As the threat of seeing the island’s reputation as a financial centre tarnished looms large over Cyprus form allegations of illegal practices based on the Panama Papers, a series of documents leaked from the internal database of Panamanian law firm Mossack Fonseca, various officials tasked with monitoring the country’s financial-services sector came out on Wednesday in defence of the island’s oversight system.
The Cyprus Securities and Exchange Commission (CySEC) has not received a complaint implicating any of the 150 companies of administrative services it oversees in allegations of crimes based on the Panama Papers, a series of documents leaked from the internal database of Panamanian law firm Mossack Fonseca, chairwoman Demetra Kalogirou told the Cyprus News Agency.
“If it is found that any of the 3,600 companies named in the press reports have been registered by any of the companies overseen by the Commission, or are clients of any of our companies, we will certainly conduct the appropriate investigation and levy the appropriate sanctions if they have failed to conform with money-laundering legislation,” she noted.
She explained that the Administrative Services law was only implemented in 2012, and that these companies are licensed to incorporate other companies in Cyprus.
But in addition to the 150 administrative-services companies overseen by the CySEC, there are also law firms offering such services, which are overseen by the Cyprus Bar Association, as well as audit firms that offer administrative services and are monitored by the Institute of Certified Public Accountants of Cyprus (ICPAC).
Kalogirou said that it is a shame for “us to shoot ourselves on the foot”, since we promote the fact that our country is mentioned in the Panama Papers.
“While other countries are higher up in the list of countries involved than Cyprus, which ranks 6th, such as the United Kingdom, we are the only ones promoting the evidence relating to our country, when press reports in other countries mention what happens with other countries but avoid mentioning what happens in their own country,” Kalogirou said.
ICPAC head Kyriacos Iordanou said Cyprus has a sufficiently strict legal and institutional framework governing administrative-services companies.
Speaking to the Cyprus News Agency, Iordanou argued that Cyprus does not feature as heavily in the revelations as some in the press reported, and added that administrative services are a regulated profession since 2012, meaning companies are licensed and overseen by three authorities – the CySEC, the ICPAC, and the Cyprus Bar Association.
“There is a sufficiently strict legal and institutional framework regulating the operations of administrative-services firms, which has been strengthened significantly since 2012,” Iordanou said.
“All the procedures for the creation of the framework and oversight have been guided by the Troika,” he added, referring to Cyprus’ international lenders – European Union and International Monetary Fund.
ICPAC’s head said that the institute has no evidence on whether companies in Cyprus are involved, and noted that most of the transactions in question were made through banks.
“The ICPAC will assess the situation and, if concrete evidence becomes available, we will conduct further investigation,” he said.
Iordanou said that politically-exposed persons who have offshore companies or accounts are “not necessarily considered criminals”, noting that such individuals are subject to “stricter due diligence checks”.
According to Iordanou, the Panama Papers affair could end up having a positive impact on Cyprus, because it exposes business destinations such as the Bahamas, Seychelles, and the British Virgin Islands.
This could conceivably prompt business activity to seek a more strictly-regulated institutional framework, leading it to Cyprus, he said.
Meanwhile, main opposition party AKEL called on President Nicos Anastasiades to officially ask for the leaked Mossack Fonseca documents, so that they can be investigated.
“Cyprus’ reputation as a financial-services centre is in danger of being irreparably tarnished,” AKEL said.
“The president must show resolve in investigating the allegations. This would be the best response to the malicious claims that Cyprus is being run by a handful of law-firms.”
In a statement, the government said AKEL’s concern is “fully justified, even as the instances in question date back to previous years”.
“In this context, it asks the relevant oversight authorities and professional groups to investigate the issue immediately, in order to establish whether any Cypriot-registered companies are involved in any illegality or not,” the statement said.
“The government’s wish is for Cyprus to remain a high-quality services and business centre, away from illegal practices. It also wants to stress that, in recent years, Cyprus has made strides of progress, fully adopting international best practices in combating tax-evasion and money-laundering.”