Financial Fraud in Cyprus: A Gateway for Dubious Transactions

Cyprus has long been known as a tax haven and a safe haven for Russian oligarchs who have indulged in criminal money laundering. However, a new investigation by Le Monde and its partners reveals that the island’s economic model allowed abuses to flourish, despite warnings from anti-fraud watchdogs.

The Cyprus Confidential Investigation

The investigation confirms that Cyprus serves as a gateway for dubious financial transactions within the European Union (EU). Despite repeated warnings about financial scandals, the EU has allowed this kind of business to thrive within its borders. Cyprus is a place where shell companies can be registered on a large scale, and Russian money flows abundantly.

The Role of Shell Companies

Russian oligarchs come to the island to take advantage of minimal taxation and long-standing banking secrecy. Among the clients of six Cypriot firms revealed by this investigation, 96 Russians have been sanctioned since 2014 and are linked to at least 800 separate companies or trusts.

Notable Examples

• Roman Abramovich, a powerful businessman close to Vladimir Putin and former owner of English football club Chelsea, holds 14 trusts in Cyprus and around a hundred companies in tax havens.
• Alexei Mordachov, one of Russia’s wealthiest oligarchs, transferred over $1.4 billion in assets to his wife in March 2022, the day after he was placed under sanctions. The transaction was eventually blocked and the funds remain frozen.

The Central Role of MeritServus Cabinet

The investigation reveals that the MeritServus cabinet played a central role in managing the offshore empire of Roman Abramovich. This highlights the lack of transparency and oversight in Cyprus’ financial services industry.

The Weak Link in the Fight Against Financial Fraud

Cyprus has allowed itself to be overwhelmed by its offshore industry, becoming the EU’s weak link in the fight against dubious financial flows. The investigation is based on leaked documents from six Cypriot financial services firms and the i-Cyprus company register.

Consequences for the EU

The excesses of Cyprus’ economic model, which is largely dependent on Russia, have finally ensnared the country – and risks dragging down the whole of the EU. The lack of political will to address these issues has allowed abuses to flourish, and it is time for the EU to take action.

Recommendations

• Improve transparency and oversight in Cyprus’ financial services industry.
• Increase cooperation between EU member states to combat financial fraud.
• Implement stricter regulations on shell companies and offshore transactions.
• Hold accountable those responsible for facilitating financial crimes.