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Cyprus

Casinos, offshore banking keeps north on money-laundering radar

Casinos and the offshore banking sector in the breakaway Turkish Cypriot state in the north of the island remain areas of concern for money laundering activity, a US State Department report said.

According to the State Department’s Bureau of International Narcotics and Law Enforcement Affairs, anti-money laundering (AML) measures were not sufficiently enforced to effectively prevent the practice.

“The casino sector and the offshore banking sector remain of concern for money laundering abuse,” the report said.

There were 34 casinos in the north as of November 2018, the report said. Quoting local experts, it said an ongoing shortage of law enforcement resources and expertise left the casino and gaming sector poorly regulated and, “consequently, vulnerable to money laundering.”

“The unregulated money lenders and currency exchange houses are also areas of concern,” it said.

The report said the offshore banking sector also poses a money laundering risk. At the end of 2017, the sector consisted of seven offshore banks and 411 companies.

Turkish Cypriots only permit banks licensed by OECD-member countries to operate an offshore branch locally.

There are also 22 banks in the area administrated by Turkish Cypriots, of which 17 are Turkish Cypriot-owned banks and five are branches of banks in Turkey.

According to the report, the breakaway state drafted AML legislation incorporating international standards and elements of the then-proposed EU fourth AML directive in 2014 but it was never passed.

“The area administrated by Turkish Cypriots lacks the legal and institutional framework necessary
to prevent and combat money laundering. Inadequate legislation and a lack of expertise among
members of the enforcement, regulatory, and financial communities restrict regulatory capabilities.”

The report said regulations were in place requiring enhanced due diligence for foreign and domestic politically exposes persons but compliance was lacking.

The EU provides technical assistance to the Turkish Cypriots to combat money laundering because of the area’s money laundering and terrorist finance risks.

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