Friday

22nd Sep 2017

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.

Mokas, its anti-money-laundering unit, in an email to EUobserver on Thursday (13 December), said: "At this point ... in Cyprus there is an open investigation on this matter." It noted: "Mokas is conducting the investigation, which functions within the office of the attorney general."

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.

  • Hermitage has has flight records showing visits to Cyprus by the Klyuev gang at key moments in the scam (Photo: Hermitage Capital)

It added that the probe already began some time ago.

But it went ahead with some reluctance.

Magnitsky, a 37-year-old Russian accountant, was killed in jail in 2009 after he exposed a huge tax embezzlement by a criminal gang - "the Klyuev group" - involving high ranking officials in the Russian interior ministry and its internal intelligence service, the FSB.

Lawyers for his former employer, the UK-based Hermitage Capital investment fund, submitted evidence to Cyprus' attorney general in July.

Its papers, including copies of financial transfers - seen by this website - show that $31 million of the tax money was moved out of Russia using five Cypriot banks: Alpha Bank, Cyprus Popular Bank, FBME Bank, Privatbank International and Komercbanka.

They also show that Dmitry Klyuev, the alleged ringleader, owns a Cypriot-based firm called Fungamico, has an account at the Bank of Cyprus and visited Cyprus with his associates at the time the money went missing.

But Cyprus in October said it must check with Moscow to see if the money was really stolen before it could move ahead.

The Magnitsky probe is unwelcome on many fronts.

No-questions-asked banking services for Russian clients are an important source of income for Cyprus, where Russians have stashed up to $26 billion, according to the German intelligence service, the BND.

The Magnitsky case also raises the question if Cyprus is a fit place for EU taxpayers to insert €11 billion of bailout money, in a deal currently in discussion with EU institutions and the International Monetary Fund.

Nikos Christodoulides, a Cypriot EU presidency spokesman, told EUobserver that even if the Russian mafia did use its banks "it does not mean there are problems with all the other [Russian] accounts."

He added that "the two issues [the bailout and money-laundering] are not related at all."

Another Cypriot spokesman, Costas Yennaris, added: "They [EU lenders] have focused more on the management of the banks than on the content of their work [in the bailout talks]."

For some European politicians, the issues should be linked.

Dominic Raab, a British Conservative Party MP, is one of four national parliamentarians - also from Finland, Germany and the Netherlands - who have urged their administrations to look into the matter.

"Britain should make every effort to ensure that its ... funds are not being used to bail out any country that cannot or will not prevent its financial system from being misused by the Russian mafia," Raab wrote to British finance minister George Osborne on 21 November.

Meanwhile, the news the EU presidency country has promised to lift the lid on Magnitsky comes at a tricky moment in EU-Russia diplomacy.

Russian leader Vladimir Putin is in Brussels on 21 December for an EU-Russia summit.

Magnitsky was already in the air because US lawmakers on 6 December passed a law forcing the state department to put a visa ban and asset freeze on Russian officials implicated in the affair.

If US President Barack Obama signs the bill in the coming days, as expected, it is likely to trigger Russian retaliation and to put extra pressure on the EU to do something as well.

For its part, the EU foreign service shows no sign of using its powers to propose EU-level sanctions, however.

Its spokeswoman, Maja Kocijancic, told this website also on Thursday that Magnitsky will not be a big feature of the Putin meeting because the case was already discussed by low-level diplomats at a "human rights dialogue" on 7 December.

She said Russia's own investigation into his death has been "very limited ... not adequate."

She also said Brussels has "noted" that the European Parliament and parliaments in the Netherlands, Sweden and the UK have called for EU action in non-binding resolutions.

But she added: "A decision on restrictive measures would be for member states to take in unanimity."

Cyprus seeks €11.5 billion bailout

Cyprus is reportedly seeking a €11.5 billion credit line from member states using the euro to help bailout its troubled banks and close its budget gaps.

Visual Data

The Merkelisation of Europe

Angela Merkel, the EU's most powerful leader, is running for a fourth time in Germany's election on Sunday. But what has changed in Europe over the 12 years of her chancellorship?

Stakeholders' Highlights

  1. Mission of China to the EUGermany Stands Ready to Deepen Cooperation With China
  2. World VisionFirst Ever Young People Consultation to Discuss the Much Needed Peace in Europe
  3. European Jewish CongressGermany First Country to Adopt Working Definition of Antisemitism
  4. EU2017EEFour Tax Initiatives to Modernise the EU's Tax System
  5. Dialogue PlatformResponsibility in Practice: Gulen & Islamic Thought
  6. Counter BalanceHuman Rights Concerns Over EIB Loan to the Trans Anatolian Pipeline Project
  7. Mission of China to the EUChina Leads the Global Clean Energy Transition
  8. CES - Silicones EuropeFrom Baking Moulds to Oven Mitts, Silicones Are a Key Ingredient in Kitchens
  9. Martens CentreFor a New Europeanism: How to Put the Motto "Unity in Diversity" Into Practice
  10. Access MBAGet Ahead With an MBA Degree. Top MBA Event in Brussels
  11. Idealist QuarterlyIdealist Quarterly Event: Building Fearless Democracies With Gerald Hensel
  12. Mission of China to the EUPresident Xi Urges Bigger Global Role for Emerging Economies

Stakeholders' Highlights

  1. EU2017EEAre We Socially Insured in the Future of Work?
  2. European Jewish CongressFrench Authorities to Root Out "Societal Antisemitism" After Jewish Family Assaulted
  3. European Federation of Local Energy CompaniesClean Energy for All? On 10.10 Top-Level Speakers Present the Clean Energy Package
  4. UNICEFUp to Three Quarters of Children Face Abuse & Exploitation on Mediterranean Migration Routes
  5. Swedish EnterprisesEurope Under Challenge; Recipe for a Competitive EU
  6. European Public Health AllianceCall to International Action to Break Deadlock on Chronic Diseases Crisis
  7. CES - Silicones EuropePropelling the construction revolution with silicones
  8. EU2017EEEU 2018 Budget: A Case of Three Paradoxes
  9. ACCAUS 'Dash for Gas' Could Disrupt Global Gas Markets
  10. Swedish Enterprises“No Time to Lose” Film & Debate on How Business & Politics Can Fight Climate Change
  11. European Free AllianceSave The Date!! 26.09 - Coppieters Awards To... Carme Forcadell
  12. European Jewish CongressEJC Expresses Grave Concern Over Rise in Antisemitism in Poland