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Our View: Lax controls are bad for business

file photo: photo illustration of a cypriot passport

At a meeting with ministers and other officials last Monday, President Christodoulides revealed that he had tried to secure the services of experts from abroad to help with investigations of the allegations of sanctions violations. Head of the president’s press office, Victoras Papadopoulos said Christodoulides informed ministers that he had “asked for the support of foreign experts from a country that has great expertise in these matters and told officials to prepare the ground so that when these experts arrive, they would help police investigations.”

This could only be construed as a vote of no confidence in the Cyprus authorities which are supposed to ensure compliance with sanctions and combat money laundering. We have several state services to enforce the law and investigate suspected violations – headed by officials on big salaries who are supposed to know their responsibilities – so why do we need experts from abroad? Has the president decided that these people are incapable of doing their jobs and assisting the police with their investigations? If this is the case, why does he not replace the people that have let the country down with competent professionals, instead of seeking outside help?

This could be part of the government’s drive to rebuild the battered reputation of the country, which has to start somewhere. Lack of know-how or incompetence are extenuating circumstances, while seeking outside help to put out house in order indicates that the government is committed to ensuring full compliance with sanctions and cracking down on violations. And the country that will provide the experts could be the country that is pressuring the government to stop professional service providers working for Russian oligarchs.

It will require a lot more than this to start to improve the image of Cyprus abroad, where the country has acquired a reputation for dubious dealings, from money laundering to selling citizenships, all helped by lax controls. This reputation did not start with the Cyprus Confidential files and the reports by the ICIJ of ten days ago. In the nineties, Cyprus was in the news because it helped then President of Serbia Slobodan Milosevic to violate UN sanctions to buy arms. In the noughties Cyprus banks and professional service providers helped Russians to launder their money and when we needed a bailout in 2013, there were European politicians who opposed it, because of the country’s reputation as a laundromat.

And once we appeared to be putting our house in order, Nicos Anastasiades introduced the citizenship by investment scheme, which came to be known as the ‘golden passports’ scheme. The state was in effect indiscriminately selling EU citizenships to wealthy third country nationals, many of dubious background, as a way of kickstarting the economy. This landed the government in trouble with the European Commission, which repeatedly demanded the termination of the scheme. The response was to tighten the criteria, but by then it was too late and only after the embarrassment caused by the Al Jazeera report did the government call a halt to the scheme and ordered investigations into it. Then there was the spyware scandal, which also exposed the laxness of our law enforcement.

In April, Cyprus-based companies and individuals were included in US and UK sanctions lists, while another four individuals and two companies were added to the US sanctions list earlier this month. When the ICIJ reports appeared, many in Cyprus dismissed them as containing nothing new, but they missed the point. The reports that were seen by a worldwide audience, merely reinforced the long-held view abroad that Cyprus was used by wealthy Russian businessmen to hide their money. The barrage of criticism at Wednesday’s plenum of the European Parliament illustrated the point. One MEP described Cyprus as “a safety-box for Russian oligarchs, a point for violating sanctions and a system of golden visas.” Another said that “whoever helps oligarchs violate sanctions either intentionally or through negligence must be punished.”

This bad reputation has been created cumulatively, the result of many years of bad press abroad, often justified. Every time something is fixed, something else comes along to ruin everything. In the last five years, for example, the banking sector ended cooperation with 42,000 shell companies and closed 125,000 bank accounts. But this year the sanction stories appeared. The situation is not helped by the ineffectiveness of the law enforcement agencies. On Wednesday, Attorney-General George Savvides told the House legal affairs committee that it would be difficult to successfully prosecute cases of sanction violations. His office was currently investigating more than ten cases, but he made a point of keeping expectations low.

Perhaps President Christodoulides’ idea of inviting foreign experts to help police investigations is not a publicity gimmick after all. It is a necessity, but this would be just the start. Years of work will be needed to build the country’s reputation abroad after decades of bad publicity, despite which the country is still attracting foreign business and investment, even with Russians completely out of the picture since 2022. The much-maligned professional service providers must be offering a good standard of service to remain profitable after so much bad press internationally.

This, however, should not stop the government drive to put our house in order, by tightening controls, upgrading supervision, and making law enforcement more effective. Not only will this ensure the end of bad press, but it will attract more foreign business.

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