Compliance Cover Story

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By Effy Pafitis | Photos by Emma Louise Charalambous

ENSURING COMPLIANCE

What it means, why it’s needed

26 | Gold | The Business Magazine of Cyprus

Market Leader in AML and Risk Solutions

ENSURING COMPLIANCE

CORPORATE COMPLIANCE hAS GAINEd CONSIdERABLE SIGNIfICANCE IN RECENT

yEARS, INfLUENCEd By A SURGE Of REGULATORy INITIATIvES ANd STANdARdS INTROdUCEd IN ThE wAkE Of ThE GLOBAL fINANCIAL CRISIS. ThIS IS PARTICULARLy

TRUE Of CyPRUS. IN AN ATTEMPT TO dISCERN ThE ISSUE’S IMPORTANCE ANd ExPLORE

hOw REGULATEd ENTITIES ON ThE ISLANd ENSURE ThAT ThEIR OPERATIONS COMPLy

wITh TOdAy’S COMPLEx REGULATORy REqUIREMENTS, GOLd SPOkE TO LEAdING

COMPLIANCE PROfESSIONALS fROM A vARIETy Of INdUSTRIES.

who’s who

Marios Skandalis Director, Compliance Division,

Bank of Cyprus Andrew Demetriou

Director, Ioannides Demetriou LLCMichael M. Antoniades Board Member, KPMG

Michalis LoizouCompliance Officer, A. Neocleous

Trust Company Ltd Eleftherios Philippou

Risk & Reputation Leader, Deloitte Ltd

Pantelis Christofides Partner, L. Papaphilippou

& Co LLCElias Neocleous

Partner, Head, Corporate and Commercial Department, Andreas

Neocleous & Co. LLC Eleana Spyris

Legal Advisor/Compliance Officer, EuroLife Ltd

Andreas Theodosiou Director, AMF Global

Andreas Andreou Vice-Chairman, Cyprus Securities

and Exchange Commission Gabriel Onisiforou

Board Member, EY Cyprus

www.goldnews.com.cy | Gold | 27


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Our TeamOur Compliance and Risk

Management Department is responsible for protecting EY from the risks that arise from its professional practice. The team works closely with all parts of the business to identify and manage EY’s risk, providing coordinated advice and assistance on inde-pendence, conflicts, compliance, regulatory, policy, security and risk management issues, as well as dealing with any queries re-garding EY ethics. At a country level, our division comprises two full-time employees with respon-sibilities specific to internal com-pliance and risk management. In addition, various other profes-sionals within the Cyprus practice are responsible for compliance functions amongst other duties. Our local division is supported as well as monitored by the regional, area and global employees that comprise the EYG compliance team. The compliance team plays a central and pivotal role in protecting EY from the risks that arise from its professional practice and its significance will continue to grow as the world business and

regulatory environment further evolves and develops. But more than ever, the team also has a crucial role to play in empower-ing and enabling the operations of EY as well as in driving better professional and business per-formance. Our role is to protect business but not to prevent it.

CyprusThe accounting profession in

Cyprus has always been at the forefront of observing, adopt-ing and following international compliance and transparency standards and regulations. Both ICPAC and its regulated ac-counting firms have capable and competent professionals with a positive attitude towards observ-ing such standards. The events of March 2013 and the economic adjustment programme that followed have brought about a new era in corporate governance and transparency in Cyprus. New laws and regulations and amend-ments to existing laws and regula-tions have been enacted and new measures, policies and procedures have been implemented. The progress in enhancing the regula-tory framework in line with EU

c O m p l i a n c e

and best international practices is enormous. It is now the time for review; all bodies (government, other regulatory, supervisory and professional bodies, institutions and associ-ations) should consolidate the knowledge acquired and work in a coordinated manner, tak-ing into account the risks that Cyprus faces at national level and leveraging and cascading down the requirements and obligations to the playing field parties (corporates, financial institutions, accountants, legal, professional and other regu-lated or obliged entities), thus ensuring that these are propor-tionate and do not go beyond

what is required to achieve the aim of compliance, corporate governance and transparency.

