Sunday

23rd Jul 2017

Leaked report damns Cyprus on money laundering

  • Cypriot banks temporarily closed in March after almost going bust on bad investments in Greece (Photo: truthpaint)

Almost 60 percent of one Cypriot bank's clients are "high risk" in terms of money laundering and almost a third of all bank depositors' records contain errors, a leaked EU report says.

The confidential paper - published at the weekend by Cypriot website stockwatch.com.cy - was drawn up in April by Moneyval, a unit of the Strasbourg-based Council of Europe, and by US accountancy firm Deloitte on the request of eurozone finance ministers.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The full version, containing banks and customers' names, is still under lock and key.

But the leaked four-page resume paints a damning picture of what goes on in the mini financial centre which just got €2 billion of EU taxpayers' money.

Deloitte looked at the six Cypriot banks which hold €2 billion or more in deposits.

It also looked at 90 big borrowers (worth €16 billion in total loans), 180 big depositors (worth €8 billion) and 120 randomly selected customers.

In terms of doing business with potential crooks, it found that 10 percent of all of them are "politically exposed persons" and that 58 percent of customers in one of the six banks pose a "high risk" on money laundering.

It got the information from "simple commercial database checks" even though the banks themselves had failed to flag them.

In terms of knowing who their customers really are, Deloitte said 27 percent of all depositors' files and 11 percent of borrowers' files "showed inaccurate information on the customer and beneficial owner."

It noted that banks rely on "introducers" - firms, lawyers and accountants who work for the real owners of accounts - for 75 percent of their international business, muddying the water on customer identity.

It added that when dealing with "complex" structures - accounts held by firms with three or more layers of nominal owners between the bank and the real customer - the banks did proper ID checks in just 9 percent of cases.

They launched just four internal probes on potential money laundering on the sample clients between 2008 and 2012.

They reported zero "suspicious transactions" to Cypriot authorities in 2008 to 2010, one in 2011 and "a few" in 2012.

But Deloitte identified 29 of them in the last 12 months alone, some of which it described as "very compelling cases."

"Deloitte's analysis exposes systemic deficiencies in the implementation of preventive measures by the audited institutions," the leaked report says.

"Overall awareness regarding clients presenting higher risk profiles was not demonstrated to be robust," it adds.

The paper gives the lie to Cypriot diplomats and politicians who have been telling media in recent months the island adheres to international standards.

It also casts doubt on the credibility of Moneyval, whose previous reports gave Cyprus a clean bill of health.

"While Moneyval was not able to access actual customer files, its findings significantly revise its previous, more favourable assessment of Cyprus' AML [anti-money-laundering] system," the report notes.

Moneyval, as an intergovernmental body, can only look at the work of Cypriot government institutions, which is one reason why the eurozone ministers brought in Deloitte.

The man who chairs the ministers' meetings, Dutch finance chief Jeroen Dijsselbloem, has said the EU will draft an "action plan" for Cyprus to enact if it wants to keep the bailout money flowing.

German leader Angela Merkel in April also promised the Bundestag that she will clean up Cyprus if MPs approved the EU rescue.

But the leaked paper risks making her look bad in the run-up to elections in September.

"It could be quite problematic for Merkel. If German people saw the report, they might say: 'I would not give my money to such a country'," an EU diplomat told this website last week.

Ultra-right group wins seats in Cyprus

The National Popular Front (ELAM) on Sunday snatched two seats in Cyprus' 56-chamber parliament. The move marks a first for an ultra-right party. ELAM has close links to Greek neo-nazi Golden Dawn party.

Opinion

Greece needs a new plan

Two years into its third bailout, Greece needs to combine the necessary fiscal targets with a new vision. This can be done in the context of the ongoing industrial revolution.

Opinion

Ceta and pesticides: A citizens' rights issue

The trade agreement with Canada will begin to apply on 21 September. But there is still a potential conflict on the right to data protection vs. the right to access information.

News in Brief

  1. Polish parliament adopts controversial justice reform
  2. GMO opt-out plan unlikely to go anywhere in 2017
  3. Slovak PM threatens to boycott inferior food
  4. France takes Google's 'right to be forgotten' to EU court
  5. Turkey accuses German companies of supporting terror
  6. Israel's Netanyahu caught calling EU 'crazy'
  7. UK does not collect enough data to expel EU nationals
  8. Polish president threatens to veto justice reform

Stakeholders' Highlights

  1. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  2. ACCAAnnounces Belt & Road Research at Shanghai Conference
  3. ECPAFood waste in the field can double without crop protection. #WithOrWithout #pesticides
  4. EU2017EEEstonia Allocates €1 Million to Alleviate Migratory Pressure From Libya in Italy
  5. Dialogue PlatformFethullah Gulen's Message on the Anniversary of the Coup Attempt in Turkey
  6. Martens CentreWeeding out Fake News: An Approach to Social Media Regulation
  7. European Jewish CongressEJC Concerned by Normalisation of Antisemitic Tropes in Hungary
  8. Counter BalanceOut for Summer Episode 1: How the EIB Sweeps a Development Fiasco Under the Rug
  9. CESICESI to Participate in Sectoral Social Dialogue Committee on Postal Services
  10. ILGA-EuropeMalta Keeps on Rocking: Marriage Equality on Its Way
  11. European Friends of ArmeniaEuFoA Director and MEPs Comment on the Recent Conflict Escalation in Nagorno-Karabakh
  12. EU2017EEEstonian Presidency Kicks off Youth Programme With Coding Summer School

Latest News

  1. Dutch coalition talks lengthiest in 40 years
  2. Polish parliament steps up showdown with EU
  3. EU urges UK to clarify its Brexit positions
  4. Law expert: direct EU powers have become too complicated
  5. Winter is here for Spitzenkandidat, but he'll survive
  6. Mafia money pollutes the EU economy
  7. Central Europe should be wary of Brexit stopping
  8. Poland's 'July coup' and what it means for the judiciary