Reasons and legal grounds for blocking

In recent years, banking and regulatory control in Cyprus has intensified in connection with the global fight against money laundering (AML), terrorist financing, and violations of sanctions legislation. More and more companies and individuals are facing unexpected account freezes, suspension of operations, and even asset freezes. Understanding the real reasons and legal grounds for such actions is key to quickly restoring access.

Legal basis

• Money Laundering Law, L.188(I)/2007 (AML Law):
  Banks are required to suspend account transactions at the slightest sign of suspicious transactions or lack of information about the origin of funds, sources of income, or payment purposes. The law is strictly enforced under the supervision of the Central Bank of Cyprus and based on EU directives (in particular, Directive 2015/849/EU).
• Companies Law, Cap. 113 (Articles 52-53):
  Requires disclosure of ownership structure and ultimate beneficial owners (UBOs). Since 2024, Cyprus has had an electronic UBO register (companies.gov.cy).
• EU directives on asset freezing and sanctions:
  Banks are required to suspend operations if they suspect a customer’s connection to persons subject to international sanctions.
• Right to suspend transactions pending investigation:
  In the event of an internal or external request (e.g., from MOKAS, the Cypriot anti-money laundering unit), the bank has the right to freeze assets until full information is provided or the investigation is completed.

Practical reasons for blocking

• Untimely updating of beneficiary data or non-compliance of corporate documents with new substance standards (actual presence in Cyprus).
• Sudden or atypical large transactions that are not justified by business necessity or do not reflect normal economic activity.
• Discrepancies between information held by the bank, tax authorities, and the UBO register.
• Internal and external AML/Compliance signals: suspicions of cash laundering, tax avoidance schemes, links to offshore zones or high-risk countries.

Under Cypriot law, the bank is not required to disclose the full internal motivation for the block, but must inform the customer of the suspension of operations and, if possible, indicate the reason.

Examples of restoring access: case studies from Almanova Law

1. Blocking of a corporate client’s account after receiving a foreign transfer
A company from Eastern Europe received a large payment from a new counterparty. The account was blocked without warning with the wording “awaiting clarification on the origin of funds.” Almanova Law’s lawyers immediately prepared a set of documents: the contract, invoices, correspondence, and a new UBO form. After a personal meeting with the bank’s compliance officer and the prompt submission of documents, the account was unblocked within 10 days.
Conclusion: timely legal response and transparent communication with the bank speed up the restoration of access.

2. Freezing of investment fund assets at the request of MOKAS
In 2024, the investment fund faced a complete account freeze due to suspicions of links with companies subject to sanctions. Almanova Law initiated an internal audit, confirmed the origin of all receipts, gathered recommendations from international partners, and prepared written explanations for the bank and regulator. Within a month, the assets were completely unfrozen, and the client received an official apology for the delay.
Conclusion: competent legal preparation and confirmation of the legality of funds are critical for “unfreezing” assets.

3. Problems with tax residency of an individual
An individual’s account was blocked after an exchange of information between the bank and the Cypriot tax authorities: suspicion of dual residency arose. Lawyers prepared and submitted new tax status certificates, copies of passports with border crossing stamps, and documents proving ownership of property in Cyprus. Access was restored after four business days.
Conclusion: even a “simple” block requires a comprehensive approach and the formal submission of explanatory documents.

Step-by-step customer protection strategy

1. Analysis of the notification and diagnosis of the cause

The first step is to obtain an official notification from the bank or an account statement indicating the reason for the block (even if the reason is vague). Request information about the required documents in writing.

If the block is related to UBO or substance, check the data update dates on the companies.gov.cy website.

2. Urgent preparation and submission of documents

Within 1–3 days, collect and submit to the bank:

• supporting documents for transactions (contracts, invoices, acts, correspondence);
• updated UBO form and information about directors/beneficiaries;
• substance documents: office lease agreement, employment contracts with Cypriot employees, utility bills, etc.;
• bank statements, audit reports, tax returns.

For individuals – residence certificates, tax documents, property certificates.

3. Negotiations and formal requests to the bank

All communications should be conducted in writing only (email, official bank portal).
At the same time, request a meeting with the compliance officer for prompt review of the situation. If the bank has a dedicated department for handling “problem cases,” involve it.

4. Interaction with regulators

If the block is initiated not only by the bank, but also by MOKAS, the tax authority, or another regulator:

• the lawyer submits an official request regarding the reasons and requirements;
• prepares written explanations for the regulator;
• participates in negotiations together with the client.

5. Challenges and legal protection

In the event of an unjustified or prolonged block, file a complaint with the Central Bank of Cyprus (centralbank.cy) and prepare documents for a lawsuit to restore access.

At the same time, record all losses resulting from the block (e.g., lost profits, penalties on obligations) in order to obtain compensation if the lawsuit is successful.

6. Prevention for the future

• Update beneficiary data in the UBO register (companies.gov.cy) on a quarterly basis.
• Use the services of professional consultants to conduct regular compliance audits.
• Automate notifications about deadlines for submitting corporate changes and documents.
• Do not put off clarifications or requests from the bank “until later” — delay increases the risk of prolonged blocking.

Insights and the value of legal support: the experience of Almanova Law

Working with Cypriot and international clients, we at Almanova Law have come to realize that the key to success is not only knowledge of the law, but also fast, professional communication with banks and regulators.

Over the past two years, we have successfully unblocked more than 20 corporate and private accounts, including complex cases involving MOKAS and the Central Bank. Each case is unique, but in 85% of situations, accelerated restoration of access was achieved through competent collection of documents, high-quality explanations, and direct dialogue with bank lawyers.

Our advice to companies and individuals:

• Do not delay resolving issues with substance and beneficiaries – banks now check this information regularly and automatically.
• At the first sign of a check or request from the bank, immediately engage professional lawyers.
• Use only proven schemes; do not trust “easy” options for circumventing sanctions or formal compliance.
• Remember: account blocking is not a sentence, but a manageable risk. The faster and more transparently you act, the higher the chance of lifting it.

If you are facing account blocking or asset freezing in Cyprus, the Almanova Law team is ready to take control of the situation.
We quickly analyze the reasons, develop a strategy, prepare documents, and negotiate with banks and regulators so that your business does not stop for a single day.

Learn more and get a personal consultation at www.almanovalaw.cy