Additional MeasuresMeasures and actions, pol-

icies and procedures as well as enforcement sanctions should follow a risk-based ap-proach, aiming to avoid delays and inefficiency in business – described thus by author C. Wright: “Extremes are easy. Strive for balance”. In addi-tion, ordinary citizens must come to appreciate that they have the power to demand and impose transparency, in-tegrity and accountability.



oRpoRate compLiance and transparency is an essential element of good governance and a strategic priority for most organizations now-adays – to keep them out of trouble, integrate sustainable approaches and to drive better

business performance. The cost of unethical behaviour has never been higher – as a former USa attorney put it: “if you think compliance is expensive, try non-compliance”. in recent years the world has experienced painful col-lapses of banks, corporations and even countries. positive developments in the compliance and transparency sphere aim to maintain the soundness, integrity and stability of corporations, institutions and governments and restore confidence in the financial system as a whole, both at a local as well as at an international level.

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“aS a fOrmer USa aTTOrney pUT iT: ‘if yOU Think cOmpliance iS

expenSive, Try nOn-cOmpliance’”

GABRIEL ONISIfOROUBoard member, ey cyprus“


“TOday, cOmpliance iS an inTegral parT Of any cOrpOraTiOn ThaT wiSheS TO adhere TO The BaSic

principleS Of gOOd gOvernance”

MARIOS SkANdALISdirector, compliance division, Bank of cyprus“

he compLiance function has gone through a tremendous transformation over the past couple of decades and the importance and need for an effective compliance function has risen significantly. The underlying

reasons for this transformation are, primarily, increased regulation and the scope of regulatory frameworks. however, what has really triggered public awareness of the importance of compliance over the past few years has been the imposition by regulators of enormous fines on the grounds of non-compliance. without any doubt, this transformation has brought a lot of corporate develop-ments to cyprus’ business world, with more people be-ing recruited in the area of compliance, and more people seeking technical training on fraud investigation, forensic examination, money laundering issues, etc. Today, com-pliance is an integral part of the strategy, organisational structure and budget of any corporation that wishes to adhere to the basic principles of good governance. as the leading financial and corporate institution on the island, the Bank of cyprus group has compliance as the core principle behind all of its operations.

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Our TeamThe Bank’s Compliance

Division has the respon-sibility for the regulatory and ethics function, the corporate governance function and the anti-money laundering func-tion in Cyprus and overseas. Compliance has traditionally been perceived as placing operational restrictions on the way the bank wished to con-duct its business. However, under the ethical framework that we have adopted, the prime role of compliance is to train all members of staff, Board members and senior management to further engage with customers and improve our quality of service, leading to higher sustainable revenues and profitability. The right compliance attitude does not restrict business; on the contrary, it enhances healthy business and builds a relation-ship of trust with customers. The significance and scope of regulatory compliance will definitely grow and, hopeful-ly, we shall see the same trend applying in terms of ethical compliance too!

Cyprusprior to our accession to

the European Union, Cy-prus had not extensively been exposed to international regu-lations and supervision, leaving accountability at a local rather than an international level and exposing our market to local risks rather than complex inter-national ones. Following EU membership and the interna-tionalisation of more and more Cypriot corporations, this status changed dramatically and the

Cyprus economy is currently accountable to a previously unknown wider framework of governance. Unfortunately we still have a lot to do, as the recently published 2015 Cor-ruption Perception Index demon-strates a further deterioration of Cyprus’ ranking to 32nd place, compared to 29th in 2012. This negative development needs to be seriously considered by the Government and society in general.

Additional Measuresa ll financial institutions

should focus on a three-tier framework to ensure that (a) adherence to the best inter-national practices of governance and transparency is a strategic corporate objective and not just viewed as a task of the com-pliance function; (b) all levels of management are actively involved in implementing a corporate culture of ethics and all such efforts are orchestrated by the head the institution; and (c) an effective and transparent channel of communication is established with the Regulator and other competent authorities such as ICPAC, CySEC and the Bar Association, setting common objectives and uni-formly supporting and mon-itoring the country’s financial services sector. Once these three objectives are achieved, all financial institutions will be freed from the unproductive burden of having to promote their compliance awareness and adherence to regulatory frame-works, and they can let their actual results do all the work!




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c O m p l i a n c e

“cOmpliance wiTh nOT jUST The leTTer, BUT The SpiriT Of OUr OBligaTiOnS iS

cenTral TO everyThing we dO”

ELIAS NEOCLEOUSpartner, head, corporate & commercial department, andreas neocleous & co. llc “

heRe have been a number of scandals over the years where irresponsible and, in some cases, illegal behaviour by businesses has led to financial damage and worse for consumers. as business becomes increasingly globalised and influential,

consumers –and governments on their behalf –are concerned to ensure that the companies they deal with behave responsibly and obey the law. This is even more important in certain sectors, such as financial services, to which people entrust their savings and financial security for their future. They want to know that the companies they deal with are honest and reliable, and will deliver their part of any bargain.

