Thursday

18th Jan 2018

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 for a 30 day free trial.

  1. €150 per year
  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.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Solutions for Sustainable Cities: New Grants Awarded for Branding Projects
  2. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  3. Nordic Council of MinistersOresund Inspires Other EU Border Regions to Work Together to Generate Growth
  4. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  5. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  6. Dialogue PlatformRoundtable on "Political Islam, Civil Islam and The West" 31 January
  7. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  8. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  9. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  10. ACCAWelcomes the Start of the New Bulgarian Presidency
  11. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit
  12. EU2017EEVAT on Electronic Commerce: New Rules Adopted

Latest News

  1. Nato prepares to take in Macedonia
  2. Taking full benefit of supercomputers in Europe
  3. Spitzenkandidat system 'difficult to get rid of', hopes lead MEP
  4. Rights NGOs face fresh threats across the EU, agency says
  5. EIB 'more sensitive' to fraud after Dieselgate, chief insists
  6. EU 'hypocrisy' condemns people to Libya, says NGO
  7. Next year's EU election at risk of Russian meddling
  8. Hungary to tax NGOs that 'help' migration

Stakeholders' Highlights

  1. European Jewish CongressChair of EU Parliament Working Group on Antisemitism Condemns Wave of Attacks
  2. Counter BalanceA New Study Challenges the Infrastructure Mega Corridors Agenda
  3. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  4. Plastics Recyclers Europe65% Plastics Recycling Rate Attainable by 2025 New Study Shows
  5. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  6. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  7. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  8. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  9. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  10. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  11. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  12. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap