Understanding Money Laundering, Terrorist Financing and Sanctions

18 free CySEC AML Chapter 2 flashcards. Tap a card to flip, or use the arrow keys to move through the deck.

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Define money laundering.: Concealing or disguising illicitly derived property so it appears legitimate — hiding where criminal proceeds came from so they can be used openly.
What are the three stages of money laundering, in order?: Placement, layering, integration.
What is placement?: The first and riskiest stage — physically introducing criminal cash proceeds into the financial system.
What is the difference between structuring and smurfing?: Structuring splits deposits into amounts kept below the thresholds that trigger checks; smurfing uses many people making many small deposits across many accounts and institutions.
What is layering?: Moving money through complex transactions (e.g. cross-border wires, offshore companies) to disguise the audit trail, source and ownership.
What is integration?: Re-entering laundered funds into the economy so they look legitimate — e.g. buying property, businesses or luxury assets.

How does the National Risk Assessment rate Cyprus's overall domestic ML threat?: Medium.
Which five sectors does the NRA name as most vulnerable to ML?: Banking, securities, insurance, other Obliged Entities, and DNFBPs — banking heads the list due to its international exposure.

How is virtual currency different from electronic money?: Virtual currency is a digital representation of value existing only electronically; it must not be confused with e-money. Its near-untraceability raises ML risk.
Who licenses electronic money institutions in Cyprus?: The Central Bank of Cyprus, under the Electronic Money Law of 2012.

How does terrorist financing differ from money laundering on source of funds?: TF may use clean, legally obtained funds, whereas ML always uses the proceeds of crime.
How do the motives and money-flow of ML and TF differ?: ML is profit-driven and circular (proceeds return to the criminal); TF is ideology-driven and linear (funds flow outward to an attack).
What is Cyprus's terrorism threat level, and why?: Raised to medium because of geographic proximity to conflict areas, though Cyprus has not faced a violent terrorist incident in the last 27 years.

Which two sanctions regimes must Cyprus apply?: EU restrictive measures and UN Security Council sanctions. Since 25 July 2025 Cyprus can also impose national sanctions (Law 150(I)/2025).
How do EU sanctions operate?: They are list-based: it is prohibited to make funds or economic resources available to, or receive them from, designated persons and entities.
From which part of the UN Charter do UN Security Council sanctions derive?: Chapter VII.
Who recommends, and who decides, on releasing frozen funds in Cyprus?: Exam material: SEOK recommends and the Minister of Finance decides. Since 25 July 2025: requests go to the National Sanctions Implementation Unit (NSIU) at the Ministry of Finance, which decides; it replaced SEOK and the UIS.
What must happen to the assets of listed (designated) persons found in Cyprus?: They must be frozen immediately, without delay.