TOur Teamyou might say that

everyone in the firm is part of our compli-ance team. Compliance with not just the letter, but the spirit of our obligations is central to everything we do, and is part of our DNA. As a leading law firm and adviser to many busi-nesses in Cyprus and abroad, we have specialist teams advising our clients on compliance with the regulatory regimes that apply to them. In some sectors, such as banking, insurance and other finan-cial services, the regulatory requirements are very specialised and detailed. However, even where this is not the case, businesses are subject to a wide range of obligations regarding, for example, employment, tax and financial report-ing. We advise our clients on all these issues. In addition, as a professional law firm we have our own regulatory and ethical obligations, for example regarding the prevention of money laundering, the safeguarding of clients’ funds and the responsibil-ity for acting in their best interests. As an ISO 9001 certified firm, we also have obligations to apply the highest standards of quality in our everyday procedures. One of the main challenges for any professional is keeping up with the ever-in-creasing volume of new requirements and devel-opments. Unlike other law firms, we adopted a

policy of specialisation many years ago. Our people specialise in a particular field, which enables them to keep up with changes as they oc-cur. We have a well-es-tablished knowledge management system that helps us pool our exper-tise effectively.

Cyprus

for many years we have led the field

in Cyprus in applying the highest international standards in every aspect of what we do, and in helping our clients do the same, and we have encouraged the author-ities to weed out the people who do otherwise and harm Cyprus’s repu-tation as an international financial centre. Great progress has been made, particularly in the past two or three years, but there is still some way to go.

Additional MeasuresThere is no substi-

tute for effective, consistent enforcement, with no exceptions. If people who breach the requirements know that they will be found out and punished, without fear or favour, they will be forced to clean up their act. If enforcement is inconsistent, people will be encouraged to believe that they can continue to get away with unacceptable be-haviour.




“cOnTinUOUS dialOgUe wiTh The cOm-pliance SecTiOnS Of lOcal regUla-

TOrS ShOUld Be encOUraged regard-ing day-TO-day implemenTaTiOn”

PANTELIS ChRISTOfIdESpartner, l. papaphilippou & co llc“

he composition and opeRation of corporate structures depends on the mechanics and application of multilateral treaties and bilateral agreements. Such legal instru-ments impose on a rolling basis, due to

their continuous amendment, compliance obligations both on an intra-group and on a group clients’ basis, as well as financial sanctions for failure to comply even with procedural aspects. regulators, at national and eU level, scrutinize daily client transactions and the adequacy of related corporate governance and super-vision steps. conformity with updated international legal standards will undoubtedly lead to entry into new financial markets and attract institutional investors; however, local businesses should not downplay com-pliance costs and the time involved in this process and proceed with relevant long-term projections.

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Competition and Concentration Control Law as well as Personal Data Protection Legislation, two are concerned with Anti-Money Laundering (AML) legislation and two focus on the application of Cyprus Securities and Ex-change Commission legislation. The importance of the com-pliance team’s role will be en-hanced in the coming years due to the corresponding trend in international regulation and the adoption of specialist multilat-eral agreements. From an AML perspective, updating Clients’ and internal databases regarding the identification of Ultimate Beneficial Owners of corporate structures, in anticipation of the implementation of the European Union 4th AML Directive is just one of the current challenges the team faces. Others include advis-ing clients on their right to claim private damages from competi-tors and other related enterprises for infringement of Cyprus and EU competition legal provisions under the EU Directive on An-titrust Damages, which is due to be transposed into Cyprus legal order by the end of 2016. Also, we are evaluating the impact of the Court of Justice of the Euro-pean Union in the Maximillian Schrems v Data Protection Commissioner case regarding the Safe Harbour Decision, in light of the conclusion of the negotiations between the EU and the US on the introduction of an “EU-US Privacy Shield”.

Cyprus

Cypriot advocates have successfully passed the

interim stage between a rock (over-compliance in excess

of international legal stan-dards and corresponding obligations) and a hard place (under-compliance due to a lack of understanding of regulatory instruments), thanks to initiatives taken by the regulators, including the Cyprus Bar Association, the Commission for the Protec-tion of Competition, CySEC, and the Commissioner for Personal Data Protection. The increased number of No-tifications of Concentrations filed before the Commission for the Protection of Com-petition regarding approval of transactions having a Cy-prus aspect and effect, and the positive outcome of the OECD Global Forum on Transparency and Exchange of Information for Tax Pur-poses’ additional evaluation process in September 2015 clearly indicate that Cyprus is not only back on track but on a new financial development course.

