Most authorities on Monday backed the creation of a national financial sanctions implementation unit, meeting Cyprus’ obligations to EU law, but lawyers bucked the trend and pointed to problems with the underlying legislation.

The bills seeking to establish and regulate the operation of a national sanctions unit were discussed for the first time in parliamentary committee, about a month after they got the nod from the cabinet.

The majority of authorities summoned – the Central Bank, the Securities and Exchange Commission, and the anti money-laundering unit – had some minor observations on certain clauses of the proposed government legislation, but by and large were on board with the establishment of a central sanctions unit.

Cyprus needs to enact the legislation, harmonising with relevant EU law, by May 20.

Other than setting up a national sanctions unit – which will be a division within the finance ministry – the bills also criminalise sanctions-busting and grant the unit the authority to slap fines on entities not disclosing the information requested.

Effectively the unit will supervise and coordinate all matters relating to the implementation of financial sanctions issued by the EU and the United Nations.

It will further issue directives, clarifications and guidance to all relevant departments and agencies.

And it will direct the tracking and freezing of financial assets that are subject to sanctions.

The legislation moreover makes it mandatory to share information with counterpart agencies overseas.

In parliament, the head of the Public Audit Oversight Board said the legislation should go even further. Panos Prodromitis proposed the insertion of a clause that would ban lawyers, accountants or financial services providers from incorporating companies, on behalf of clients, in jurisdictions outside of the EU.

However the bar association came out strongly against – not the national sanctions unit per se, but rather the way it was being set up and the powers vested in it.

Pantelis Christofides, of the bar association, said one of the bills is riddled with irregularities and is possibly unconstitutional.

The unconstitutional argument has to do with the fact that the paperwork handled by the sanctions unit will use the English language, in addition to Greek.

According to Christofides, this constitutes a breach of the constitution, as English is not an official language of the Republic of Cyprus.

Answering this point, a representative of the attorney-general’s office said English would be used as a matter of convenience, to facilitate affected foreign nationals.

Moving on, Christofides asserted the legislation is problematic as it provides that the cabinet would unilaterally issue ordnances relating to national sanctions without previously having briefed parliament.

He also said that certain clauses violate the EU acquis in relation to attorney-client privilege.

What’s more, the mechanisms proposed by the legislation would exclude the bar association from its current role as one of the supervisory authorities in the anti-money laundering field.

“They’ve driven us out of the sanctions authority, just like they’ve done to the Institute of Certified Public Accountants,” complained Christofides.

Significantly, he added, the proposed national sanctions unit would not be independent, as it would come under the finance ministry.

In remarks to the media later, House finance committee chair Christiana Erotokritou (Diko) sought to downplay the criticisms heard.

The bills are based on an EU directive, she stressed. Having in place a framework that’s fully in sync with EU law and norms would solidify Cyprus’ status as a “dependable and reliable country for lawful business activities”.

The MP said that the bar association had even asked that the discussion of the bills be suspended altogether.

But she was having none of it; the debate would continue. The parliamentary committee will resume the discussion next week.

In 2023 Cyprus and the UK signed a memorandum aimed at enhancing their collaboration in matters of combating illicit finance.

The British High Commission then assigned a project manager and a team of experts, tasked with submitting a report regarding the establishment and operation of a financial sanctions implementation unit in Cyprus. The proposed unit would adopt international best practices and be modeled on the UK’s own Office of Financial Sanctions Implementation.

Cyprus found itself in hot water for allegedly aiding Russian oligarchs evade sanctions in 2023, after both the United States and the UK sanctioned dozens of Cypriot entities and individuals for being financial enablers.

In November 2023 the International Consortium of Investigative Journalists and the Organised Crime and Corruption Reporting Project published ‘Cyprus Confidential’, a slew of reports claiming that while the West was trying to block funding for Russia’s war against Ukraine, financial fixers in Cyprus — including accounting powerhouse PwC — scrambled to help oligarchs evade the sanctions.