Cyprus's financial market regulator unveiled comprehensive guidance requiring brokers, crypto and financial firms to implement strict controls against weapons proliferation financing (PF)
CySEC Mandates Sweeping Anti-Proliferation Controls for Trading Firms
The Cyprus Securities and Exchange Commission's (CySEC) new framework demands regulated entities, including crypto platforms and FX/CFD brokers, to establish robust screening systems and enhanced due diligence procedures to prevent the financing of weapons of mass destruction through trading operations.
“As a country whose financial services account for a large part of its GDP and those services are attributed to a large number of non-resident customers, the Republic of Cyprus must be vigilant to PF risks,” CySEC commented in the official guidance.
“Although no evidence currently exists that there are direct PF links between Cypriot entities and persons engaged in weapons of mass destruction proliferation activities, the exposure of the financial system when conducting international business and overseas financial transactions poses higher PF risks.”
CySEC Key Requirements
Financial firms must now:
- Screen international payments for proliferation financing indicators
- Monitor dual-use goods transactions
- Implement enhanced due diligence for high-risk jurisdictions
- Deploy sophisticated beneficial ownership verification systems
The guidance specifically addresses crypto-asset service providers, highlighting concerns about North Korea's use of digital assets to evade sanctions. Firms must implement blockchain analysis tools and enhanced transaction monitoring systems.
Impact on FX/CFD Sector
Cyprus, a major hub for retail trading firms, hosts numerous regulated brokers serving international clients. The new requirements reflect growing global pressure to prevent sanctioned entities from accessing financial markets through complex corporate structures and cryptocurrency transactions.
For Cyprus's substantial FX/CFD sector, the guidance creates significant operational challenges. Brokers must now:
- Revamp customer onboarding procedures
- Enhance transaction monitoring capabilities
- Implement specialized staff training programs
- Deploy new screening technologies
This week, CySEC also launched a new website, aimed at enhancing the experience for regulated firms, investors, and the general public. The regulator stated that the updated platform is intended to improve accessibility, transparency, and user convenience. The website features a redesigned interface that is compatible with smart devices.
