Central Bank on defensive after documents leak

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The Cyprus Central Bank (CBC) on Thursday defended its policies after a damning probe on the island’s financial centre, arguing it has tight anti-money laundering mechanisms in place.

Following the ‘Cyprus Confidential’ sting, the CBC said it would investigate potential breaches highlighted in leaked documents, particularly concerning credit institutions.

“As a result of its focused supervisory measures from late 2018 to the present, credit institutions have severed ties with a total of 42,728 shell companies and closed 125,782 bank accounts,” said the CBC announcement.

The global investigation, ‘Cyprus Confidential,’ published on Tuesday, shed light on Russia’s “long-standing hegemony” facilitated by local financial fixers.

Allegedly, Cyprus firm assisted Russian oligarchs and billionaires in structuring their wealth in a way to avoid sanctions in the years leading up to the 2022 full-scale invasion of Ukraine.

Russian oligarchs have been facing sanctions since 2014 when Russia illegally annexed Crimea.

Compiled by the International Consortium of Investigative Journalists (ICIJ) and the Organised Crime and Corruption Reporting Project (OCCRP), the report involved over 270 journalists from 68 news organisations working collaboratively for eight months across 55 countries and regions.

The investigation delves into corruption, sanctions evasion, alleged shielding of Russian wealth, relations with Russia, the role of the banking sector, independent institutions, and the well-documented golden passports scandal.

In response to the allegations, the CBC stated that, in addition to its routine supervisory measures, it is now scrutinising potential violations mentioned in the publications, focusing on credit institutions.

The CBC emphasised its commitment to assessing credit institutions’ compliance with the legal and regulatory framework to prevent money laundering.

It said since 2015, the CBC has imposed fines in 13 cases due to its supervisory controls aimed at preventing the use of the financial system for money laundering or terrorist financing.

The institution is responsible for ensuring compliance with targeted financial sanctions imposed by the United Nations Security Council and the European Union.

“To bolster the compliance of supervised institutions with the sanctions regime, the CBC collaborated with a reputable solutions provider in 2023 to conduct audits assessing the systems implemented by supervised institutions for sanctions and transaction monitoring.

“The CBC is currently in the final stages of evaluating the sanction control systems of supervised institutions,” it said.

CBC highlighted its favourable evaluation by Moneyval — the Council of Europe body that assesses compliance with international standards to counter money laundering and the financing of terrorism — in its fifth evaluation round.

“The report outlined measures taken by Cyprus to combat money laundering and terrorist financing, identifying areas for improvement”.