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US sees Cyprus progress in combating illicit finance

August 22, 2018 at 10:49am
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Although Cyprus remains a jurisdiction of concern from the perspective of Russian money laundering,  progress is being made, the US Treasury has told Congress.

In a report on US efforts to combat illicit finance relating to the Russian Federation, the US Treasury said it has prioritised engagement with jurisdictions with high volumes of Russian financial flows, including the United Kingdom, Cyprus, and Latvia.

In the section on Cyprus, it said that senior officials from the Departments of State and Treasury have engaged Cypriot authorities extensively over the past year and a half to underscore concerns that Cyprus continues to host a large volume of suspicious Russian funds and investments, and have pressed Cypriot officials to harden its financial system against these threats.

“Vulnerabilities Cyprus presents include its permissive citizenship by investment program, its weak supervision of
Administrative Service Providers, and lax company formation requirements, which are exploited by illicit actors to set up front companies and to use these fronts to open bank accounts and access the international financial system,” the report said.

And it added: “Although Cyprus remains a jurisdiction of concern from the perspective of Russian money laundering, the Administration is seeing some signs of progress.”

It said that following the April 6 oligarch designations, Oleg Deripaska and Victor Vekselberg both had bank accounts frozen. In May 2018 Cyprus issued a circular instructing its banks to address certain illicit finance risks from shell companies, in particular the challenges in verifying customers’ background, it added.

On April 6, 2018, the US Treasury sanctioned 38 individuals and entities, comprised of seven Russian oligarchs, 12 companies they own or control, 17 senior Russian government officials, and Russia’s primary state-owned arms trading concern along with its bank subsidiary.

Among those sanctioned were Deripaska an Vekselberg with the US Treasury saying that as a result of the sanctions Deripaska’s personal net worth has dropped by more than 50% while Vekselberg’s net worth has dropped nearly USD 3 billion.