Additional MeasuresThe first step would be the

re-enforcement of the composition of the Republic of Cyprus teams negotiating the structure of international compliance instruments so as to reflect, as far as possible, local realities and the importance of the administrative services sec-tor vis-à-vis the total turnover of Cyprus economy. The second facet relates to continuous dia-logue with the compliance sec-tions of local regulators, which should be encouraged regarding day-to-day implementation.

Our Teamwe aim at securing

daily conformity with substantive and procedural compliance obligations, whilst alleviating unnecessary obstacles to transactional closings, by

updating internal client files on a regular basis and through con-tinuous staff training and coop-eration with external advisors and international law firms. Our Compliance Division comprises seven advocates, three of whom deal with the Protection of




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Our TeamT he Compliance Depart-

ment has a main objective of establishing throughout the organisation a compliance culture that will ensure not only the ef-fective implementation of an in-ternal control framework but bet-ter customer service at all levels. This means that all concerned, from the Board of Directors to business line personnel, know their responsibilities to ensure that the organisation is compliant not only with regulatory require-ments but with best industry practices and standards. Within our company, compliance is a top priority. The fast pace of reg-ulatory change sees compliance professionals facing the challenge of remaining one step ahead of the regulators and ensuring swift adherence to changes. An addi-tional issue faced by our team concerns changing perceptions, so that compliance is not viewed as a burdensome process but as

a means of enhancing the suc-cess of our business operations, by ensuring greater efficiency, quality of service and maintain-ing customer satisfaction. The challenge is therefore to be able to strike the appropriate balance between the strict adherence of our compliance framework with-out the excessive complication of processes and procedures.

CyprusAs a member of the Euro-

pean Union, Cyprus has national law transposing the plethora of EU directives, regula-tions and guidelines with regard to the insurance industry. The insurance regulatory authority in Cyprus, the Insurance Com-panies Control Services (ICCS), issues regulations and directions to ensure that EU-wide standards in insurance law are upheld. The regulatory framework of Cyprus is therefore of a sufficiently high standard. The supervision of the observance of such regulations is

c O m p l i a n c e undertaken by the ICCS, and through increased reporting requirements of insurance companies brought about by Solvency II and onsite audits by the ICCS, an adequate standard of compliance by the industry overall is maintained.

Additional MeasuresA dherence to corporate

governance requirements requires that compliance starts from the top. The tone for a company’s effective control environment and culture should be set by the company’s Board of Directors and senior management. Transparency, through the adequate exchange of information between the levels of the organisation

should be encouraged, and corporate governance principles should be well documented and followed. Most impor-tantly, making compliance the responsibility of all staff and encouraging interaction be-tween the compliance function and all personnel allows for a more effective implementa-tion of corporate governance requirements. Another sugges-tion would be for a compliance team to be comprised of peo-ple who have sufficient knowl-edge of the specific business operations. Such knowledge helps facilitate the effectiveness of the company’s compliance with regulatory requirements by incorporating the compli-ance framework into existing business processes.

“The cOmpliance deparTmenT haS a main OBjecTive Of eSTaB-liShing a cOmpliance cUlTUre

ThrOUghOUT The OrganiSaTiOn.”

ELEANA SPyRIS Legal Advisor/Compliance Officer, eurolife ltd“

cRuciaL factoR in the burgeoning importance of corporate compliance and ethics worldwide remains the 2008 financial crisis, the effects of which are still being felt in most parts of the world, including cyprus. The concept of

strengthening corporate compliance and transparency as a means to prevent the corruption and conflicts of interest that led to the financial crisis has gained traction, and compliance is now considered one of the most important functions in an organisation. in the insurance industry, regulatory frame-works such as the eU Solvency ii directive have ensured that compliance is a key pillar for an effective system of corporate governance, adding requirements for the independence of the function from a company’s operational activities, and the fitness and probity of persons fulfilling the compliance role. Similar regulations across the financial services industry have led to a rise in both dedicated, technically competent and specialist compliance personnel.

