CYPRUS DID 'A GREAT JOB' IN COMBATING MONEY LAUNDERING

HomeNewsCYPRUS DID 'A GREAT JOB' IN COMBATING MONEY LAUNDERING

The Assistant Secretary for Terrorist Financing in the US Department of the Treasury Marshall Billingsley, who visited Cyprus last month, concluded that the Republic “has done a great job in combating money laundering,” while in a number of areas, the results are “simply outstanding”. Mr. Billingsley recently appeared in Nicosia while on a two-day visit to check on the island's “strong and healthy financial sector”. His visit to Cyprus in May 2018 led to a sharp tightening of requirements for foreign clients of Cypriot banks by the Central Bank, the closure of more than 20,000 accounts of third-country nationals and a reduction of capital flight.

Billingsley's visit to Cyprus “is part of the U.S. commitment to work with partners in the wider region to intensify their efforts to combat money laundering and the financing of terrorism,” the U.S. Treasury said in a statement.

“We see improved laws, regulations and the law enforcement procedures. A great progress was achieved in combatting money laundering. The work implemented by the government on a number of issues is outstanding,” the guest from Washington said during his meeting with the Cypriot Finance Minister Harris Georgiades.

Noting that the two countries maintain excellent political relations, the head of the Treasury added that “we have to do more, we can do more in terms of expanding economic and financial ties, and this was the main topic of our talks.”

“We are facing common challenges, global challenges in combating money laundering and combatting financing of terrorism. Together we can work even more effectively,” Mr. Georgiades concluded.

Last month, the U.S. Department of State published its annual report on money laundering, which included the Republic of Cyprus in its list of "high-risk" countries, despite the 'several positive steps' that have been undertaken. The report points out that Cyprus' financial system is still “vulnerable to money laundering by criminal groups and individuals.”

What happened in Latvia

Cypriot bankers are well aware of who Mr.Billingsley is. During his previous visit to Cyprus in May 2018, the American held high a “list of names of yet another group of Russian oligarchs, who are likely to be chastised” while also mentioning a “Latvian bank [ABLV Bank], closed in February following the US accusations of money laundering from Russia.”

“Have you seen what happened in Latvia?” Mr.Billingsley questioned the bankers, “You don't want anything like this happening here!”

In case someone didn't get the message, the Central Bank of Cyprus invited the management of the local banks once again and recommended paying close attention to the accounts of those Russian individuals and companies that were included in the U.S. and EU sanctions lists, and to take measures if necessary.

On 1 June 2018, the banks of the Republic of Cyprus received a message from the Central Bank prescribing to them the closure of accounts of fly-by-night companies that do not carry out any real activities in Cyprus. The banks began to seriously tighten the rules of compliance, which led to the closure of more than 20,000 accounts of the non-EU nationals.

There is no arguing that the fight against the money laundering is important, and that a 100-million euro payments made through the firms of 2 or 3 people are not quite “clean”. However, a high number of compliance demands, new for Cyprus, resulted in problems hitting not only the money laundering firms, but also many decent businessmen.

Interestingly enough, last year's visit by Marshall Billingsley did not receive much attention in the Cypriot media, but the U.S. Embassy's website published a statement focusing on the need for a “strong and well-regulated banking sector” on the island.

According to the American official, he was “impressed by the commitments made by the Cypriots” as part of the continued “joint fight against corruption, money laundering and other financial threats.” According to Billingsley, it is very important that those who are known for this sort of activities understand that “Cyprus is not open to their business.”

This approach means that Washington is seriously pressuring Nicosia, which in turn tries to prove that it follows the U.S. recommendations. Certainly, Washington has no right to meddle in the policies of sovereign states in this manner. However the Cypriot authorities realise that the consequences of ignoring American demands are too serious. An example here is the sad destiny of the FBME Bank, once active on the island.

Roughly, as of around 2005 the US intelligence gained capacity to keep an eye on all the major financial transactions in the world through the online tools. They have no need to prove that someone is laundering money: they know it. It makes no sense to act as innocent, and the Cypriot authorities seem to have already acknowledged this. The other side of the scale are the Russian capitals, which helped many Cypriots becoming millionaires.

“They cannot order Cyprus to get rid of all the accounts of Russian clients. That is why they say: it's probably money laundering, since they're all so rich,” comments the Nobel Prize winner in economics Christopher Pissarides, a member of the boards of directors of several Cypriot banks.

Despite all this, only few Russians continue to do business in Cyprus. On the coast of Limassol several high-rise elite apartment buildings have many well-off Russian residents. They may obtain a citizenship in Cyprus by investing 2 mln euros, for example, in the island's real estate.

“Russia has created this economy,” said one of the Cypriot bankers in September 2018, ironic and discontent with the need to break off relations with the best clients. “We cannot go back to growing cucumbers!”