Our View: Government’s stance on sanctions is commendable

Speaking on state radio on Friday morning about the US and UK sanctions, economics professor Marios Zachariades made a very valid point. He said there was either compliance or non-compliance and nothing in between. The banks had recognised this – perhaps because they were under the supervision of the ECB – and complied with sanctions the moment they were announced, but businesses offering professional services, such as law and audit offices argued that compliance was not legally necessary.

Cyprus was only obliged to comply with sanctions imposed by the EU, argued the president of the Bar Association, citing legal arguments, while other representatives of professional services companies claimed the sanctions dealt a big blow to the economy. The noise made was “disproportionate,” said Zachariades, adding that professional services accounted for less than 10 per cent of GDP and were making this noise because their financial interests were affected.

If Cyprus wanted to be part of the international financial system, it had to fully comply with sanctions. No country could attract foreign investment and international business if it were not part of this system. In fact, non-compliance, which, to be fair, was not an option for the Christodoulides government, would be another blow to the reputation of the country still reeling from the golden passports affair. And it would cause much greater harm to the economy in the medium-term as it would discourage reputable businesses from setting up operations here.

The government handled the issue very well, refusing to be bullied by the auditing and law firms which have great influence over the authorities. It may have taken a bit longer than necessary to allow the registrar of companies to accept changes submitted by companies that had their bank accounts frozen because of links to sanctioned firms, but this will be done now. The registrar made it clear on Friday that each application would be investigated, but changes to companies whose ultimate beneficial owner is sanctioned would be rejected.

It is the right way to go about the matter and it is encouraging that the powerful lawyers/auditors lobby has, for once, been ignored by the government. President Christodoulides underlined this point on Friday when he said: “I am not here to cover up for anyone. For all those that violate sanctions and cause a problem to the standing of the country and the sector itself, the legal course must be followed.” It was a very clear message that was consistent with the strong stand taken on sanctions by the president from the day these were announced.

On another positive note, the updated sanctions lists of the UK released on Friday did not include any other Cyprus legal entities or Cypriot individuals (the US list was expected later in the day), but this should not lead to complacency. The government must maintain its commendably tough stance.