Cyprus Banks to Reopen But Will Face Cash Lockdown

March 28, 2013 Taxation in Cyprus

Forex Money for Exchange in Currency BankNICOSIA – The clients of banks in Cyprus will soon have access to their funds again, although a new regime of tight capital controls will be enacted to ensure that the money does not flow overseas, further worsening the already beleaguered nation.

Banks in Cyprus will officially be allowed to open their doors once again at midday on March 28th, after a mandatory two week closure, but the financial institutions will be required to enforce strict controls on withdrawals and the use of money in order to prevent a cash run-out and to stop the funneling of deposits to overseas financial institutions.

From the time of opening, clients of local banks will not be able to withdraw more than EUR 300 cash per day, and cheques will no longer be cashed and can only be deposited.

The daily use of non-cash credit and debit cards on the island will not be affected by the controls, but Cypriot travelers will not be able to spend more than EUR 5 000 per month on their cards if traveling outside of the country.

Individuals who are leaving the island will also be restricted to carrying no more than EUR 3 000 in cash when leaving.

Account holders will also be restricted from transferring more than EUR 5 000 abroad, except in cases where the funds are needed to pay for approved import and trade purposes.

All banks in Cyprus will also be required to conduct a review of any requested transactions involving between EUR 5 000 and EUR 200 000, and will need to conduct further in-depth investigations of transactions which exceed this threshold.

The currency controls are currently planned to be imposed for a week, however, at this stage it is widely expected that the economic situation of the country will not improve dramatically and the time frame for the controls may be extended further.

Banks have been forced to close their doors for almost two weeks, as the government sought to reach an agreement with international lenders on a tax to be imposed on deposits held with local banks as part of the country’s bailout loan package.

Adding to the unfolding controversy surrounding the capital controls, new allegations have surfaced in the international media that over the last two weeks while the banks have been closed, a number of large international transfers have been made from banks in Cyprus to other financial institutions located outside of the Eurozone, and the transactions have simply been recorded as “special payments” without further explanation or justification on why the money was allowed to leave the country despite the imposed lock down.

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