Cyprus urged to leverage EU regulation to strengthen financial centre role

Nicosia, Cyprus. Cyprus could strengthen its position as an international financial centre by treating its European regulatory framework as a competitive advantage rather than a cost, according to Kyriacos Antonaki, Head of AML & Compliance at KENDRIS Capital Limited.

Changing competition

In an analysis published by the Cyprus Investment Funds Association, Antonaki said competition among international financial centres is changing as investors place greater emphasis on governance, transparency, resilience and regulatory credibility.

For years, financial centres often competed by offering flexibility, speed and relatively low regulatory barriers, while firms viewed compliance requirements as an expense to be minimised.

That approach is becoming less attractive amid geopolitical uncertainty, sanctions risks, increased scrutiny of anti-money laundering controls and higher investor expectations in the financial services sector.

Focus on investment funds

Antonaki said the shift is particularly evident in the alternative investment fund sector, where institutional investors are increasingly assessing not only a fund manager’s investment strategy but also its governance, compliance arrangements and the quality of regulatory supervision in its jurisdiction.

“The discussion is moving away from how ‘light-touch’ a jurisdiction is, towards how credible and internationally trusted its framework is,” Antonaki said.

He said this development makes the European regulatory framework increasingly valuable to Cyprus.

EU regulatory framework

Over the past decade, the European Union has strengthened its financial regulatory system through measures including the Alternative Investment Fund Managers Directive, MiFID II, the Digital Operational Resilience Act and the developing EU anti-money laundering framework.

The EU’s new AML framework includes Regulation (EU) 2024/1624, which establishes the Anti-Money Laundering Authority, or AMLA, as part of efforts to introduce more integrated and centralised supervision across the European financial system.

Although the rules have increased compliance requirements for financial institutions, Antonaki said they have also created greater consistency and predictability.