Financial Crime World

Unmasking Financial Crimes: A Look into Cyprus’ Battle against Money Laundering, Terrorist Financing, and Economic Crime

Introduction

Financial crime continues to pose a significant challenge for nations worldwide. In Cyprus, the fight against money laundering, terrorist financing, and economic crime is a top priority for regulators and financial institutions. The following case studies, presented in collaboration with ICPAC’s Compliance Committee and Economic Crime and Forensic Accounting Committee, aim to provide practical insights into detecting and preventing financial crimes.

Case Studies

1. Deposits and Movement of Funds between Bank Accounts with no Business Rationale

Facts

  • Company A and C receive large deposits
  • Make suspicious transfers
  • No clear business logic

Red Flags

  • Common ordering party for incoming funds
  • Cash withdrawals without business need
  • Continuous movement of funds
  • Accounts opened/closed within short timeframes

2. Money Laundering through Used Car Dealership

Facts

  • Accountant and administration service provider in Cyprus helps a drug dealer launder funds
  • Uses a used car dealership

Red Flags

  • Obsolete cars sold at a premium price
  • High volume of cash receipts
  • Cars registered under a different name from the buyer
  • Client structures transactions to avoid reporting thresholds

3. Insufficient and Unsatisfactory KYC Documents

Facts

  • Prospective client, Mr. Shamir, fails to provide required KYC documentation

Red Flags

  • Unwillingness to provide documents
  • Urgency to register with the Inland Revenue
  • Substantial cash payment to the firm before completing KYC procedures

4. Watch for the Middleman, Not for the PEP

Facts

  • XYZ Audit Ltd fails to adequately perform KYC checks on a client involving a PEP (Politically Exposed Person) and a suspected money launderer

Red Flags

  • Transactions lacking economic substance
  • BO’s investment significantly less than the sole investor
  • Conduct of transactions when the client’s address or employment address is outside the local service area

Conclusion

These case studies demonstrate the importance of staying vigilant against financial crimes and the risks and potential threats faced by accounting firms. Following best practices, such as thorough KYC procedures and ongoing monitoring, can help mitigate these risks and maintain the integrity of the financial system.

Sources

  • ICPAC Directive on Anti-Money Laundering and Combating Terrorist Financing Activities
  • The Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007 (L188(I)/2007 as amended)