Dark Side
Conflict over Money Laundry
By Stelios Orphanides, Cyprus Mail, February 14, 2018
Feb 15, 2018 - 10:38:07 AM

The non-governmental organisation (NGO) Transparency International has denied official membership status to its Cypriot branch due to fundamental disagreements regarding anti-money laundering work, prompting anger from members in Cyprus.

“The affiliation of Transparency International Cyprus was ended in August,” said Stan Cutzach, member of the ethics and governance committee of Transparency International in an emailed statement.

Cutzach, who was commenting in response to an emailed inquiry from the Cyprus Business Mail, said that the global anti-corruption watchdog could clarify questions early this year with its Cypriot branch or “chapter” related to the use of the logo and brand.

Two former members of the board of directors of Transparency International Cyprus, former chairwoman Maria Kramvia Kapardi and former vice chairman Marios Skandalis said they were dismayed over the Berlin-based organisation’s decision, and questioned the NGO’s motives that led to it.

“Our priority was not money laundering but corruption,” said Kapardi who also teaches accounting at the Limassol-based Cyprus University of Technology, better known as Tepak. “The ultimate goal of Transparency International is not tackling money laundering by fighting corruption. They were obsessed in demonstrating that Cyprus did nothing in the money laundering area”.

Kapardi added that Transparency International had ignored the work the Cypriot branch had accomplished and added that the decision was guided by “ulterior motives”.

Similarly, Skandalis, who is now chairman of the Cyprus Integrity Forum, a successor organisation of Transparency International Cyprus, said “unfounded obsession with money laundering and vague perceptions as to conflict of interest” and a German attempt to discredit Cyprus were behind the Berlin-based NGO’s decision not to offer the Cypriot branch an official status as a chapter.

“When they told us in writing that they cannot give us the official status of ‘chapter’ because of the above reasons we requested to talk to them and even visit them in Berlin to clarify what exactly they meant, but there was a complete absence of response from their side,” he added. “At the same time and after serious discussion at our board we decided that probably it was not right for us to be associated with such an association which lacked practical transparency”.

Skandalis is head of the anti-money laundering compliance department of Bank of Cyprus, the largest lender on the island. In June, he was elected chairman of the Institute of Certified Public Accountants of Cyprus (ICPAC), a body tasked with supervising the anti-money laundering compliance of accountants, who together with law offices often act as customer introducers for banks.

In 2016, Bank of Cyprus said that it had ditched nine in ten of its former introducers and terminated relations with thousands of customers since 2014, citing compliance reasons.

“It was as if they were hiding,” to avoid giving an explanation for their decision, Skandalis continued. “Our legal advisor’s position was that this absence of communication and not getting the right to support our position, violated our basic human rights”.

The Bank of Cyprus chief compliance officer said the parent NGO also asked the Cyprus chapter to look into the island’s controversial citizenship-by-investment scheme, which allows foreign investors to acquire a Cypriot passport within months by investing as little as €2m, which led to an inflow of around €5bn in foreign investment in recent years mainly into real estate.
“And we said that this issue needs complete transparency and that it should constitute a by-product of the real economy of Cyprus,” he continued.
“But what more was it expected from Transparency International Cyprus to say? To say that it is an illegal sector of the economy? Well it is not, it is a sector that applies in all EU economies including Germany”.

The parent NGO ignored the Cypriot branch’s contribution in modernising Cypriot law in the area of the financing of political parties and the protection of whistleblowers, he added. It also ignored the findings of the financial transparency index, a survey which showed that Germany was the 7th least transparent economy among 112 jurisdictions. Cyprus was the 24th least transparent.

“So here we have country number 7 accusing country number 24 for lack of transparency,” Skandalis continued. “I am not saying that it is Germany behind all these unfounded and unfair allegations, but all these things are really very strange. Why isn’t Transparency International Germany being questioned and probably disaccredited?”

Cyprus which in 2012 requested an international bailout, paid a heavy price five years ago when Germany declined to make funds available to support Cypriot banks citing their use by Russian oligarchs.

The island made headlines at the beginning of the millennium when it emerged that former Serbian leader Slobodan Milosevic laundered illicit funds through the Cypriot banking system. As recently as last year, Hermitage Capital founder Bill Browder said that Cyprus had done little to investigate the theft of $230m (€183m) in stolen funds uncovered by lawyer Sergei Magnitsky in Russia a decade ago.

A year ago, Transparency International said that Cyprus disclosed the most complete set of anti-money laundering data among 12 analysed countries including Germany, the US, the UK and France.

“So, we decided to continue our struggle alone, as the Cyprus Integrity Forum with the same values and objectives as before, but without having to do with Transparency International secretariat in Berlin anymore,” the Bank of Cyprus compliance officer said. “We wanted to see more honesty, transparency and fruitful communication in our relationship to with the secretariat. However, we realised that ‘transparency’ is a principle and a virtue of those who want to pursue it and not the ownership of anyone