A jury on Thursday will begin weighing the fate of Paul Manafort, the former Trump campaign chairman standing trial on bank and tax fraud charges that could put him behind bars, while a former Cyprus central banker said he was surprised to hear of two major transactions, appearing as loans, at a time when tough controls were in place.
During the two weeks of testimony in federal court in Alexandria, Virginia, witnesses described how Manafort routed $16m in income hidden in foreign bank accounts, including Cyprus, to US vendors to purchase real estate, bespoke suits and antique rugs, income he is charged with omitting from his tax returns.
The case is the first to go to trial arising out of special counsel Robert Mueller’s probe of Russia’s meddling in the 2016 U.S. election, although the charges against Manafort largely predate his five months on the campaign.
Manafort, 69, a veteran political consultant, made his fortune bringing pro-Russian politician Viktor Yanukovych to power in Ukraine in 2010. When Yanukovych fled the country in 2014, the political work dried up and Manafort lied about his finances to get loans from banks, prosecutors said.
The jury heard that 31 accounts had been identified, located in Cyprus, the Grenadines and the United Kingdom, belonging to Manafort. Payments had been traced for luxury items back to those hidden bank accounts, while documents from banks and corporations showed how the corporate entities and offshore accounts were linked to Manafort.
In an op-ed on Euobserver published on Wednesday, former central bank governor Panicos Demetriades suggested “Manafort’s Cyprus connections may well turn out to be just a prelude.”
The former governor, who was forced to resign, albeit with a generous payment, by President Nicos Anastasiades after just two years into a five-year term, said he was surprised to see that the indictment itself lists two wires from Cyprus in 2014 and 2015, amounting to $0.9 million (€0.79m) and $1m, respectively, which were disguised as loans.
“This was puzzling. How could such large transactions go under the anti-money laundering radar of any bank?” he said. “How could they happen after all the improvements made in 2012-13? How was that even possible if Manafort’s bank accounts in Cyprus had been closed in 2013?”
Demetriades then discusses the role of law firms in attracting Russian business, saying that prior to the crisis of 2013, “these firms were, in fact, the catalysts of foreign capital inflows into Cyprus, often acting as ‘introducers’ of wealthy clients to the island’s banks.”
“In fact, one of the first to enter the Russian market was the law firm belonging to the family of the current president of Cyprus, Nicos Anastasiades,” he said.
Demetriades argued against suggestions that Wilbur Ross, the former biggest shareholder in Bank of Cyprus and now US secretary of commerce, began forcing Russian members off the bank’s board, including a former KGB officer who had worked with the President of Russia, Vladimir Putin.
“I find this the least persuasive part of the story. Even setting aside the allegations made in Forbes magazine on August 7 about Ross being a “serial grifter”, I very much doubt that the Cypriot government would want him there if they had thought he might have been a threat to the ‘special relationship’ between Cyprus and Russia.”
He said developments in fact suggested that Ross was no such threat.
“His arrival at Bank of Cyprus in mid-2014 coincided with a more high-profile Russian oligarch, Viktor Vekselberg, buying out the shares of ‘ousted’ Russians (who never wanted to be shareholders in the first place).
Vekselberg, a close ally of Putin, is currently at the centre of allegations relating to Russian interference in the 2016 US elections.
“It is hard to believe that the simultaneous presence of Ross and Vekselberg as major shareholders of Bank of Cyprus from mid-2014 (soon after I left Cyprus to return to my academic position in the UK) was a coincidence. Their co-existence appears to have been organised and deliberate.”
In contrast to the accusations levelled against BoC and Anastasiades, in 2016, Demetriades wrote a letter to the US treasury’s Financial Crime Enforcement Network, FinCen, in support of FBME Bank, a Tanzanian lender which had its licence in Cyprus revoked, after it was deemed a primary money laundering concern.
“Smaller banks such as FBME, as well as being a source of healthy competition, are inadvertently a threat to the supremacy of larger banks,” Demetriades said. “As such, they tend to attract interest by politicians, often for the wrong reasons.”
He said that during his tenure as governor, the anti-money laundering capabilities of the Central Bank had been strengthened considerably and “at no time was I ever presented with any evidence to suggest that any bank in Cyprus engaged in money laundering during that period”.
The former governor said that with many activities in Cyprus, including banking, being an extension of party politics, “certain politicians”, whom he did not name, “were uncomfortable with FBME’s presence in Cyprus” and may have been “overprotective of the biggest domestic banks, although it is those banks’ reckless actions that fuelled an unsustainable property boom and created large contingent liabilities for the sovereign through excessive exposures to Greece and Eastern Europe, including Russia”.