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n oRdeR to do business and to deposit funds, you need to know a client’s true identity, you need a valid address for that client, you need to be certain that the funds paid by your client emanate from legitimate sources and

that his transactions are legitimate. This is not re-in-venting the wheel. it is simple common sense and these were always necessities of good and prudent business practice. what has changed lately is that you have to have all the above information on record and be able to demonstrate that you have performed the necessary due diligence and compliance checks on your client.

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Our Team

T here are two persons in our compliance team, which

will clearly play an increasingly important role as our organisa-tion continues to grow and as the demands of the supervisory authorities increase in order to protect the community against unconscionable practices and to enforce correct tax practices. The challenges facing the team emanate from two sources: the authorities or their agents and the clients. I feel that the Central Bank and the banking sector in general have, in some cases gone way over the top. They approach the issue of compliance with the fervour of the newly converted, which is never a good thing. They should realize that they are not fooling anybody. They can-not make up for their past unfor-givable (and so far unpunished) sins by over-legislating, over-en-forcing and overcharging their customers. The challenges from clients are simpler to deal with. A client who does not accept the fact that we must comply with legal and regulatory requirements does not remain a client. No client is so large or so important that we will risk our reputation and compromise our quality standards or principles to retain them. If they do not respect our desire and commitment to be professional in all aspects of our business, then they do not respect who we are or what we stand for and you cannot do business with somebody who does not show and demonstrate respect to you.

Cyprus

c yprus is certainly a far more transparent business

centre than it was before the events of March 2013. How-ever, I don’t believe that it can demonstrate greater integrity or accountability than before. I have not, however, lost hope. The main reason for this opti-mism is because, like the ma-jority of Cypriots, I trust and respect the Attorney-General. I see him as a man of principle who is demonstrating that he has the independence, the courage and the tenacity to bring about true accountability by bringing the perpetrators of the crimes which have contrib-uted to the country’s economic collapse to justice. Speaking for my particular profession, I believe that there is inadequate supervision by the Cyprus Bar Association with the result that, when we enforce com-pliance, we are seen by some clients as being over officious in comparison to other law firms on the island. In the banking industry, if we ignore the overzealous approach of some officials, Cypriot banks and foreign banks operating in Cyprus have done an excellent job in establishing and main-taining international regulatory standards.

Additional measures

i believe that company direc-tors should pass a fit and

proper person test and demon-strate at least a basic knowledge of their legal duties to the shareholders of the company and to the state and its relevant regulatory authorities in terms of compliance before they can be appointed.



“i feel ThaT The cenTral Bank and The Banking SecTOr in gen-eral have, in SOme caSeS gOne

way Over The TOp.”

ANdREw dEMETRIOU director, ioannides demetriou llc“


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Our Teamcomplying with regulations

and acting with integrity, as well as maintaining the quality of our work, have always been top priorities and targets for KPMG. As the effectiveness of a compli-ance framework depends on a well-communicated code of eth-ics and on the active participation of all personnel, our primary ob-jective is to ensure that each em-ployee is aware of, and takes all necessary steps to comply with, relevant laws and regulations, as well as internal policies and procedures. To this end, we have dedicated teams that set the tone, communicate and train our staff and monitor the implementation of compliance. Compliance in a firm like KPMG implies com-prehensive procedures for every level of services provided, from accepting someone as a client to the delivery of our final report. Our teams monitor compliance with our operational systems and evaluate the quality of our work.

The average number of persons in such teams is 20. The role of the Compliance Department is crucial since it is the backbone of the credibility of our organisation and it guides personnel during their day-to-day operations.

Cyprusc yprus offers a competitive

modern and transparent financial and regulatory frame-work, comprising robust and effective anti-money laundering laws and regulations which apply all the requirements of interna-tional standards, and it is fully harmonized with EU Directives. In late 2015, Cyprus was up-graded from “non-compliant” to “largely compliant” as regards compliance with the standards of the Global Forum on transparen-cy and exchange of information on issues of taxation. Apart from the OECD upgrade, the country has also received positive feedback from MONEYVAL, which is evidence of the island’s improved

c O m p l i a n c e

reputation as an international business centre. We have an obligation to the coming gen-erations not to allow previous mistakes to happen again and thereby jeopardise Cyprus’ reputation.

