Regulation and licensing in Cyprus

Also, the country has a strong regime for the protection of intellectual property and copyright, which remain in force for up to 70 years. Furthermore, Cyprus constantly implements new reforms and initiatives to further improve conditions for doing business. These include the “Digital Cyprus” project, which aims to make the country a leader in the field of digital economy.

Looking for a reliable partner to start a business or obtain a licence in Cyprus? Our international law firm will provide full legal support and help you quickly go through all stages of registration — from document collection to interaction with regulators. We offer tailored solutions considering your goals, create an optimal corporate structure, and ensure compliance with all Cypriot and European legislation.

Cyprus Investment Firm, CIF, is a legal entity registered in Cyprus and licensed by the Cyprus Securities and Exchange Commission (CySEC) to provide investment services.

The CIF status grants a company the right to provide a wide range of financial and investment services not only within the territory of Cyprus but also in other member states of the European Economic Area thanks to the “single European passport” (passporting) mechanism.

Let us consider the key purpose of Cyprus Investment Firm:

Before commencing activities, each Cypriot investment firm is required to obtain a CySEC licence, confirming compliance with a number of criteria (financial stability, sufficient authorised capital, qualified personnel, internal control system, etc.). After obtaining the CIF licence, it regularly reports to CySEC, maintaining the reputation of a reliable market participant.

Organisational and legal form. The company must be registered in Cyprus as a private or public company with limited liability (Limited Liability Company). A legal address and office located in Cyprus are required.

Authorised capital. The amount of required authorised capital depends on the type of investment services the company plans to provide. The exact amounts are regulated by the European directive MiFID II and Cypriot legislation.

Management structure and key personnel. The Board of Directors must include independent and executive directors with relevant experience. Directors and senior management undergo the Fit & Proper procedure (assessment of competence, impeccable business reputation, qualifications).

Internal policies and procedures. Companies must adhere to compliance procedures: regulations on combating money laundering and terrorism financing, KYC policy, monitoring of suspicious transactions. Risk management involves the implementation of a system for identifying, assessing, and minimising risks associated with trading financial instruments.

Liability insurance. The Cyprus Securities and Exchange Commission requires a professional indemnity insurance policy to cover losses related to the company’s activities. Participation in the Investor Compensation Fund protects clients in the event of CIF insolvency.

Alongside the requirements for minimum share capital and financial obligations, CySEC pays particular attention to the quality of corporate governance, management structure, and the qualifications of key employees.

CySEC requires that the Board of Directors of a CIF includes at least 1 or 2 non-executive directors, not directly connected with the management and major shareholders. There must also be 1 or more executive directors directly involved in the operational management of the company.

All directors undergo an assessment (Fit & Proper), which includes a check of business reputation, experience in the financial markets sector, and the presence of relevant professional competencies.

The Compliance Officer is responsible for ensuring the company’s activities comply with CySEC requirements, as well as national and European legislation.

A risk management specialist assesses financial, market, credit, and operational risks, develops a strategy to minimise potential losses, implements and improves systems for monitoring and controlling operations, interacts with management and other departments to reduce risks.

The Internal Auditor conducts an independent audit of processes and procedures, checks the compliance of operations with internal regulations and CySEC requirements, and regularly reports directly to the Board of Directors, helping to identify and promptly address discrepancies.

Before proceeding with official actions, it is necessary to understand exactly which investment services you intend to provide (brokerage, advisory, portfolio management, client funds custody, etc.). This will determine the minimum authorised capital, as well as the set of documents and internal procedures.

We recommend consulting professionals specialising in Cypriot law. They will help assess risks, determine the optimal corporate structure, and calculate the required authorised capital.

The next stage is the preparation of a business plan. It is necessary to reflect the key indicators of future activities: the expected client base, the structure of income and expenses, risk management methods, and development strategy.

After this, it is necessary to choose the form of a legal entity. The company name must be approved by the Department of Registrar of Companies, the procedure may take several days.

Next, it is necessary to proceed with the preparation of the founding documents. The memorandum must contain information about the goals and objectives of future activities. The articles of association define the rules and procedures for managing the company.

After the approval of the name and submission of the founding documents, registration in the state register is carried out. Information about management bodies and ownership structure is entered into the corresponding registers. To deposit the authorised capital and conduct further activities, it is necessary to open a corporate account in a bank in Cyprus.

The most important part for CySEC is the anti-money laundering policy and adherence to the Know Your Customer principle. It is necessary to detail how the company will verify clients and identify suspicious transactions.

CySEC charges a certain fee for submitting an application and the subsequent licence. Then, a preliminary review of the provided documents is conducted. If anything is missing, the regulator will send a request for revision.

After addressing all the remarks from CySEC, a final decision is made regarding the issuance of the CIF licence. From this moment, the company obtains the legal right to provide the declared investment services.

CIF must annually submit to CySEC financial statements certified by an external auditor. The reports reflect the company’s assets, liabilities, income, expenses, and other financial indicators.

It is also mandatory to submit statistical and operational reports: data on the volume of transactions, client structure, financial instruments the company works with. CySEC may request additional information about the business model, risk management policy, etc.

A compliance officer regularly prepares reports on how the company complies with regulatory requirements: adherence to CySEC directives, the presence of effective AML/KYC procedures, handling customer complaints, and other aspects.

Most key indicators (capital adequacy, financial results, operational statistics) are submitted to CySEC quarterly or semi-annually. At the end of the financial year, the company is obliged to submit a full set of documents certified by an independent auditor.

If a company expands its range of services, changes its shareholder structure, or faces force majeure circumstances, CySEC requires additional reporting in the prescribed form.

Anti-Money Laundering, AML, is a set of measures and procedures aimed at preventing, detecting, and suppressing the laundering of proceeds obtained through criminal means, as well as the financing of terrorism.

Know Your Customer is a principle according to which a financial company identifies and verifies the identity of its clients before starting business relationships and regularly updates the data during the course of cooperation. The purpose of KYC is to detect suspicious transactions, avoid involvement in criminal activities, and protect the interests of both the CIF and its bona fide clients.

CIF must obtain reliable data about its clients: passport details, information on the origin of funds, and beneficial owners (in the case of companies). In case of doubts or incomplete information, the company is obliged to request additional documents, including financial and tax reports.

Each client is classified by the level of potential risk (low, medium, high). Enhanced due diligence measures are applied to high-risk clients (for example, politically exposed persons or residents of jurisdictions with an unfavourable regime).

The risk management system must provide for automated and manual mechanisms for identifying suspicious transactions.

When clear signs of money laundering or other illegal activities are identified, the company is obliged to report this to the relevant authorities (for example, MOKAS — the Cypriot Financial Intelligence Unit). Failure to fulfil this obligation may result in serious sanctions from CySEC.

Obtaining a CIF licence is an important step for entering the European financial market. Mistakes at any stage can result in significant delays or even a refusal of the licence. This is why collaboration with professional lawyers and consultants becomes the key to success and resource savings.

Our experts are well-versed in Cypriot legislation and the requirements of CySEC. We will help avoid repeated application submissions, error corrections, and related additional costs.

Our task is not limited to preparing the application. We are ready to support you in the process of interaction with CySEC, as well as provide consultancy on compliance and regular reporting even after obtaining the licence.

Contact us right now for an initial consultation and to find out how our company can help you confidently reach a new level in the European financial market.