(Adds comment by former owners of FBME Bank in ninth paragraph)
By Stelios Orphanides
As Cyprus launches a public relations campaign abroad to improve its reputation as a regional financial centre, focusing on its activities in combating money laundering, legacy issues continue to haunt the island as authorities are being asked again about the handling of the Magnitsky case and Nicosia’s ties to Moscow.
Ana Gomes, a Portuguese member of the European Parliament (MEP) has asked Attorney-general (AG) Costas Clerides about Cypriot authorities’ progress in investigating and prosecuting two key suspects in the Magnitsky case, Dmitry Klyuev and Andrei Pavlov, and their operations and assets in Cyprus.
“Have the Cyprus authorities taken steps to interview Klyuev and Pavlov during their regular trips to Cyprus in relation to the fraud against Hermitage and the laundering of the $230m fraud proceeds,” the European lawmaker asked the AG in a letter dated April 23, obtained by the Cyprus Business Mail.
On Wednesday, the Central Bank of Cyprus unveiled a campaign that aims at informing the global community over the next two years by providing updated information about the action it has taken over the past five years when the island agreed in its cash-for-reforms programme to do more in to combat money laundering and terrorist financing. The need for the campaign was justified by the findings of a disappointing unplublished opinion poll abroad that showed that Cyprus’s image among supervisors and other financial institutions and bodies was outdated.
In 2013, depositors at the two largest Cypriot banks lost €8bn in savings after euro area countries declined to provide funds to bail them out on the grounds that Cyprus had failed in going after Russian oligarchs using its banks to launder illicit funds. In July 2014, US authorities described Tanzania’s FBME Bank which operated a branch in Cyprus which carried out roughly 90 per cent of its total business as a financial institution of primary money laundering concern. The Central Bank of Cyprus, which had months ago introduced its fourth anti-money laundering directive which provided for enhanced anti-money laundering procedures, placed FBME under administration and subsequently under supervision. Several banks, including largest lender Bank of Cyprus, announced measures they took in their fight against illicit funds, including the termination of accounts and ties to customer introducers.
The announcement of the PR campaign comes two weeks after Treasury Assistant Secretary for Terrorist Financing Marshall Billinsglea held talks in Cyprus with Finance Minister Harris Georgiades, Foreign Minister Nicos Christodoulides and Central Bank of Cyprus governor Chrystalla Georghadji about “positive improvements and reforms” the island made in enhancing the anti-money laundering framework and supervision. Less than a week later, three supervisory bodies; the Cyprus Securities and Exchange Commission (CySEC), the Institute of Certified Public Accountants of Cyprus (ICPAC) and the Cyprus Bar Association issued circulars advising supervised entities and professionals to be more diligent in applying anti-money laundering regulations.
The action recommended by the supervisors is forward looking, unlike the questions currently raised by the Portuguese MEP about the use of the island’s banking system in the past to launder illicit funds.
In her letter, Gomes asked whether Cypriot authorities had issued an arrest warrant against the two Russian nationals. US authorities consider Klyuev, who also banked with FBME, as the mastermind of the fraud named after Russian lawyer Sergei Magnitsky. The latter died in a Russian prison almost nine years ago when the police officers he implicated in the theft of taxes paid by Hermitage Capital, arrested him and deprived him access to healthcare. Both Klyuev and Pavlov are placed on a sanctions list.
The former owners of FBME Bank, the Lebanese brothers Ayoub-Farid Saab and Fadi Saab, who repeatedly dismissed allegations in the past that their lender faciliated money laundering, also deny that Klyuev or Pavlov, were among the bank’s customers.
“Neither Dmitry Klyuev nor the Andrei Pavlov who has been sanctioned were ever clients of FBME and we deny any wrongdoing,” a spokesperson for FBME Ltd, the holding company of FBME Bank, said.
Hermitage Capital founder Bill Browder is currently embroiled in a legal battle in Cyprus to prevent the Cypriot government from cooperating in a probe against him, which came in response to his campaign for justice for Magnitsky. The case prompted the US into passing the “Magnitsky Act” which provides for punitive measures against those involved in the lawyer’s death. The Council of Europe asked member states four years ago not to cooperate with Russia in its politically-motivated probe against Browder and encouraged them to pass similar laws like that of the US.
“Why are the Cyprus executive authorities cooperating with the retaliatory Russian criminal proceedings against Hermitage executives and lawyers, contrary to the recommendations by the Council of Europe to give assistance to these very Russian proceedings, found to be emblematic of ‘legal nihilism,’ and also found to be politically motivated by Interpol’s governing bodies, and despite the European Convention’s provision entitling refusal of assistance in such cases?” Gomes asked the AG.
Gomes also inquired about whether Cyprus had looked into those who assisted Klyuev and Pavlov either as agents, nominee directors or company administrators, or identified who had wired funds to other bank accounts, and whether the island’s authorities had shared the information with other bodies such as Europol and Eurojust to aid their investigations. She also inquired about the status of the investigtion into the accounts of Balec Ventures, a British Virgin Islands company linked to Syria’s chemical weapon’s programme.
The lawmaker also asked whether the authorities had interviewed “enablers and facilitators of money laundering at banks and registration agents,” linked to 16 accounts that received $11m of the stolen $230m.
In his response letter, the AG practically answered one of the issues raised by the lawmaker regarding the investigation into an email leak of attorney Eleni Loizidou in November which exposed her both offering and requesting favours from Russian colleagues. After a probe found no indication of any criminal offence, “disciplinary proceedings were ordered, and she is now facing disciplinary offences before the Public Service Commission,” Clerides said before referring Gomes to the Ministry of Justice which is in charge for mutual legal assistance matters.