Sunday

18th Nov 2018

Cyprus gets €2bn despite money laundering concerns

  • Dijsselbloem (c) and Cypriot finance minister Charis Georgiades (r) in Brussels on Monday (Photo: consilium.europa.eu)

The EU on Monday (13 May) said many Cypriot banks do not know who their customers really are, but wired Nicosia €2 billion anyway.

Commenting on a recent study on money laundering in the Mediterranean island, eurozone finance ministers said in a joint communique that it must do better on "customer due diligence by banks" and must fix "the functioning of [its] company registry."

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Dutch finance chief Jeroen Dijsselbloem, who chairs the ministers' meetings, added: "This report shows that while the legal [anti-money-laundering] framework is OK, the implementation is really lacking."

A branch of the Strasbourg-based Council of Europe and US accountancy firm Deloitte did the audit in March and April.

The full text is available only to a handful of officials in the European Commission, the International Monetary Fund (IMF) and the Cypriot finance ministry.

But eurozone ministers got a two-page resume over the weekend.

One EU official told this website on Monday: "The report has identified significant shortcomings in the implementation of the 'know your customer' principle [in Cypriot banks]."

Another EU official told EUobserver it would make frightening reading for German taxpayers, who are footing a large part of the bailout bill.

"If you look at some of the numbers, it says that Cypriot authorities in recent months identified just one or two suspicious transactions. But Deloitte found 30 times that amount," the contact noted.

"It's politically sensitive because of the German elections [in September] … It could be quite problematic for [German Chancellor] Merkel. If German people saw the report, they might say: 'I would not give my money to such a country'," the source added.

To give some context, Cyprus hosts about 12,000 shell companies which have no physical presence on the island.

But its company registry has a 10-year backlog of paperwork on who owns what.

Meanwhile, one Bank of Cyprus customer is Dmitry Kluyev.

Documents seen by this website show that Kluyev (a convicted Russian fraudster) and his associates used five Cypriot banks to launder $31 million of stolen money linked to the alleged murder of Russian whistleblower Sergei Magnitsky.

For its part, the Luxembourg-based bailout fund, the ESM, on Monday wired Nicosia €2 billion despite the concerns.

It aims to pay another €1 billion out of a total €9 billion by the end of June.

But EU and IMF officials are to draft an "action plan" on what Cyprus must do to combat money laundering in order to keep the money flowing.

"Compliance with the action plan will be monitored over the next years," Dijsselbloem said.

"Cyprus' business model was unsustainable … This problem has to be dealt with," he added.

Investigation

Cyprus launches probe into Russian mafia money

Cyprus has opened an investigation into evidence that stolen Russian tax money linked to the murder of Sergei Magnitsky was laundered through its banks.

News in Brief

  1. US warns EU banks and firms against trading with Iran
  2. Merkel urged Romania not to move embassy to Jerusalem
  3. Protesters call for Czech leader to step down
  4. Former German chancellor labelled 'enemy' of Ukraine
  5. French lead opposition to Brexit deal on fisheries
  6. Private accounts of Danske Bank employees investigated
  7. UK's May defends Brexit deal to MPs, after ministers resign
  8. Brexit MP calls for 'no confidence' vote on May

Opinion

Interpol, China and the EU

China joins a long list of countries - including Russia - accused of abusing Interpol's 'Red Notice' system to harras activists and dissidents.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. Brexit dominates EU affairs This WEEK
  2. How the EU commission got tunnel vision on self-driving cars
  3. No-confidence calls against May put Brexit deal in doubt
  4. Key points of the Brexit deal (if it ever comes into effect)
  5. Romania heaps scorn on 'revolting' EU criticism
  6. US steps in to clean up Cyprus
  7. 'Decisive progress' on Brexit as British cabinet backs deal
  8. Asylum for Macedonia's ex-PM puts Orban on spot

Join EUobserver

Support quality EU news

Join us