Cyprus Needs an Anti-Money Laundering Champion

Back in 2012, organizational change and leadership expert Marina Theodotou and I co-wrote a report of PwC entitled "Professional Services: driving growth and employment in Cyprus". (positive) impact of the sector on employment and growth of the economy and as a reference point both in Cyprus as a place to do business and as an innovative analyzed. analysis "SWOT" (identifying strengths, weaknesses, opportunities and threats) and monitoring for the government, the private sector and industry representatives was held.

One of the main risks that "the loss of favorable tax system was stressed. We cite the risk, he flatly denied at the time that the troika would require an increase in the tax rate of 10% of businesses in 12, 5% (as it did quickly a few months later), the introduction of a common tax base at European level is proposed, the European Commission relaunched in mid-2015, and the risk of a tax on financial transactions.

We also highlight the risk of excessive concentration in a market (Russia) and said: "In the future, Cyprus may have to be distinguished not by its tax system, but only on the basis of the quality of their service."

Fast forward to 2016 and we can add global precipitation Papers leak Panama as another major risk for the sector, for two main reasons.

The first is related to the global appetite of voters. Clearly public support, not only for the suppression of money laundering and tax evasion, but what has so far been perfectly legal tax planning, too. This could be the next target for British Prime Minister David Cameron, after hosting the summit against corruption this week.

Combine the difficulties in creating tax structures with a common tax base for companies (pushed through if the UK left the EU, perhaps) and it will be a major setback for professional services in Cyprus.

The impact on the economy as a whole can not be ignored. The two combined sectors account for almost 16% of GDP in 2015. This makes them larger than the direct contribution of tourism.

International Banks Risk Aversion

The second risk relates to how international banks Panama gather documents.

Just this week, the Financial Times reported that Barclays, Deutsche Bank and UBS have decided to close their accounts at 25,000-30,000 divisions of corporate and investment banking.

The FT said the closure of the accounts of the company showed banks are becoming more aggressive, "either because they are considered too risky under the rules of the fight against money laundering or because it was no longer profitable to light of the new regulations. "

Last month, Deutsche Bank has also ceased to be a correspondent bank for transactions in euros with BCR Cyprus. The decision was taken before the escape of paper and Panama RCB Cyprus "categorically denies" any link with Panama documents.

But Deutsche Bank was already becoming extremely careful. Its own internal investigation this year (after the issues raised by a Cypriot bank probably doing due diligence correctly) said a "systemic" failure internal controls and a "pattern of possible money laundering".

Other big banks are also struggling with reputation. UBS was indicted by a Belgian court in February to money laundering and serious and organized tax fraud (which denies the charges). Barclays paid a fine of £ 72m at the end of last year, when the Financial Conduct Authority UK found that could be used for money laundering.

Before this attack, one can imagine what the mantra is as international banks these days: "If it sounds risky, download it."

The opportunity for Cyprus

This brings me to the possibility that Cyprus and the need for a national champion.

In this new world order, only survive squeaky clean. Cyprus has done much in recent years to improve its record of compliance, in letter and in practice.

Of the 10 areas covered by the OECD in its strict "second peer review" late last year, Cyprus has been found fully compliant at seven and "largely compliant" in three areas. This puts Cyprus ahead of Luxembourg (fully compliant to five), the same level as Germany, the Netherlands and the United Kingdom (also seven) but behind Malta (eight) and Ireland (10).

The only problem is that no one is aware. I know this because of the flow of foreign journalists who come knocking on my door every year with nothing but money laundering in their minds. As for (which are mostly NATO countries), Russia is bad, so the Russian business should mean money laundering.

One reason knows that Cyprus was cleaning his act is because there are many agencies in the fight against money laundering: the Institute of Chartered Accountants of Cyprus (ICPAC / SELK), the Securities and Exchange Commission of Cyprus (CySEC) the Central Bank of Cyprus, the Bar, and, of course, MOKAS, the money anti-laundering unit in the attorney general's office.

A Single Record And With One Voice

There is no single record of what they did, who were fined, closed, or the withdrawal of licenses.

It's time their efforts were gathered in one place and saved, shared with one that meets foreign journalists, politicians and potential investors in their daily lives, then shouted to the four winds for everyone with an interest in promoting investment in Cyprus.

This work should not drop regulators and supervisors mentioned above could be interpreted as a conflict of interest. However, there is a body that has investments in Cyprus as its main objective, namely investments Agency Cyprus (CIPA).

The work done is too important to leave to the younger ones. It only needs a persuasive champion with the following qualities:

• A impeccable reputation.
• Strong sales skills to convince a skeptical international audience.
• A background in the area so he or she can identify the remaining weaknesses.
• The diplomatic skills to pressure the government and the sector silently make the necessary changes.

In case you think I put forward the requirement of a fund in the sector excluded me. But there must be someone out there.