The Institute of Certified Public Accountants of Cyprus (ICPAC) has issued a critical alert urging accounting professionals to enhance their monitoring and Know Your Customer (KYC) measures to combat the increasing use of cryptocurrencies in terrorist financing. This alert highlights the growing risks and the need for robust compliance practices among accounting firms in Cyprus.
ICPAC has released a “terror financing alert” for accounting firms in Cyprus to address the rising use of cryptocurrencies to fund terrorism. This alert stresses the necessity of stricter transaction monitoring and enhanced KYC measures. The increasing threat of terrorist financing, which can occur through both legitimate and illegitimate funds, requires thorough transaction monitoring irrespective of the transaction amount.
ICPAC identified several methods used by terrorists to transfer funds, including:
Terrorists often exploit the anonymity of cryptocurrencies for cross-border peer-to-peer transfers and receive funds through crowdfunding or charitable donations, making it challenging to track and monitor illicit financial flows.
To combat these risks, ICPAC advises financial professionals to use specialized blockchain investigation tools to monitor suspicious wallets and transactions. The organization emphasizes the importance of strict KYC procedures to prevent terrorist financing activities. Charitable and non-profit organizations (NPOs) are particularly susceptible to exploitation by terrorists, and ICPAC urges these entities to scrutinize donations, especially those linked to conflict zones or jurisdictions under sanctions.
ICPAC reminds its members, associated firms, accounting firms in Cyprus and compliance officers of their duty to report suspicious transactions. Failure to report is considered an offense, and flagged transactions will be scrutinized through profiling, crypto wallet screening, and the use of specialized blockchain tools. This directive aligns with global concerns about the use of cryptocurrencies in terrorism.
For instance, a U.S. Treasury official highlighted that Palestinian militant groups, including Hamas, have used small amounts of cryptocurrencies for funding but predominantly rely on traditional financial products and services. According to blockchain analytics firm Elliptic, Palestinian Islamic Jihad raised $12 million through crypto fundraisers, though earlier reports had significantly overestimated these amounts.
ICPAC’s alert details specific steps for financial professionals and accounting firms in Cyprus to take in identifying and reporting suspicious activity. These include verifying the account registration details, scrutinizing the geographical profile of transfers, and using advanced blockchain tools to trace suspicious activities.
Accounting firms in Cyprus must remain vigilant and proactive in their compliance efforts, especially in the face of evolving risks associated with cryptocurrency transactions. By enhancing KYC measures and utilizing advanced monitoring tools, these firms can play a crucial role in combating terrorist financing.
For more detailed insights, visit the ICPAC website and explore the Soneverse homepage as well as our Accounting Cyprus page.
Additional reading on the importance of compliance and the global context of these issues can be found in the Financial Mirror and Kathimerini Cyprus.
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