According to Constantinos Herodotou, Governor of the Central Bank of Cyprus (CBC), the US and UK sanctions against Cypriot persons and entities, who allegedly assisted Russian sanctioned nationals, have not affected Cyprus’ financial stability. However, he noted that non-compliance with the US and the UK sanctions would result in "very negative consequences to the economy," as it would damage Cyprus' credibility.

The US and the UK have placed several Cypriot persons and legal entities on their sanctions lists, because they allegedly facilitated financial transactions of sanctioned Russian citizens. Although the Republic of Cyprus has so far enforced sanctions imposed by the EU and the UN, the banking system has chosen to comply with the US and the UK, resulting in the freezing of Cypriot natural and legal persons’ accounts.

During a parliamentary committee meeting, Mr. Herodotou stated that there is no legal framework that mandates compliance with the US sanctions. Nonetheless, non-compliance would be harmful to the economy. If a bank does not freeze the accounts of sanctioned individuals, this act would be deemed as a severe violation of the sanctions and as a result, the bank would be regarded as a “designated entity”.

The Governor warned that this would be disastrous, not only for the bank but also for the country, as investors would withdraw their funds, causing further damage. In addition, he explained that if a banking institution enters the US sanctions list, it would automatically lose access to US dollar based transactions. As a consequence, potential new investments would be in danger and current investors might leave Cyprus.

Furthermore, Mr. Herodotou highlighted that the US law includes secondary sanctions, allowing the US to prosecute those who assist individuals included on the primary sanctions list. He also reminded the committee that Cypriot banking institutions' basic rules require compliance not only with the EU and UN regulations but also with those of other nations.

Regarding the frozen accounts, the Governor urged commercial banks to expedite the due diligence process and unfreeze accounts, If necessary, but without putting any banking institution at risk. He also clarified that exemptions for transactions, such as staff salaries paid by a sanctioned entity, may be possible but must be requested by the affected company, not by the bank, to the US authorities.

Later, when asked about the competence of the legal framework in Cyprus, Mr. Herodotou replied that the primary issue is the implementation of imposed fines, in order for the supervised entities to feel they are being monitored.

Georgia Themistocleous, a member of the sanctions team in the Ministry of Finance, specified that Cypriot entities have been placed on the US and UK sanctions lists, based on a report which concluded that these entities were aiding Russian oligarchs who were already on the US sanctions list. She added that this information has been passed on to the Attorney-General.

In the end, she revealed that the Ministry is preparing a response to the EU concerning the total investments before and after the sanctions in Cyprus; the purpose of the planned response is to refute the numbers given by the EU Justice Commissioner, Didier Reynders, in regard to the deposits in the Cypriot banking system, which amount to €50 billion, not €96 billion.