Additional MeasuresCyprus has already un-

dertaken a number of actions in order to comply, among others, with the thir-teen recommendations made in MONEYVAL’s action plan in the context of Cyprus’ re-quest for a bailout in 2013. To this end, frequent inspections are carried out in the industry, reviewing the level of compli-

ance and making recommen-dations for improvement, if required. It is imperative that these specialized and targeted recommendations be adhered to and all suggested measures and actions be followed. Moreover, measures for the improvement of corporate governance were also a pre-requisite under the Economic Adjustment Programme for Cyprus. Bearing in mind that Cyprus exits the Programme shortly and the review by the Troika will no longer be as rigorous, it is important that all competent local authorities monitor the implementation of such actions in order to ensure their continuous appli-cation.

“imprOving cOmpliance imprOveS The qUaliTy Of gOOdS and Ser-viceS, which iS really whaT The lOcal markeT iS lOOking fOr”

MIChAEL M. ANTONIAdESBoard member, kpmg“

“

he impoRtance of compLiance and transparency has grown because, as a consequence of the global financial crisis, the regulatory regime has become more robust and broader in scope. This, in turn, has already resulted in a shift

of focus in local businesses, in order to comply with great-er legislation, more regulations and internal risk policies. By extension, businesses and the market will benefit from the improved quality of services, which will be carried out more effectively. To this end, a quality corporate compliance programme for every business is extremely valuable and important, since it can reduce the risk to which a compa-ny is exposed. moreover, as stakeholders require quality and transparency, organisations with a vision of the future understand that the way forward is to invest in this area. improving compliance improves the quality of goods and services, which is really what the local market is looking for.

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“regUlaTOrS acrOSS The glOBe are cOnSTanTly Upgrading The relevanT regUlaTOry framewOrk in Order TO increaSe cOnfidence and SecUriTy”

ANdREAS ThEOdOSIOUdirector, amf global“

orporate compliance and transparency are highly valued by the stakeholders of any organisation nowadays. given the increased importance and attention giv-en to these areas by such stakeholders,

regulators across the globe are constantly upgrad-ing the relevant regulatory framework (or coming up with a new one) in order to increase confidence and security. further developments in this sphere will certainly benefit the local business scene since cyprus, as an international services hub, will further expand the scope of services currently provided in order meet requirements on corporate compliance and transparency.

COur TeamOur organisation is

able to offer support through a team that spe-cializes in corporate com-pliance and transparency matters by giving priority to companies’ compliance and transparency require-ments. Hence, the manage-ment team of our clientele can rely on our services and enjoy peace of mind to focus on higher value issues for their organisa-tions. We collaborate with internationally recognized firms operating in the same area and we share knowl-edge and resources on an ongoing basis, Moreover, our team of 10 undergoes continuous training on up-coming developments and/or regulation.

The role of the com-pliance team is of vital importance. I would dare to say that it is of great-er importance than any other function, since all working cycles within an organisation need to receive compliance clearance. Giv-en the constant upgrades to the relevant regulatory framework, I expect that the demand for regulatory compliance will continue to grow.

The main issue faced by our team at the moment is the challenge to keep on track with all the devel-opments currently taking place in this sphere. In order to do so, dedication and commitment are two of the most important characteris-tics we are searching for.

Cyprus

cySEC and the industry itself,

including professional service providers, aim at all times to keep up with the EU and local regulatory requirements. Notable progress has been observed in recent years. The transparency, integ-rity and accountability of Cyprus as an internation-al business centre have been strengthened further in recent years. This is particularly notable within the local industry. Internationally, the status of Cyprus has been im-proving, notwithstanding the fact that more work is required to convinced foreign investors of our progress.

Additional Measuresan effective and val-

ue adding measure that can be implemented locally in order to ensure adherence to corporate governance requirements is the setting up of an independent body, of which the principal objec-tives will be (a) the provi-sion of an organisational framework for all bodies to which corporate gov-ernance requirements ap-ply; (b) the monitoring of those bodies through var-ious sub committees de-pending on the industry that will ensure adherence to the framework; and (c) the provision of technical support and training.




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c O m p l i a n c e

Our TeamT he key aims of our Com-

pliance Department are, through constant improvements to its extensive system of checks and controls, to ensure full com-pliance with the law and our regulatory obligations and, at the same time, to contribute to the improvement in the quality of our professional services, thus building clients’ confidence in our work and enhancing the organisation’s competitiveness. The Compliance Department comprises myself plus another member of staff and we work closely with our fellow compli-ance professionals at our sister firm, Andreas Neocleous & Co LLC. Our role within the organ-isation is strategic: by enhancing compliance we reduce risk and at the same time we help raise qual-ity. The Compliance Officer has unrestricted access to all company information and reports directly to the Board of Directors. In view of increasing regulation, our im-portance within the organisation is becoming more apparent and is set to increase even further. A major issue Compliance Of-ficers face is educating clients, colleagues and company manage-ment about the constant need to

adapt to the demands of the new regulatory environment, which is here to stay. People need to understand that, while enhanced compliance means additional cost and effort by everybody, it also implies a better quality of service to the benefit of all.

