Law firms failed due diligence for golden passports

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According to the Bar Association, some of Cyprus’ largest law firms lacked due diligence checks on foreign investors granted a Cypriot passport via the now defunct Citizenship for Investment scheme.

In comments to Phileleftheros daily, Christos Clerides, the head of the Cyprus Bar Association, said it reviewed actions taken by some 20-25 big law firms while dealing with the naturalisation cases of their clients.

The law firms under the Bar Association’s microscope were mentioned in at least one of the two public probes carried out or in the latest report issued by the Auditor General.

Clerides said the investigated cases concerned the non-compliance with the provisions of the Cyprus Bar Association and EU directives on money laundering.

He explained that the investigations looked at how law firms conducted due diligence checks to get to know their clients.

“This entails a thorough investigation into who their client is, their history, if they are politically exposed persons, if they have ever been convicted of a crime, or if they are wanted in their country or any other part of the world,” said Clerides.

The other aspect is whether lawyers carried out the necessary checks on the legality of the origin of the investment funds.

“This means that every lawyer dealing with these issues must create a financial profile of the client, know what their income is and whether they have the ability to invest the money for investment purposes.

“In most cases, we looked at; unfortunately, these two aspects were poorly checked, resulting in convictions and fines.”

Asked about fines imposed by the Bar Association, Clerides said some had been paid while others are pending.

“The board will consider referring these offences to the Disciplinary Council of the Cyprus Bar Association, given non-compliance with decisions, money laundering law may constitute a breach of ethics regulations.”

Clerides is confident that offenders will be brought before justice and called to pay the price for any mishaps.

In the latest probe, the Auditor General said the Citizenship for Investment Scheme was ‘rotten’.

The 200-page dossier into 3,517 cases of foreign investors who acquired citizenship through the golden passport scheme said actions by officials, including the cabinet, deprived the state of sizeable revenue.

The report’s key conclusion is that many people who used the scheme did not meet the criteria.

At least 3,810 additional people were issued passports as spouses, adult dependent children, or parents of the investors without any legal authorisation.

A damning report put together by a probe committee headed by former supreme court judge Myron Nikolatos said over half (53%) of the 6,779 passports granted were done so illegally, encouraged by a due diligence vacuum or insufficient background checks.