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BY ANDREAS KARMIOS
It is estimated that the size of money laundering worldwide through the banking sector, is more than US$ 500 bln to 1 trln annually.
Worldwide money-laundering is very real, not only economically destabilising a country but also exposing it to terrorist attacks, and threatening its integrity and sovereignty. It conceals the huge, illegal profits generated by unscrupulous, organised criminal groups in various fields of crime. The culture of these groups is regulatory resistant, and the speed and case of modern electronic finance have contributed a great deal to the growth of this crime.
Money laundering generally involves a series of multiple transactions used to disguise the source of financial assets so that these assets may be used without compromising the criminals who are seeking to use the funds.
Cyprus is no exception as money laundering hit the business market through the development of off-shore entities and off-shore partnerships in the 1990s, offering a preferential tax rate of 4,25%, as well as tax exemption of partnership profits. Preferential tax rates attracted foreign funds to Cyprus largely because they promised both anonymity and the possibility of tax avoidance, and in some cases, tax evasion.
International focus following an investigation into billions of dollars that went missing from Yugoslavia under former president Slobodan Milosevic in 2001, combined with ongoing negotiations for Cyprus to gain entry into the European Union in 2004, led local authorities to have to fend off persistent accusations of Cyprus being a tax haven and money-laundering centre.
In December 2007, the House of Representatives enacted “The Prevention and Suppression of Money Laundering Activities Law” by which the former Laws on the Prevention and Suppression of Money Laundering Activities of 1996-2004 were revised.
With the introduction of the Euro on January 1, 2008, the Cyprus legislation was harmonised with the Third European Union Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (Directive 2005/60/ÅC). In April 2008, the Central Bank of Cyprus issued a revised Directive to the banks, in accordance with the provisions of the Law of 2007, requiring the upgrading and enhancement of applied measures and systems for the effective prevention of money laundering and terrorist financing in line with the EU Directives in this sector.
Financial crime continues to be the biggest fear for the finance industry as it faces significant reputational damage should it have inadequate controls to prevent money laundering. It is important for each country to recognise that financial crime needs to be understood, analysed and fought proactively.
One of the best control techniques to control money laundering is to Know Your Customer, which allows for robust client screening, not only at the account opening stage but also retrospectively and on an ongoing basis.
End-to-end anti-money laundering solutions now offer fully automated systems with the capacity to monitor millions of names. Such systems deliver the ultimate security of knowing that your client names are being monitored constantly against a full range of data, including sanctions, financial regulations, law enforcement information, politically exposed persons lists and adverse media.
Perhaps now may be the right time for you to get to Know Your Customer?
Andreas Karmios is Business Development Manager for Infocredit KYC Global Services.
www.infocreditgroup.com
