Cyprus bank accuses troika of misleading EU ministers

The summary was drafted on behalf of the "troika" - the European Central Bank, the European Commission and the International Monetary Fund - and circulated to ministers on 14 May.

It was also leaked last weekend by the Cypriot website stockwatch.com.cy.

It says that some leading Cypriot banks rely on "high risk" clients for most of their business, that banks do not do proper checks on who their customers are and that they do not file "suspicious transaction reports" even in "compelling cases."

It notes there are "systemic deficiencies in the implementation of preventive measures by the audited institutions."

It prompted Jeroen Dijsselbloem, the chair of the eurozone ministers' meetings, to say: "This report shows that while the legal [anti-money-laundering] framework is OK, the implementation is really lacking" and to call for action from Cyprus.

But eurozone ministers never saw the full version of the study.

The full version is accessible only to the Cypriot central bank and to a handful of troika officials because it contains commercial secrets and private data of individual banks and their clients.

According to the Cypriot central bank in a statement sent to press on Friday (24 May), it tells a different story.

The bank quoted from the Deloitte section of the full report, which speaks of a "generally solid level of compliance" with customer due diligence (CDD) obligations, which are "more detailed … than in many other jurisdictions, including other EU member states."

It said Deloitte found just 29 suspicious transactions out of the 570,000 which it audited.

It said the Moneyval section of the full study speaks of "strong" implementation of CDD rules and "strong" anti-money-laundering measures, including "the rejection of some high risk business."

It said Moneyval also praises Cypriot banks because they "identify customers in all cases" and "through all layers" of complex company structures.

The Cypriot central bank in its own comments added: "The summary paper does not provide a synopsis of the main findings of the [Deloitte and Moneyval] reports but rather a description of the perceived weaknesses of the system, drawing inferences where none exist in the original reports."

It complained that the authors of the summary did not consult the authors of the full report.

It said the summary "cannot be considered balanced" because it does not mention the positive findings.

It also said that in the "reports as a whole, there is no reference to or indication of systemic deficiencies … [and] the general picture portrayed is not negative."

For its part, the troika is currently drafting an action plan for anti-money-laundering reforms in Cyprus.

Dijsselbloem on 14 May said troika officials will closely monitor compliance, hinting that EU bailout funds might stop flowing if Nicosia does not fall into line.

But it is unclear which version of the Cyprus money laundering study - the short/negative or the long/positive version - the troika will use as the basis for its demands.