In what is being considered a bold move to strengthen Cyprus’s financial security system and curb corruption, the Central Bank of Cyprus, after much pressurization from US officials, has announced that it will take measures to discourage brokers from setting up shell companies on the island country.

Cyprus’s premier bank has sent said measures as an email to all compliance officers in financial credit institutions, informing them of the new directive, which involves banks and other financial institutions boycotting commercial relations clients from shell companies.

With such a rule in place, it will become more difficult for companies to do business in Cyprus, as they will have neither physical presence nor the ability to engage in economic activity. The directive also expands on the existing definition of “shell companies,” going forward from the outsiders point-of-view that shell companies are only those based in tax havens or are offices without any tax residence.

The move has been heavily criticized by the Cyprus Fiduciary Association (CFA), which has helmed the CBC for being careless with consulting stakeholders. According to the CFA, the shell companies issue is a long-standing one, and the CBC should not have flown-off with a directive before taking into consideration the discussions on the new model which aims to put focus more on meaningful business activities.

Cyprus has been described as a “country of primary concern” by the United States regarding international money laundering and terror funding activities, with a United States Report from the  State Department alleging that the country of Cyprus is working as an median for criminal organizations looking for places to launder finances.