Cyprus

Since 2013, as a result of the requirements of the

Troika, Cyprus has upped its game in adopting and implementing international regulatory standards. The pace of change has been fast and clearly many are not ready yet but there is no doubt that over-all standards are improving. In terms of transparency, integrity, and accountability, there have been improvements in this area and these have been noted in-ternationally. However, many problems remain. For instance, corruption is still widely prev-alent. There have undoubtedly been successes such as the improvement of government finances and the implemen-tation of regulatory changes enforced by the Troika but we have squandered the chance to introduce reforms to tackle the country’s chronic problems and

decisively change it for the better.

Additional MeasuresCorporate governance

in Cyprus may be improved by the adop-tion of strict controls to improve accountability and transparency. For instance the number and powers of non-execu-tive directors within the Board could be increased, though currently there is no such requirement for ASPs as there is, for

instance, in the case of CIFs. Non-execs could be provided with the power to evaluate the performance of the CEO every year. There need to be improvements in the flow of information up to the Board level and in systematically assess-ing performance against plans. The ethical and professional standards of directors should be raised and scrutinized. The adoption of a common Code of Conduct by all three regulatory authori-ties will also help.

“Since ��3, AS A reSuLT Of The TrOika, cyprUS haS Upped iTS

game in implemenTing inTerna-TiOnal regUlaTOry STandardS”

MIChALIS LOIzOUCompliance Officer, A. Neocleous Trust company ltd and chairman, aml & compliance affairs commit-tee, cyprus fiduciary association “

he pRocess of buiLding up a strong compliance culture in cyprus in the last few years has been an important tool in the recovery from the reputational damage that the country suffered in 2013. The hard work in enhanc-

ing compliance, in particular the implementation of strict anti- money laundering legislation and a new law governing administrative Service providers, has brought us tangible benefits in boosting the confidence and trust of clients. This is good news for our sector and a real investment in the future of Cyprus as a credible financial centre but more still needs to be done.

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CyprusThe banking crisis in Cy-

prus was partly a result of the failure of the two largest systemic banks. Excessive risk, poor governance and compliance standards, and a culture that allowed or even encouraged bad practices was to blame for the largest bail-in ever undertaken in Europe. The island’s reputation was also unjustly harmed by un-founded reports of money laundering. After a report by Deloitte – Italy was conducted at the request of the Troika, it became clear that the problem was of much lesser proportions that some had claimed. Since 2013, the Directives of the var-ious regulators (ICPAC, Cen-tral Bank, CySEC, etc.) have been successfully implemented across business sectors with special enforcement priority in

the Financial Markets sector. In terms of both transparency and integrity, I believe that the progress made is both measur-able and significant. In terms of accountability, there is still ground to cover but I believe that we are on the right path and growth in the financial ser-vices sector is perhaps the best evidence that Cyprus is on the road to restoring its credibility once again a major financial services centre in the region. Without doubt, compliance, integrity and transparency, along with strong enforcement, are key success factors.

Additional MeasuresCorporate governance

and compliance go to-gether. We cannot speak of good corporate governance

if there are no strong compli-ance systems in place. Strong corporate governance requires independence, expertise, Board commitment to the organisa-tion’s strategic objectives and continuous training at Board level in areas of compliance, risk and regulation. An effec-tive corporate compliance pro-gramme includes the following elements among others:• Identify all regulatory and internal compliance needs and efforts. • Define Objectives from an enterprise and business unit standpoint.• Understand Compliance: Everyone needs to know their roles and understand the “why” and “how” of the com-pliance programme. Controls need to be clearly communi-cated, ideally with a feedback loop so control owners can voice their insights and con-cerns.

• Conduct a Risk Assessment: Identify risks, probabilities, and the significance in terms of both qualitative and quantitative mea-sures. • Align Procedures and Con-trols with Regulatory Frame-work • Tone at the top and leader-ship compliance• Monitoring to Assess On-Go-ing Compliance: Build moni-toring, internal audit and special reviews into the compliance programme to help ensure that controls are operating effectively. • Train, Educate and Commu-nicate: Employees and Board Members need to understand their responsibilities with regard to compliance and educate customers, vendors and other stakeholder groups to understand its value. • Measure Results and Report to the Board: Develop a report-ing dashboard to keep man-agement groups and the Board aware of compliance measures, trends and developments.

