In November 2018, the Central Bank of Cyprus issued a new guide to shell companies (“mailbox companies”). The new manual contains an updated and expanded definition of this term.
A shell company is a company that does not have a physical presence at the place of registration, or anywhere else (for example, office), does not carry out organized economic activities in the country of its registration, i.e. does not have regular business partners (accounting or law firms are not taken into consideration), has a small or zero economic value. Particular attention is paid to companies that are issued for nominal values.
Earlier, the Central Bank of Cyprus has officially explained the meaning and characteristics of such companies to Cyprus banks in order to identify shell companies among their clients and to consider the possibility of continuing their service. Now all credit organizations, payment systems and electronic money institutions should pay attention to signs of shell companies in order to combat money laundering. In addition, financial institutions are required to carry out all necessary measures to verify clients (due diligence), establish the ultimate beneficial owners, sources of funds’ origin and the nature of clients’ operations.