Financial Crime World

Title: US-Cyprus Partnership to Combat Money Laundering and Financial Crimes: A New Era of Cooperation

Background

Over the past few years, Cyprus has faced criticism for its role as a hub for money laundering, sanctions evasion, and other financial crimes. The latest revelation came from the International Consortium of Investigative Journalists (ICIJ), which exposed the extent of Cyprus’s role in moving dirty money for autocratic regimes and anti-democratic actors, particularly Russia.

Strengthening Partnership

In response to these allegations, Cyprus has announced plans to strengthen its partnership with the United States to combat financial crimes. The collaboration will include:

  1. Memorandum of Understanding (MoU): Cyprus plans to sign an MoU with the U.S. Justice Department and Federal Bureau of Investigation (FBI) to bolster efforts in detecting, investigating, and prosecuting money laundering, sanctions evasion, and other financial crimes.
  2. Partner Organizations: The partnership includes the U.S. State Department’s Bureau of International Narcotics and Law Enforcement Affairs, the Cyprus Law Office of the Republic, and the country’s Finance Intelligence Unit (MOKAS).
  3. Request for Assistance: The collaboration came about following a request for assistance from Cyprus President Nikos Christodoulides.

Allegations from ICIJ Investigation

According to ICIJ’s analysis of leaked documents, nearly 800 Russian-owned or controlled companies and trusts were registered in secrecy jurisdictions, over 650 of which were registered in Cyprus. These entities included mother companies of Russian holdings, Russian conglomerate subsidiaries, and opaque entities used to conceal investments in properties, yachts, and world-renowned artwork.

Response from Cyprus

Following the investigation, Cyprus vowed to investigate all allegations and established a professional-services sector oversight body in February 2023. This oversight body, led by the Cyprus Securities and Exchange Commission, is intended to review cases potentially violating international sanctions and work alongside the Cyprus Bar and Accountants Associations to ensure adherence to both Cyprus and international regulations.

Criticism and Challenges

The new partnership between the U.S. and Cyprus has faced criticism, particularly from the Cyprus Bar Association, which has expressed concerns about the potential risks to attorney-client privilege and the lack of appropriate consultation prior to the government’s approval of the oversight body. Neither the FBI nor the U.S. Department of Justice provided a statement in response to ICIJ’s request for comment.

Significance of the Partnership

This new partnership represents a significant step towards addressing the consequences of financial crimes and increasing transparency within Cyprus’s financial and professional services sectors. Both parties remain committed to the initiative, with ongoing discussions on further measures to combat illicit financial activities.