EU Sanctions Advisory in Cyprus for Cross-Border Structures

Sanctions compliance is no longer a technical back-office function. It is a board-level risk, a reputational issue, and in many cases, a criminal exposure.

In recent years, European Union restrictive measures, particularly those adopted under Regulation (EU) No 269/2014 and Regulation (EU) No 833/2014, have evolved into a highly complex framework affecting ownership structures, corporate governance, cross-border transactions, financial flows and professional service providers.

At AGPLAW, we have seen a substantial increase in requests from corporate service providers, investment groups, family offices, regulated entities and international intermediaries seeking structured, legally defensible opinions on:

• Ownership and control under EU sanctions law
• “50% rule” application and aggregation risks
• De facto control and governance analysis
• EU nexus and extraterritorial exposure
• Cyprus criminal sanctions liability
• Anti-circumvention provisions
• “Secondary” sanctions misconceptions
• Risk positioning for high-value transactions

In this article we intend to explain why sanctions advisory now requires litigation-grade legal analysis,  and how AGPLAW supports complex cross-border projects in this sensitive area.

Sanctions risk is no longer binary

One of the most common misconceptions in the market is that sanctions exposure is straightforward: either an entity is designated or it is not.  In practice, matters are rarely that simple.  Under EU sanctions, exposure may arise not only where an entity is directly listed, but also where it is owned (directly or indirectly) by a designated person, or, controlled by a designated person, or acting on behalf of or at the direction of a designated person.  But its not only that, exposure still arises in the event of participating in arrangements that may constitute “circumvention” or engaged in transactions creating a sufficient EU jurisdictional nexus.

The assessment of ownership and control is highly fact-sensitive. It is not limited to share percentages. Governance rights, voting arrangements, board appointment rights, veto powers and de facto influence may all become relevant.  This is where legal precision matters.

The 50% rule, and its limits

The EU “ownership” test generally looks to whether a designated person owns 50% or more of proprietary rights or holds a majority interest. Where that threshold is met, the entity is treated as subject to asset-freezing measures.  However, two issues frequently arise in practice:

1. Just under 50% shareholdings (e.g. 45%), which may still require careful control analysis.
2. Multiple sanctioned shareholders, requiring aggregation and contextual assessment.

Corporate service providers and transaction counterparties often assume that falling below 50% automatically removes risk. That assumption can be dangerous.  The control test is broader, and EU Best Practices guidance emphasises indicators such as authority to appoint or remove directors, dominant influence over strategic decisions, veto rights and other similar governance arrangements that may be conferring decisive influence over a company or a group of companies.

Sanctions advisory therefore requires a structured legal methodology and not just informal comfort as we often see clients, or even their advisors, to believe.

Governance matters, but so does scope

A key challenge in sanctions advisory is maintaining clarity between (a) legal analysis based on provided information; and (b) factual due diligence (KYC / EDD) work.

At AGPLAW, we clearly define the scope of engagement. Where we are engaged to review a structure from a sanctions point of view, we analyse the applicable EU and Cyprus legal framework for the client’s clear understanding, we conduct sanctions screening for identification purposes at a group level, we distinguish between ownership analysis and control risk and analyse the facts of each project on their own merits. This clarity protects both our clients and their representatives, whether external advisors or board members, but also third parties who are about to transact (whether on EU or non-EU level).

EU Nexus and “Extraterritorial” concerns

Another recurring issue is the perceived “extraterritorial” reach of EU sanctions.  Non-EU counterparties frequently ask:

Does dealing with an EU-incorporated entity automatically bind us to EU sanctions?

Does the presence of an EU person in a transaction extend EU obligations globally?

Are we exposed to EU secondary sanctions?

The legal position is more complex and requires careful interpretation, rather than being a straightforward yes/no answer. EU restrictive measures apply based on defined jurisdictional connecting factors, including EU territory, EU nationals, EU-incorporated entities and business conducted in whole or in part within the Union.

EU law does not operate a system of “secondary sanctions” comparable to other non-EU regimes. However, indirect exposure may arise where EU operators remain bound by compliance obligations, EU financial institutions are involved, funds pass through EU territory or anti-circumvention provisions are triggered.

