Cyprus: A Hotbed for Financial Crime and Corruption - Leaked Data Reveals Continued Enablement of High-Risk Clients

The Cyprus Confidential investigations uncovered serious concerns regarding the effectiveness of regulatory oversight in the non-financial sector of Cyprus. The international consortium of investigative journalists, including the International Consortium of Investigative Journalists (ICIJ), Paper Trail Media, the Organized Crime and Corruption Reporting Project (OCCRP), and other media outlets, analyzed leaked data from five Cypriot firms providing corporate, accounting, and auditing services. The data showed that these firms continued to work with high-risk individuals despite EU sanctions, highlighting Cyprus’s role as a global financial hub for stashing and shuffling illicit assets.

Concerns Raised by Transparency International

Transparency International, an anti-corruption organization, expressed its concerns about the regulatory oversight in the non-financial sector of Cyprus. Maíra Martini, Interim Head of Policy and Advocacy at Transparency International, emphasized the challenge Cypriot authorities face in addressing the influx of illicit funds. She underscored the urgent need for decisive action against enablers in the non-financial sector, not only in Cyprus but also beyond.

Professional Enablers Shifting Dirty Money Across Borders

The firms implicated in the leaks often established companies and provided services abroad, representing a broader issue of professional enablers orchestrating the flow of dirty money across borders.

Deficiencies in Risk Mitigation Strategies

Despite EU sanctions, the relationships between firms and high-risk clients should have triggered concern within these service providers. The investigations revealed clear deficiencies in designing and implementing appropriate risk mitigation strategies, which is amplified by the current decentralization of supervision between multiple bodies.

Changes to EU’s Anti-Money Laundering Framework

Roland Papp, Senior Policy Officer at Transparency International EU, emphasized the significance of the changes to the EU’s anti-money laundering framework being debated by EU co-legislators. He highlighted the need for new measures to prevent the types of abuse exposed in Cyprus. The upcoming regulation will:

• Mandate that supervisors need oversight.
• Countries that currently rely on professional bodies to supervise lawyers, corporate services providers, accountants, and other professions will be required to delegate this responsibility to an authoritative government agency.
• The EU Anti-Money Laundering Authority will hold powers to scrutinize the conduct of supervisory bodies, not just in the non-financial sector but also the public authorities overseeing them.