Cyprus: a chance to strengthen its fight against money laundering

The issue of whether or not to bail out the troubled banking sector in Cyprus has taken on serious political overtones as the crisis deepens. During the past few weeks Cyprus has been accused of failing to combat money laundering and fraud and that Russian oligarchs seek refuge for their money in this “tax haven” country.

Cyprus is clearly not the first country to face such criticism and I am not in a position to evaluate the claims and counter claims as to whether Russians attempt to find loopholes in Cyprus’ framework with the aim of exploiting it. What I can say is that discussions like these should force the authorities to take a long hard look at the regulations in place and ensure that they are fully enforced.

Cyprus complies with most of the international tax treaties and guidelines which was the basis for which OECD placed Cyprus on the White List. Also based on recent Financial Task Force (FATF) findings, Cyprus ticks many of the most critical anti-money laundering boxes. More specifically, FATF reported that Cyprus has a tough regime for identification of beneficial ownership, with the obligation to identify ownership kicking in at 10 per cent, instead of the 25 per cent threshold mandated in the 3rd EU Anti-Money-Laundering Directive. On the basis of the number of areas in full compliance with EU money laundering directives, Cyprus ranks 7th out of 17, whereas Germany ranks close to the bottom, at 14th, just two places ahead of Greece.

Source: FATF findings

 

The key issues I would like to highlight relate to the effective enforcement of this framework and the transparency measures that should apply. Now is a particularly good time to ask for an even stronger commitment to fight financial crime as Cyprus negotiates for a hefty chunk of bail-out funds to shore up its ailing banking system and inherent public deficit.

Transparency International (Cyprus) has put forward a series of recommendations we believe would improve the country’s ability to fight financial crime:

  • Yearly detailed reports should be prepared and distributed to the EU Commission by the Cyprus Unit for Combating Money Laundering indicating the number and nature of money laundering and suspicious activity cases reported.  To enable this, the above named authority should keep and collate a comprehensive and up to date statistical database.  This database should be available for review by the EU authorities.
  • Independent reviewers should periodically be assigned by the EU to visit Cyprus assess and report on the entire anti-money laundering compliance process and the way it is applied and enforced. This is something that is currently under discussion.
  • Further training of prosecutors for more effective law enforcement.
  • The professional bodies that regulate accountants, solicitors and lawyers, banking institutions, etc., should improve and increase the frequency of all monitoring procedures and introduce independent inspections at least once a year in areas relating to any transactions vulnerable to money laundering.
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Marios M. Skandalis

About Marios M. Skandalis

Marios M. Skandalis is a board member of Transparency International (Cyprus) and a vice president of the Institute of Certified Public Accountants of Cyprus.

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17 Responses to Cyprus: a chance to strengthen its fight against money laundering

  1. D 1 February 2013 at 4:20 pm #

    Den mas xezeis re Dallara!?!!

  2. Andreas Frank 1 February 2013 at 6:48 pm #

    All 17 Euro countries have to strengthen their fight against money laundering.

    The MOKAS rating table of compliance with the FATF recommendations proves that none of the 17 EURO countries are implementing and enforcing all of the FATF recommendations. Since the EU money laundering directive (AMLD) is based on the FATF recommendations, all of the 17 EURO countries should violate the AMLD.

    http://www.frank-cs.org/cms/modules/news/article.php?storyid=473

  3. Andreas Frank 1 February 2013 at 6:50 pm #

    All 17 Euro countries have to strengthen their fight against money laundering.

    The MOKAS rating table of compliance with the FATF recommendations proves that none of the 17 EURO countries are implementing and enforcing all of the FATF recommendations.

    Since the EU money laundering directive (AMLD) is based on the FATF recommendations, all of the 17 EURO countries should violate the AMLD.

  4. Marios M. Skandalis 2 February 2013 at 8:48 am #

    Dear Andreas, I fully share your comments. However the fight against corruption and money laundering is an ongoing and persisting process. Surely all 17 EU member states have some gaps in relation to an 100% adoption of the EU directives and not only. Therefore instead of these 17 member states accusing each other, they should save their energy and concentrate on how to apply effective measures to prevent money laundering in their countries.

  5. Fiona Mullen 2 February 2013 at 2:35 pm #

    Dear Marios, Recommendations for Cyprus from a trusted source are welcome but to keep up that trust please design your own table next time! You got this table from the Financial Mirror. http://www.financialmirror.com/news-details.php?nid=28565 I know because I prepared it and added the rankings on the right. The MOKAS table on the MOF website is laid out differently.

  6. Fiona Mullen 2 February 2013 at 2:47 pm #

    Incidentally, one of the weaknesses of FATF is that it doesn’t do a ranking like this for naming and shaming purposes. Or if it does, you can’t find it.
    In fact, it doesn’t even give a table of who complies in each of the areas. To get that you have to trawl painstakingly through each of their incredibly long reports for each country. I did not have time to do that, but MOKAS has clearly taken the time to do so, which is why in my table I source it to MOKAS and not to FATF.
    I would add one more recommendation: proper protection for whistleblowers. I also have my doubts about self-regulation for lawyers and accountants. Why are fiduciary agents regulated by law but not the others?

  7. Marios M. Skandalis 2 February 2013 at 3:36 pm #

    Dear Fiona, the table indeed was prepared by MOKAS based on the source of FATF findings. What is the untrustworthy act here since the source is what we both mention. Moreover this table as presented in the Financial Mirror stated that its source was MOKAS and not you (Check your link you have just sent). Unless you claim that MOKAS has not based their conclusions to the FATF findings like MOKAS is claiming?