Understanding this distinction is critical when structuring transactions and on this ground at AGPLAW, we regularly provide legal analyses clarifying when EU law applies, and when it does not.

Cyprus criminal exposure, a critical layer

Since the introduction of the Criminalisation of Violation of Restrictive Measures Law of 2025 (Law 149(I)/2025), the Republic of Cyprus has reinforced enforcement mechanisms for breaches of EU sanctions.

Where a sufficient Cyprus nexus exists, exposure may include criminal prosecution, financial penalties, director liability, regulatory consequences and license suspension (for regulated firms) and of course, reputational damage.

Importantly, criminal exposure does not arise simply because a foreign entity transacts with an EU counterparty. A jurisdictional link must exist.  In advisory mandates, we carefully assess whether such a nexus could be triggered, and if so, how risk can be mitigated.

Litigation-grade advisory

Sanctions advisory cannot be treated as a compliance checklist.  Our litigation and arbitration experience teams up with our sanctions advisory approach. We analyse questions as if they may one day be examined by a court of law or an arbitral tribunal, a regulator or an enforcement authority. This perspective ensures that conclusions are legally structured, documented and defensible.

Who we advise

• Our sanctions advisory practice supports:
• Corporate service providers in Cyprus and abroad;
• Regulated financial entities;
• International law firms requiring Cyprus law input;
• Family offices and investment structures;
• Cross-border M&A transactions;
• Professional trustees and fiduciaries;
• International intermediaries and holding structures;
• UAE-based and other non-EU entities interacting with EU operators.

We understand the commercial pressures, the reputational sensitivities and the regulatory realities.

Why clients choose AGPLAW

Sanctions work requires a rare combination of skills including, regulatory precision, corporate structuring knowledge, litigation strategy awareness, cross-border understanding, and risk communication clarity.

At AGPLAW, our team integrates:

• Sanctions advisory team, fully backed up by
• A solid litigation and arbitration expertise,
• corporate and governance advisory,
• regulatory and compliance experience,
• Cyprus criminal law knowledge, and
• International structuring insight.

We do not provide superficial comfort. We provide structured, legally reasoned analysis.

Sanctions advisory is about risk positioning, not just Compliance

In many mandates, the core question is not simply “Are we sanctioned?”  The real questions are “what is our exposure?, Where is the grey area? How defensible is our position? How will a regulator or tribunal see treat this situation? Can this structure withstand scrutiny? Are we comfortable proceeding?”

These are strategic legal questions, not administrative ones, which require in depth legal analysis with expertise in sanctions regulations and practices, as well as a clear understanding of the judgments and interpretative guidance issued by the Court of Justice of the European Union. The ECJ plays a central role in shaping sanctions law, including rulings on the validity of restrictive measures, proportionality and fundamental rights, ownership and control standards, anti-circumvention provisions, jurisdictional nexus, and the scope of judicial review. Understanding how the Court interprets these principles is critical when assessing exposure, structuring transactions, or defending a position before regulators, financial institutions, or arbitral tribunals.

Looking ahead

The sanctions landscape continues to evolve. Regulatory expectations are rising. Enforcement appetite is increasing. Corporate service providers and international intermediaries are under greater scrutiny.  Cyprus, as an international business and structuring hub, sits at the intersection of these developments. Professional, well-structured legal advisory is no longer optional, it is essential.

How can AGPLAW assist

If your organisation is reviewing a high-risk ownership structure, assessing exposure under EU restrictive measures, responding to a bank compliance query, structuring a cross-border transaction involving EU persons, seeking clarity on Cyprus criminal exposure or, concerned about control or circumvention risk, our sanctions advisory team is ready to assist.

We provide clear, legally grounded opinions tailored to the commercial realities of international projects. For discreet consultations or structured legal opinions on EU sanctions and Cyprus law exposure, please contact our team.

The information provided by AGP Law | A.G. Paphitis & Co. LLC is for general informational purposes only and should not be construed as professional or formal legal advice. While every effort has been made to ensure the accuracy and reliability of the information contained herein, the author, publisher, or any related parties make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability of the information. In no event will the author, publisher, or any related parties be liable for any loss or damage, including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this document/article. You should not act or refrain from acting based on any information provided above without obtaining legal or other professional advice.