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Cyprus Confidential: Gaps in supervision give free rein to enablers abusing financial secrecy

The Cyprus Confidential investigations add to the evidence that professionals operating in the non-financial sector aren't supervised effectively enough, said Transparency International today.

The International Consortium of Investigative Journalists, Paper Trail Media, the Organized Crime and Corruption Reporting Project, and other media outlets have analysed leaked data from five Cypriot firms providing corporate, accounting and auditing services. The stories released so far show that, despite worldwide attention, these firms continued to work with high-risk individuals even after the EU designated them under targeted Russia-Ukraine sanctions. These revelations underscore the outsized role played by Cyprus's non-financial sector in the global financial system and highlights its status as a hotspot for stashing and shuffling illicit assets from Russia and elsewhere.

This problem is not just confined to Cyprus, the firms exposed in the leaks were often establishing companies and providing their services abroad. It is also part of a broader picture of professional enablers orchestrating the flow of dirty money across borders.

Maíra Martini, Interim Head of Policy and Advocacy at Transparency International, said: “Cypriot authorities are clearly confronted with a substantial challenge in addressing the inflow of dirty money. Decisive action against enablers in the non-financial sector is long overdue in Cyprus and beyond. These enablers cater to the super-wealthy from around the world, with no questions asked. They sell secrecy and shield assets from the scrutiny of anti-corruption agencies and law enforcement authorities, undermining global efforts to combat cross-border corruption and financial crime.”

Notwithstanding EU sanctions, the relationships exposed in the leaks between firms and high-risk clients should have raised red flags within these service providers, and professional bodies should also have taken notice. The investigations confirm clear shortcomings of self-regulation, which is exacerbated by the current decentralisation of supervision between multiple bodies.

Roland Papp, Senior Policy Officer as Transparency International EU, said: “Changes to the EU's anti-money laundering framework, currently being debated by EU co-legislators, cannot come soon enough. New measures are needed to stop the types of abuse that have been exposed in Cyprus. Forthcoming regulation will establish that supervisors need supervisors, too. Countries that currently leave it up to professional bodies to supervise lawyers, corporate services providers, accountants and others will have to task a government authority with overseeing these supervisors.”

Additionally, the new EU Anti-Money Laundering Authority will have powers to examine the conduct of the supervisory bodies not only in the non-financial sector, but also the public authorities overseeing them.