    What we recommend above as Transparency International, is an INDEPENDENT and frequent monitoring of the regulators. Hence your concern about self regulation are fully addressed. d

    With regards to your additional comments about whistleblowing we are in full agreement. As far as I know some banking institutions already introduced this function.

  8. Fiona Mullen 3 February 2013 at 12:27 pm #

    Dear Marios
    OK I accept that my source could be misinterpreted. It should have said ‘Drawn from MOKAS presentation’ to be 100% clear. But the main point I want to make is that to copy and paste something like that without also naming your (real) source (you also copied at least once sentence word for word from the article) is simply not done. Worse still, it can make you vulnerable to litigation.
    I know from having spent decades in the publishing business that the question turns on intellectual property input. When I looked at the MOKAS table the first thing I did was to try and find the original source. Perhaps that is what you should have done with the Financial Mirror table (I say that this presentation is on the MOF website in the article so there is a clue on where to find it).
    I couldn’t find the MOKAS table on FATF so I realised that there was considerable MOKAS IP input in there (either that or FATF does not publish tables it send to governments). For that reason knew that if I simply copied and pasted it, it would be IP theft. So I added my own IP input by reordering the countries by level of full compliance, adding a ranking to make it easier to compare Cyprus with Germany, and then putting it in the Financial Mirror house style for table colours and layout (that is what gave you away!) but also ensuring that the source noted what was the basis for my information.
    Since you had downloaded the original Excel table you could have done the same. To be honest I wouldn’t have minded if you had copied the artice wholesale as long as you had mentioned/linked to the Financial Mirror as a way of acknowledging where you got all this information.
    I am saying all this not just to let off steam (I don’t actually work for the Financial Mirror) but also to point out that if you do this again you might get yourself and TI into all kinds of trouble. Imagine if you had copy-pasted something from a US litigious company with deep pockets!
    Meanwhile, I have leared that I need to change the way I source things when I have put my own work into it.

  9. Marios M. Skandalis 3 February 2013 at 5:07 pm #

    Dear Fiona,
    Thanks for your feedback. I fully and truly appreciate and share your concerns. Being an author as well many times in the past I fully understand the principles which you are raising. There has not been an intention to copy any rights by referring to the MOKAS analysis of the FATF findings. The intention was to present the analysis of MOKAS which was based on the FATF findings and this is what we did because this is what was mentioned in the article of the financial mirror which you are refferring to.

    I am perfectly aware of copyrights and If you feel that it would shed more light and transparency by mentioning “Source: MOKAS Analysis of FATF findings” rather than “Source: FATF findings” like I mentioned above (below the statistics table), then let it be like this. If MOKAS stated a different source or an individual, like you, been involved we would have surely clarified it in our Source statement as well. As you confirm in your previous message this was not clear and surely there was no intention from my side to take advantage of the results derived by another individual. I was just referring to the table presented by MOKAS based on the FATF findings.

    Finally, as you can see on the table above, MOKAS clearly states that it is the “Eurogroup FATF Ratings” thus confirming that the FATF findings is the basis for these results.

    To conclude, I would like to mention that there has not been any intention to “steal” the work of someone as we clearly state below the table that the Source is another one. So it is obvious that no value is potentially added to my or TI’s outlook. If further clarfications were needed to confirm this, I believe we covered it with the exchange of our messages and a common understanding between us.

    Thanks for your understanding and please let us in TI and the other readers of this blog have a few more tips in relation to this topic since you have been involved in analysing figures related to money laundering.

  10. Christina Anast. 20 February 2013 at 10:10 am #

    Dear Mr. SΚandalis, the data you indicated are very interesting. Complementary to what you wrote, I would like to highlight the following: Money laundering is one of the most serious forms of financial crime in many developing and developed societies. However, corruption is a different form of behavior from money laundering, as money laundering is usually following the act, or acts of corruption. Corruption and money laundering are concepts that many times appear as parallel and interrelated, but are not identical concepts. Corruption has an extra-legal meaning and is a multileveled and complex behavior, and that’s why there is debate around criminalization – and whether this is necessary – of specific forms of corruption. Evidence of corruption in a country is not only the existence, or suspected existence, of severe forms economic criminality, such as money laundering or organized crime, but also whether the criminal justice system of a country, namely the police, prosecutors and judicial authorities have the ability and above all, the willingness to suppress serious economic crime. The debate about the relationship between money laundering and corruption is very big and it is fortunate that Transparency International Cyprus dealing with the matter as a non-governmental organization and fulfills the purposes of its operation .

  11. Mario Skandalis 20 February 2013 at 10:36 am #

    Dear Ms Anastasiadou,
    Thanks for your very nice comments and remarks.

    You have addressed the issue of corruption from the right perspective and rightly indicated its complexity and diversion.

    The fight against corruption is an endless, ongoing process and unless people with the eager and right ethos are engaged in this fight, the situation will significantly be worsening.

    As Transparency Cyprus we shall appreciate any further comments in the future on the area of corruption in general.

  12. eau de parfum 29 May 2013 at 1:30 pm #

    Thanks for the auspicious writeup. It in truth was once a entertainment
    account it. Glance advanced to far added agreeable from you!
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