Financial Crime World

Title: “Leaked EU Report Reveals Alarming Money Laundering Risks in Cypriot Banks”

Damning EU Report Exposes Money Laundering Risks in a Cypriot Bank

  • A leaked EU report reveals worrying money laundering risks in one of Cyprus’ bailed-out banks
  • The report was leaked to the Cypriot website stockwatch.com.cy
  • The banks’ questionable practices following the €2 billion EU bailout were under scrutiny

Moneyval and Deloitte’s Analysis of Cypriot Banks

  • The report, compiled by Moneyval and Deloitte, analyzed six large Cypriot banks
  • Focused on top borrowers, depositors, and random clients

Significant Money Laundering Risks

  • Almost 60% of clients at one of the banks showed elevated money laundering risk
    • Identified using simple commercial database checks
  • 10% of customers across six banks are politically exposed persons (PEPs)
    • equivalent to high-risk individuals

Challenges in Client Identification

  • 27% of all depositors’ files and 11% of borrowers’ files contained inaccurate information
  • Banks in Cyprus rely on introducers, like law firms and accounting firms, for 75% of international business
    • Complicates client identification

Inadequate Implementation of Preventive Measures

  • Banks performed proper ID and KYC checks in only 9% of instances with complex structures like companies
  • Reported minimal internal investigations into potential money laundering cases
    • Declared only four suspicious transactions from 2008 to 2012
  • Deloitte identified 29 instances of suspicious transactions in the last year alone
    • Described as “very compelling” in the report

Criticism of Cypriot Authorities and EU’s Response

  • EU finance ministers brought in Deloitte for a more comprehensive assessment due to Moneyval’s limitations as an intergovernmental body
  • The EU is preparing an “action plan” if Cyprus wishes to continue receiving bailout funds
  • German Chancellor Angela Merkel committed to cleaning up Cyprus
  • Leaked report may deter German voters ahead of the country’s September elections
  • EU diplomat shares concerns about the potential impact on Merkel’s reputation if the report becomes public