The Cyprus Securities and Exchange Commission (CySEC) issueda circular on July 9, 2025, updating the requirements for verifying customeridentities under the country’s anti-money laundering law. The circular appliesto all entities regulated by CySEC, including investment firms that offerContracts for Difference (CFDs).CySEC Updates Rules on Client VerificationThe updated rules affect how firms onboard new clients,especially when accepting early deposits. The new guidance replaces a previousversion issued under Circular C367.Firms are generally required to verify the identity ofclients and beneficial owners before starting a business relationship orallowing any transactions. This includes collecting proof of ownership forcorporate clients.However, the law allows firms to begin a relationship beforecompleting full verification if certain conditions are met. CySEC has now setout stricter requirements for using this exception.Funds Returned If Verification Not CompletedUnder the new rules, total deposits from a customer cannotexceed €2,000 before full verification is complete. Funds must come from a bankaccount in the customer’s own name. Firms must complete verification within 15days of first contact or the initial deposit. If they do not, they must end therelationship and return all funds and any profits, after deducting losses.Funds cannot be frozen unless the firm files a report withthe Money Laundering Reporting Authority. Customers must be informed inadvance if the firm intends to apply this exception, and their consent must beobtained.Firms are required to update their anti-money launderingprocedures to reflect the new rules. Importantly, no funds can be acceptedwithout at least initial identification and an economic profile of the client.You may find it interesting at FinanceMagnates.com: CFDsBrokers Are to Adjust as CySEC Moves Away from Excel Reporting.ASPs Excluded from Verification ExceptionAdministrative Service Providers (ASPs) are excluded fromusing the exception due to their higher risk profile. They must verifyidentities before beginning any business relationship, unless they providewritten justification explaining why early verification would disruptoperations and why the risk remains low.CySEC has urged firms to prioritize full verification beforestarting any business activity. It also warned against frequent or unnecessaryuse of the exception.While the circular applies broadly, the updated measures arelikely to influence how CFD providers handle small deposits and monitorearly-stage risks when onboarding clients.This article was written by Tareq Sikder at www.financemagnates.com.