Cyprus Confronted with Substantial Challenge in Combating Financial Crime

Effective Supervision of Professionals in Cyprus’s Non-Financial Sector Lacking

A joint investigation by international media outlets has uncovered evidence that professionals operating in Cyprus’s non-financial sector are not being supervised effectively enough, according to Transparency International. The revelations highlight the significant role played by Cyprus in the global financial system and its status as a hotspot for stashing and shuffling illicit assets from Russia and elsewhere.

Leaked Data Reveals Continued Work with High-Risk Individuals Despite EU Sanctions

The investigation analyzed leaked data from five Cypriot firms providing corporate, accounting, and auditing services. The findings revealed that despite EU sanctions, these firms continued to work with high-risk individuals. This highlights the need for decisive action against enablers in the non-financial sector, not only in Cyprus but also globally.

Quote from Transparency International

“Cypriot authorities are clearly confronted with a substantial challenge in addressing the inflow of dirty money,” said Maíra Martini, Interim Head of Policy and Advocacy at Transparency International. “Decisive action against enablers in the non-financial sector is long overdue in Cyprus and beyond. These enablers cater to the super-wealthy from around the world, with no questions asked. They sell secrecy and shield assets from the scrutiny of anti-corruption agencies and law enforcement authorities, undermining global efforts to combat cross-border corruption and financial crime.”

Shortcomings in Self-Regulation and Decentralized Supervision

The investigations also confirm clear shortcomings of self-regulation in the sector, exacerbated by the current decentralization of supervision between multiple bodies. Notwithstanding EU sanctions, the relationships exposed in the leaks between firms and high-risk clients should have raised red flags within these service providers and professional bodies.

New Measures Needed to Combat Financial Crime

“Changes to the EU’s anti-money laundering framework, currently being debated by EU co-legislators, cannot come soon enough,” said Roland Papp, Senior Policy Officer at Transparency International EU. “New measures are needed to stop the types of abuse that have been exposed in Cyprus. Forthcoming regulation will establish that supervisors need supervisors, too. Countries that currently leave it up to professional bodies to supervise lawyers, corporate services providers, accountants and others will have to task a government authority with overseeing these supervisors.”

EU Anti-Money Laundering Authority to Play Key Role

The new EU Anti-Money Laundering Authority will also have powers to examine the conduct of supervisory bodies not only in the non-financial sector but also public authorities overseeing them. The authority is expected to play a key role in combating financial crime and ensuring that the sector is effectively supervised.

Conclusion

Cyprus’s non-financial sector faces a substantial challenge in combating financial crime, with professionals lacking effective supervision. Decisive action is needed against enablers in the sector, and new measures are required to stop the types of abuse exposed in Cyprus. The EU Anti-Money Laundering Authority will play a key role in ensuring that the sector is effectively supervised and combating financial crime.