CYPRUS Law and Practice Contributed by: Angelina Fitoz, Svetlana Remezova, Darya Averyanova and Sude Dogan, Lawitt Buro
For robo-advisers, execution decisions are built into algorithms, so the main risks relate to system design and governance rather than human trader discretion. Key points include the following. • Execution policy – Firms must maintain and regularly review a clear policy explaining how they achieve the best possible result for clients. • Algorithm design – Systems must consistently pri - oritise price, cost, speed and likelihood of execu - tion in a defensible way. • Conflicts of interest – Revenue models or venue incentives must not influence routing decisions in a way that undermines best execution. • Execution monitoring – Firms must review slippage and overall execution quality, including both posi - tive and negative price movements. • Technology risk – Latency, outages and ICT failures must be monitored within the firm’s operational resilience framework. • Crypto liquidity – In crypto markets, firms must justify venue selection given fragmented liquidity and price differences. 4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities In Cyprus, the regulation of fiat lending depends on the type of borrower. Core banking and consumer credit laws apply, but protection levels differ for indi - viduals, SMEs and large corporates. Individuals (Consumer Credit) Consumer loans are heavily regulated. Lenders must provide clear pre-contractual information, carry out a mandatory creditworthiness assessment and grant statutory withdrawal and early repayment rights. Affordability must be sustainable, and pricing is sub - ject to safeguards against abusive terms. Small and Medium-Sized Enterprises (SMEs) SMEs receive less protection than consumers, but lenders are expected to apply transparent terms and structured arrears management. Supervisory focus is
on responsible lending and proportionate restructur - ing before enforcement. Large Corporates Corporate lending is largely based on contractual negotiation, subject to prudential standards. Recent reforms have facilitated loan transfers and secondary market participation by non-bank lenders. AML Requirements All lenders must comply with Central Bank Directive R.A.A. 120/2025, applying risk-based KYC, remote onboarding where appropriate and enhanced moni - toring for higher-risk clients. 4.2 Underwriting Processes Underwriting in Cyprus is increasingly data-driven but tightly regulated. Core methods include traditional credit bureau data (ARTEMIS), open banking cash- flow analysis under PSD2, and limited use of alterna - tive data for thin-file borrowers, subject to fairness and data protection rules. Regulatory limits under Directive (EU) 2023/2225 require lenders to ensure repayment is sustainable and to consult relevant credit databases, with documented evidence. AI use in credit scoring is treated as high-risk under the EU AI Act, requiring transparency, bias monitoring and, where applicable, human review. AML integration under CBC Directive R.A.A. 120/2025 requires robust identification, including high-assur - ance electronic identification, and supports ongoing rather than one-off credit assessment for certain prod - ucts. Credit assessment is increasingly continuous rather than one-off, particularly for revolving facilities sup - ported by digital data feeds. 4.3 Sources of Funds for Fiat Currency Loans In Cyprus, how a lender funds loans depends on its licence. Deposits Only authorised credit institutions may take depos - its, triggering full supervision by the Central Bank of Cyprus and, where relevant, the European Central
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