation is not considered a viable long-term strategy. Most firms either obtain local authorisation or implement strict geo-blocking and onboarding controls. 3. Robo-Advisers 3.1 Requirement for Different Business Models In Cyprus, the regulatory model for a robo-adviser depends on the legal classification of the assets involved. The distinction is asset-based, not technol - ogy-driven. Security Tokens (MiFID II Model) If the robo-adviser provides advice or portfolio man - agement for assets that qualify as financial instru - ments (eg, tokenised shares or bonds), it must be
authorised as a Cyprus Investment Firm under MiFID II. Full prudential, governance and investor protection rules apply. Tokenisation does not change classifica - tion. Non-Security Crypto-Assets (MiCA Model) If services relate to crypto-assets that are not financial instruments, the firm must be authorised as a Cryp - to-Asset Service Provider under MiCA. Requirements differ from MiFID II, particularly regarding capital and investor compensation, but governance and disclo - Platforms offering both asset types typically use dual licensing or group structures, with clear segregation and disclosure. Where electronic money tokens are involved, supervision shifts to the Central Bank under the electronic money regime. 3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers Legacy institutions in Cyprus have mostly integrated robo technology into existing banking and wealth plat - forms rather than launching standalone robo-advisers. Hybrid Advisory Model sure duties remain significant. Hybrid Structures and EMTs Algorithms support portfolio construction and risk profiling, but human advisers retain final oversight to meet suitability and governance requirements. Digital Integration Automated investment tools are embedded within mobile banking apps, offering investment, payment and lending services through a single interface. Operational Use Robo-style systems are also used internally for analyt - ics, compliance checks and risk monitoring, enhanc - ing efficiency rather than replacing human decision- making. 3.3 Issues Relating to Best Execution of Customer Trades Best execution in Cyprus is governed by MiFID II for financial instruments and, in adapted form, by MiCA for certain crypto-asset services.
175 CHAMBERS.COM
Powered by FlippingBook