Cyprus Mail

Companies changing hands without owners’ permission could be money laundering

By Elias Hazou

THE ownership of a number of Cyprus-registered companies has changed hands in dubious circumstances, in what amounts to fraud and possibly money laundering activities, MPs said yesterday.

The House Institutions Committee was discussing complaints lodged by beneficial owners of companies who saw ownership transferred to others without them having approved it – pointing to document falsification.

Some of the companies in question are understood to have operated with nominee shareholders – a common practice.

An official from the Attorney-general’s office told lawmakers that 10 such complaints were filed to police by businessmen; of these, six were then forwarded by the police to the Attorney-general as potentially warranting criminal investigation.

However the AG’s office subsequently determined that a criminal case could not be made based on the available evidence.

Rather, the majority of the cases seemed to involve disputes between the concerned law firms representing the companies, the official said.

But MPs, who meantime are also probing broader banking and corporate practices that led the financial sector to the brink of collapse, decided to press on with the matter.

Speaking to newsmen later, committee chairman Demetris Syllouris described the reports of suspect ownership change as “theft or abduction of companies”.

“With the current system, it is alarmingly easy to transfer ownership from one person to another. It’s easier to transfer ownership of a multi-million company than to register an aluminium-fabricating company with your son,” he noted.

Taking it a step further, Syllouris alluded to Moneyval’s report on due diligence measures in the local banking sector.

“The whole affair [ownership of companies] smacks of money laundering. It is not a simple matter of shortcomings in our system, it is a most serious issue that could tarnish our reputation as a financial services centre,” he said.

Among other things, the Moneyval report noted “potential effectiveness issues… with respect to the identification and verification procedures of legal entities registered with the Registrar of Companies in Cyprus due to the incomplete data which was available at the registry.”

Spyros Kokkinos, head of the Department of the Registrar of Companies and Official Receiver, said the system in place has remained virtually unchanged for the last 50 years.

Although the registry system is being automated (as of late 2012), Kokkinos said this should be coupled with adequate checks against fraudulent signatures as well as personal login codes.

Melina Pyrgou of the Bar Association said company documents are often signed abroad by notaries and are then brought to Cyprus for the changes to be approved.

Computerising the system would certainly diminish forgeries but would not completely wipe them out, she said.

Speaking to the Cyprus Mail, committee member and EDEK MP Pheidias Sarikas was more cautious than Syllouris, acknowledging the lack of hard evidence for money laundering.

“That is why we are saying it could possibly involve money laundering,” he said.

“What we can say for the time being is that certain shady operators appear to be taking advantage of the shortcomings or loopholes in the system,” he added.

The commerce ministry, responsible for the Registrar of Companies, has commissioned a study into the workings of the department. The study has been assigned to the Institute of

Certified Public Accountants of Cyprus, the Cyprus Investment Promotion Agency and the Bar Association. Their preliminary findings have been forwarded to the ministry.

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