(Adds comment by the Ministry of Justice in sixth, fourteenth and twenty-first paragraphs)
By Stelios Orphanides
A British lawmaker’s allegations that Cyprus “actively” obstructs a global money laundering investigation involving Russia, and the UK should therefore seek to downgrade it to non-compliant in MONEYVAL’s assessment triggered an angry response from the Ministry of Justice and Public Order.
“My request is based on a pattern of behaviour which is exemplified by the way they have dealt with the Magnitsky case,” Ian Austin, member of the House of Commons, said in a letter to Stephen Barclay, also a member of parliament and economic secretary of the Treasury.
“ln this regard, the Cypriot government has been actively involved in the obstruction of an international money laundering investigation into the U5$230m (€195) fraud perpetrated against the Russian Treasury in 2007,” he said. “This fraud was uncovered by the Russian lawyer, Sergei Magnitsky, in 2008; something for which he was falsely imprisoned, tortured and then extra-judicially killed”.
In his letter to Barclay dated October 13, the Labour member of parliament says Cyprus, which five years ago came under pressure to bolster its anti-money laundering practices, procrastinated in cooperating with France in the investigation of illicit funds transferred through Cypriot banks to bank accounts in France by Russian nationals.
Austin’s letter was the basis for a report in The Times of London on Thursday to which the Ministry of Justice made a reference in a statement.
“With respect to reports that the Cypriot authorities omitted to investigate allegations of fraud and that they obstructed assistance to French authorities with respect to funds suspected of being the product of money laundering, the ministry rejects these allegations as completely unfounded and informs that the investigation by the Cypriot authorities is (still) open and continues,” it said. “Cooperation with French authorities is still underway and no problem whatsoever is noted”.
The ministry also said that Cyprus’s cooperation with the UK “is deemed close and effective by both sides,” hence stamping Cyprus as non-compliant to EU anti-money laundering law, was surprising.
On October 13, Hermitage Capital founder Bill Browder said in an interview that Cypriot authorities had dragged their feet for almost a year in forwarding information collected by police and requested by France as part of its investigation. The French investigation also implicated Denmark’s Danske Bank.
According to Browder, two companies based in the British Virgin Islands (BVI), Zibar Management Inc. and Altem Invest Ltd, transferred $6.2m to France from their accounts held at the Cyprus branch of FBME Bank that has since been taken over by the island’s Central Bank. The two companies are linked to Dmitry Klyuev, a Russian national blacklisted by the US Treasury, which considers him the mastermind behind “the criminal conspiracy uncovered by Magnitsky”.
More than $31m of the funds stolen in the Magnitsky case, were laundered through Cyprus, according to Browder.
As part of its bailout terms agreed in March 2013, Cyprus introduced stricter anti-money laundering regulations. The anti-corruption watchdog Transparency International said in a February 2017 report that the island scored best among 12 analysed countries, including the US, the UK, France and Germany.
Austin also said that “at the same time, the Cypriot government has been actively cooperating with the Russian government in persecuting William Browder,” who heads a global campaign for justice for Magnitsky as a result of which several countries, including the US, the UK, and as recently Canada, introduced legislation targeting individuals implicated in Magnitsky’s death.
Austin was referring to Cyprus’s legal cooperation with Russia against Browder as part of a probe which the Parliamentary Assembly of the Council of Europe, Interpol, and other democracies, including the UK, regard as politically motivated and refuse to cooperate.
In its response, the Ministry of Justice said that the evaluation of requests, like that of Russia in the probe against Browder, is founded on Cyprus’s conventional obligations that restrict the reasons for which a state can deny requests for legal assistance. In addition, Cyprus does take into account resolution 1966(2014) of the Parliamentary Assembly of the Council of Europe, the relevant report, and related notices of Interpol and Europol about the case.
“The execution part of the requests was done in this context,” it said and added that alleging that the cooperation with Russia in its investigation against Browder was based on political considerations was “insulting”.
MONEYVAL, the Council of Europe’s expert committee assessing member states’ compliance in combatting money laundering and terrorism financing, said in a 2014 report that while Cyprus had made progress in enhancing its legislation, “much work [was]still needed to be done to ensure that the recommendations made by the special assessment team were implemented”.
As Cyprus is currently undergoing an assessment by MONEYVAL, a member of the Financial Action Task Force (FATF), an intergovernmental anti-money laundering body, “I believe the UK delegation should recommend to the FATF that Cyprus is downgraded in the FATF evaluation from ‘largely compliant’ (as was concluded in 2011) to ‘non-compliant’ in the key areas of money laundering, the transparency of legal persons and international cooperation,” Austin said.
“This double standard raises serious questions about Cyprus’s trustworthiness in international relations and combating money laundering,” he added. “It is imperative that the working group’s evaluation accounts for the vast disparity between Cyprus’s current rating for compliance with international standards and the observable realities that are at work in the jurisdiction.”
Browder resorted to a Cypriot court seeking the termination of the island’s co-operation with Russia in the investigation against him. In response, Cyprus, whose economy is reliant on Russia, froze co-operation pending the issue of the court ruling, angering Moscow.
President Nicos Anastasiades, who met Russian President Vladimir Putin on Tuesday, found himself compelled to explain the provisions of Cyprus’s legal framework when Russia’s ruler raised the issue saying that he looked forward to a satisfactory decision, according to the Cyprus News Agency.
The Ministry of Justice also said that the Republic of Cyprus has introduced all anti-money laundering measures applied globally in its “strict” legislation which are evaluated by MONEYVAL. “As a European Union member state, authorities monitor and apply the European acquis both in terms of pre-emptive and corrective action”.
Austin’s letter is available here: