November 5, 2012 / 5:09 PM / in 5 years

Cyprus rejects money laundering report

NICOSIA (Reuters) - Cyprus on Monday dismissed suggestions it was a money laundering haven which could imperil European taxpayers’ cash in a bailout the island desperately needs.

Germany’s Der Spiegel magazine on Sunday cited a German intelligence report claiming “Russian oligarchs, businesspeople and mafiosi who parked illegal earnings in Cyprus” stood to gain from a bailout the island is now negotiating with international lenders.

“They are claims and reports which seek to slander and attack Cyprus as an international business centre,” Cypriot government spokesman Stefanos Stefanou said.

Cyprus is in talks with international lenders on the terms of financial aid expected to exceed 10 billion euros, after its two largest banks suffered huge losses due to the Greek debt writedown earlier this year.

The island, the third smallest economy in the euro zone, has for long tried to shake off an image of being a money laundering haven. Nicosia says it has met and passed assessments by EU watchdogs, the G20 Financial Action Task Force and the IMF.

“Cyprus has received praise both for its legal framework in fighting money laundering, and for its implementation,” the Cypriot spokesman said.

The Spiegel report said Russians held an estimated 21 billion euros in Cyprus-based bank accounts. That figure tallies with the 21.26 billion in non-resident deposits reported by the Cypriot central bank for September, though Cypriot authorities never offer breakdowns of account-holder nationalities.

Cyprus says there is nothing untoward in doing business with Russia, maintaining that a double-taxation avoidance treaty with Moscow gives the island a competitive edge, along with its low corporate tax.

Financial experts say Cyprus has toughened money laundering regulations, particularly since joining the EU in 2004.

But its past history could also cloud present perceptions.

Former Serbian strongman Slobodan Milosevic secretly siphoned large amounts of money from former Yugoslavia to Cyprus in suitcases, according to prosecution investigators during his trial at the U.N. War Crimes Tribunal.

Reporting By Michele Kambas; editing by Keiron Henderson

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