EU-experts stellen vragen over redden van zwart geld Cyprus (en)

BRUSSELS - As anti-money-laundering auditors begin work in Cyprus, some experts, such as the head of European operations for US due diligence firm Kroll, are questioning the value of the exercise.

EU lenders want it to shed light on whether bailout money will be used to protect the savings of Russian criminals.

But for a pro-transparency task force, its work is so far shrouded in secrecy.

The operation is being co-ordinated by the European Commission, the International Monetary Fund and the Cypriot central bank.

Its terms of reference, which stipulate, for example, the cut-off point for the size of Cypriot banks to be inspected, have not been made public. The central bank has hired a private firm to do the work alongside Moneyval, a branch of the Council of Europe in Strasbourg, but it has not said which firm.

Moneyval's people are already in Cyprus and preliminary findings are due by the end of March. But the precise deadline is not known.

For his part, Tommy Helsby, the head of European operations for Kroll, which recently did similar work in Afghanistan and Iceland, told EUobserver that the choice of Moneyval is dubious.

He noted that Moneyval already did four reports on Cyprus in recent years.

"The last one is full of glowing words - that they have put in place this and this statute or legislation. Only the last paragraph says that Cyprus doesn't have the resources to actually implement them. That's going to be the central issue," he said.

He pointed out the March deadline for the new Moneyval study is also a problem.

It took Kroll nine months to audit one Afghan bank which managed $1 billion and two and a half years to audit Iceland's Glitnir, while Cyprus hosts more than 40 large banks with more than €130 billion in assets.

"Can anybody produce a comprehensive and reliable answer in a week? No," Helsby said.

"But you might say: 'We need a scoping study to determine what needs to be done and … we get the agreement of the Cypriot central bank that they will undertake that effort and that effort might take two years'," he added.

Helsby said the biggest problem is that money-laundering is a global rather than a Cypriot issue, however.

He also said it is a "red herring" in terms of safeguarding European taxpayers' bailout money.

"You might ask: 'Has there been money-laundering going on in Cyprus that people have turned a blind eye to?' The answer is: 'Yes. of course. But why does that surprise you? It happens in every country'," he noted.

"Swiss banks, German banks, British banks, American banks - they launder all sorts of people's money … It's wrong to point the finger at Cypriot banks because they have Russian money, some of which is from Russian organised crime. You could do just the same look at Miami banks and Latin American money laundering, or Swiss banks, which launder money for everybody," he added.

He said the task force should instead be looking at "related party lending."

"In Iceland, you had a situation in which one shareholder in one bank lent money to a shareholder of another bank, who later returned the favour. So you're not doing it with legitimate parties within the bank. Then it creates a system in which people say: 'You scratch my back, I scratch yours.' It may not break the letter of the law, but it creates a kind of systemic risk," he explained.

"If you're concerned about the integrity of the Cypriot bailout, you ought to focus on improper lending practices," he added.

Michel Koutouzis, a Paris-based criminologist who advises the UN, the EU and the French government and who has written a series of books on money laundering, agreed with the Kroll chief.

"The problem is global and it is a radical injustice to point the finger at countries just because the are in financial difficulty when you do not point the finger at other ones who aren't," he told this website.

"Money laundering does not take place within a national territory. It takes place in an international space, a network which also covers London, Vienna, Berlin, Helsinki, Luxembourg, Malta or Tel Aviv as well as Cyprus. The thing [for money launderers] is to be present in all these places and to exploit the specificities of each market," he said.

Citing his own sources inside the EU-Cyprus bailout talks, he said that Luxembourg and the UK took Cyprus' side on limiting the scope of the audit.

"The Cypriot negotiators said: 'OK. Let's take measures. But if you really want to ask questions, let's also ask them about Luxembourg.' When the EU got this answer, they couldn't go much further," Koutouzis said.

"Cyprus knows very well what's going on in Luxembourg and in London. That's why it's very difficult to really push them," he added.

Going back to Kroll, Helsby gave an insight into what Moneyval should be doing.

He said the auditor's job is not to catch banks red-handed on specific cases, but to look at documents and to conduct interviews to see how they implement rules.

"It's not a bank's job to investigate if you are a criminal or a fugitive from justice. But it is their job to make sure they identify who their clients really are. If you've come to Cyprus with $3mn in cash, they have a reason to be suspicious. You should have a very good story. But if the banks just say: "Thank you. Would you like to open a savings account?" then that's a violation," he said.

He noted that a good forensic accountant is someone who "marries technical accounting skills with scepticism and with the investigative nose of a policeman."

"There's a side of accounting which is ticking boxes … but there's also a side with attitude, people who say: 'I looked at that, but it's a bit unclear. The ink looks a bit wet on this document. I'm going to look at the properties of this document and not just the contents. OK. So, it was created six months after it is dated'," Helsby said.