“we cannOT Speak Of gOOd cOrpOraTe gOvernance if There are nO STrOng

cOmpliance SySTemS in place”

ELEfThERIOS PhILIPPOU, risk & reputation leader, deloitte ltd“

ithout doubt, compliance is becoming increasingly important to banking and financial services organisations in order to meet ever-increasing regulatory standards. if one takes a closer look at any major financial or

banking scandal, compliance failures are there for all to see. it is therefore essential for every organisation in the field of financial services to develop a strong compliance programme and a well-structured team to meet its legal and regulatory requirements. we at deloitte have con-sidered the importance of compliance and transparency in the new and unfolding landscape in which we operate and we have come up with a strategy to guarantee our long-term success, based on integrity, fair dealing, quality and transparency. we are investing in the future. we have also developed a range of services that can assist others to understand and comply with their regulatory and compli-ance duties efficiently and effectively.

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ObjectivesThe ultimate objective of

CySEC is to ensure the fair, competitive and smooth functioning of a thriving securi-ties market, in which investors are well protected. Investor protection and market efficien-cy are the opposite sides of the same coin: if there is no investor protection, there is no market efficiency. For this reason, Cy-SEC pays particular attention to both improving the regulatory framework by promptly trans-posing the relevant European Directives into national law and addressing any regulatory gaps identified, thus enhancing its supervision in various ways, the latest being the creation and adoption of a risk-based super-vision framework. This state-of-the-art supervisory tool enables CySEC to enhance the capaci-ty, efficiency and concentration of its supervisory resources and

focus on entities and areas of the market that demand greater attention. Overall, a well su-pervised market gives a sense of security and confidence for the industry and investors alike and provides a fertile ground for economic growth and pros-perity.

Challengesall financial supervisors face

the challenge of keeping up-to-date with market de-velopments in a sector that is highly dynamic and fast-paced. The proliferation of new finan-cial instruments that utilize the latest information technology systems make their supervision complex and broaden the number of available services and products that falls in the regu-lated sphere. CySEC also has to accommodate the need to su-pervise an ever-growing invest-ment services sector. We remain

vigilant in monitoring market changes and many times we are acting preemptively in an effort to combat potential mar-ket abuses.

Additional Measuresfurther measures need

to be taken to develop local adherence to corporate governance requirements. Regarding the investment service sector, I believe that a code of corporate governance applicable to CIFs would greatly enhance their struc-tures and further improve their overall compliance and performance. Furthermore, it would be quite useful if both directors and the senior management of CIFs were obligated to participate in cor-porate governance training and practices in order to become eligible for appointment.

The Sectordespite the chal-

lenging financial environment of the past few years, the transferable securities market in Cy-prus has exhibited great resilience. Not only did the securities sector not suffer from the investor confidence crisis of the last few years in Cyprus, the EU and the region but, on the contrary, it continues to grow. For example, the number of CIFs has in-creased from just 18 in 2003 to a staggering 209 today. Over the past few years, Cy-SEC has confronted the is-sue of corporate governance aggressively by performing numerous investigations, some of which have become the basis of the Attorney General’s cases relating to the banking sector.

“in pracTice, a gOOd cOmpliance recOrd enhanceS a cOmpany’S

image and pUBlic percepTiOn and imprOveS inveSTmenT cOnfidence”

ANdREAS ANdREOUvice-chairman, cyprus Securities and exchange commission “

y coRpoRate compLiance we refer to the com-panies fulfilling all their legal responsibil-ities as these are defined in the applicable legal framework. laws and regulations are designed to protect economic agents and,

in the case of the provision of investment services, are there to protect the weakest element – the investing public and minority shareholders in particular. There-fore, compliance with the legislation ensures not only that the market is functioning fairly but it also enhances investor protection. The cyprus Securities and exchange commission (cySec), as the regulatory and supervi-sory authority of the cypriot securities market, places the highest importance on the proper compliance of its supervised entities with the laws and regulations that govern their operation. in practice, a good compliance record enhances a company’s image and public percep-tion and improves investment confidence. At the end of the day, we all wish to do business with a company that always acts responsibly and within the remit of the law.

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c O m p l i a n c e



Documents

Compliance Cover Story