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The Cyprus Securities and Exchange Commission (CySEC) has recently issued a circular reminding all regulated entities about their obligations under the 19th package of restrictive measures put forth by the European Council on October 23. These sanctions were introduced as a response to activities threatening the territorial integrity, sovereignty, and independence of Ukraine. The circular, signed by CySEC chairman George Theocharides, targets a broad range of entities, including Cyprus Investment Firms (CIFs), Administrative Service Providers (ASPs), UCITS and AIF management companies, crypto asset service providers, and small AIFMs.
A key update highlighted by CySEC involves clearer definitions surrounding the concepts of "owning" and "controlling" a legal person or entity. "Owning" is now explicitly defined as possessing 50% or more proprietary rights or having a majority interest. Notably, a majority interest might exist even if less than 50% is held, especially where the designated person is the largest shareholder amid divided ownership. For example, if a designated individual holds 40% of shares while the rest are split evenly, they are considered to have majority interest. The notion of "controlling" encompasses a range of factors, such as the power to appoint key management personnel, control voting rights, or exercise dominant influence, whether legally or de facto. Entities are urged to carefully assess all relevant factors to determine control.
If a person or entity is deemed to own or control a designated legal person, CySEC mandates freezing all funds and economic resources of that entity and its subsidiaries, and prohibits making any funds available to or for the benefit of the designated person. Additionally, there are new prohibitions specifically targeting crypto-asset services, payment instruments, payment transactions, payment initiation services, and electronic money issuance directed at Russian and Belarusian nationals or entities. This represents a tightening in financial and digital asset compliance related to these jurisdictions.
The sanctions package also introduces broad restrictions concerning Russia’s special economic, innovation, or preferential zones. It is now forbidden to acquire or extend ownership or control in any legal person or entity based within these zones, to create new joint ventures, branches, or representative offices there, or to enter into new contracts or arrangements linked to supplying goods, services, or intellectual property in these areas. As of January 25, existing ownerships, joint ventures, or contracts related to these zones will also be disallowed. Investment services directly tied to these activities are likewise banned. Furthermore, these prohibitions extend to entities outside the zones if they’re owned or controlled by entities inside.
Exceptions to these restrictions are permitted only for activities deemed essential for public health emergencies, humanitarian efforts, or critical energy supplies, including natural gas and various metals like titanium, aluminium, and palladium. CySEC clarified that contracts concluded before October 24, 2025, may continue execution until January 25, 2026, and activities necessary for humanitarian, medical, agricultural, or food-related purposes, judicial proceedings, or divestment from Russia may be authorised by competent authorities.
Finally, CySEC requested all regulated entities impacted by these changes to report affected business relationships within a month, detailing the nature of the relationship and compliance measures taken. The commission stressed the importance of considering these amendments in conjunction with EU Best Practices and the European Commission’s Consolidated FAQs and urged entities to review the 19th restrictive package comprehensively and adjust their compliance frameworks accordingly.
