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SOUTH CYPRUS; A HAVEN FOR MONEY LAUNDERING ON ROUTE TO THE EU

 Prepared by Nihal Erülgen August, 2002
Foreign Affairs and Defence Ministry/ Public Relations Department

Introduction

             According to EU authorities, the Greek Cypriot Administration (GCA) may become a full member of the European Union (EU) in 2004. However, the international community, mainly the EU should re-examine the GCA's membership from the point of view that it is the centre for all illegal activities, particularly money laundering and drug smuggling, since the European Union tries to provide the basis for Member States to prevent criminal money entering the financial system.

            Former President of the Yugoslav Republic, Slobodan Milosevic, responsible for the mass murders of thousands of people in Bosnia, laundered millions of dollars in South Cyprus. Recently, United Nations reports stated that Slobodan Milosevic used South Cyprus as a money-laundering centre to finance his crimes in Bosnia and Kosovo.

            On the other hand, Saudi terrorist Osama Bin Laden, who is one of the CIA's most wanted men, used South Cyprus as a transit point of exports in order to finance his terrorist activities. He has bank accounts in Nicosia in order to finance several terrorist activities.

            The Russian mafia, also, used South Cyprus as a base for its extensive operations and they benefits greatly from this.

            Under these circumstances, the recent developments regarding the assistance of the GCA to the money laundering activities of Milosevic and Bin Laden, compels us to question and discuss the EU's "best candidate", while the majority of the international community fights against terrorism all over the world. We should not ignore the fact that the EU tries to provide the basis for Member States to prevent criminal money entering the financial system.

            The main aim of this paper is to discuss, how the GCA will become a full member of the EU, while she still has a long way to go to achieve progress on international development, regarding anti-money laundering efforts, and is also supporting war crimes and terrorism. 

The EU Directive on Money Laundering

            The European Union (EU) applies some rules within its member states in terms of denying access of 'dirty money' into the EU's financial systems.

            The money laundering Directive of the EU (91/308/EEC) has provided the basis for Member States' efforts to prevent criminal money entering the financial system, which is a crucial part of the campaign against drugs trafficking and organised crime in general. Indeed, the Directive serves as a reference at the world level for other countries' measures to counter money laundering. The cornerstone of the Directive is the obligation on credit and financial institutions (including 'bureaux de change') to require identification of all their customers when beginning a business relationship (particularly the opening of an account or offering safe-deposit facilities), when a single transaction or linked transactions exceed ECU 15,000 or when they suspect laundering.

            A new proposal by the European Commission aimes to extend the scope of the EU Directive on combating money laundering and to make it more effective. The proposal will extend the Directive's obligations to activities and professions outside the financial services sector (such as auditors, legal professions, real estate agents and casinos) and extend the definition of suspicious transactions to cover the proceeds of other serious crimes besides drug trafficking. Such an extension of the Directive will bring EU rules in line with the latest international recommendations, in accordance with the Amsterdam European Council's Action Plan to combat organised crime and requests from the European Parliament. The announcement is featured in a Commission report on the implementation of the 1991 Directive. (http://europa.eu.int/comm/internal_market/en/finances/general/launden.htm)

  Events that Brought Us to Today

            The European Union considers the Greek Cypriot Administration (GCA) as the government of all Cyprus, having only one constitution on the island and one valid government. The GCA has been accepted by the EU as "the best candidate" in the fore-coming enlargement wave. However, when human rights criteria are considered, to ignore the mass genocide committed by the Greek Cypriots, it is not possible to make sense of the EU's treatment of the GCA as a perfect candidate.

            Starting in December 1963, and for the next eleven years, the Turkish Cypriots had to seek survival in violent and traumatic conditions. Until the intervention of Turkey as a guarantor state, 103 villages were burned down, many innocent Turks, including women and children, were mercilessly killed, more than 50,000 people were driven away from their homes and forced to live in 3% of the island in isolated enclaves.

            The Greek Cypriots were not only trying to ethnically cleanse wipe out the Turkish Cypriots they also destroyed the 1960 Cyprus Republic in 1963 by expelling the Turkish Cypriots from all the administrative organs by force of arms. The Turkish Cypriot people became the victims of the ethnic cleansing policy of Greece backed by Greek Cypriot paramilitarists.

            With the Turkish Peace Operation on 20 July 1974, peace in Cyprus was achieved. However, the perfect EU candidate continues its illegal activities in different ways. Support of the GCA to terrorism and money laundering activities was highlighted in some reports which were published in different time periods. The Greek Cypriot 'House Special Committee on Organised Crime' in a report in 1997 stated that "It's widely accepted now that organized crime does exist in Cyprus." (Cyprus Mail, June 19, 1997)

South Cyprus: Milosevic's Treasure Island

            The Greek Cypriots involvement and assistance in money laundering activities cannot be disregarded: "A US State Department Report has stated that South Cyprus is a major area of concern for money laundering and drug smuggling." (Fileleftheros, March 2, 2001). A massive investigation involving American, Swiss, Yugoslavian and UN officials has consistently pointed to Cyprus as a transit point for money smuggled out of war-torn Yugoslavia during the presidency of Slobodan Milosevic. (Cyprus Mail, March 14, 2001) Slobodan Milosevic secretly financed Serbian military operations in Croatia, Bosnia and Kosovo during the 1990's through Greek and Greek Cypriot bank accounts, according to documents from the United Nations war crimes court. (The New York Times International, December 1, 2001)

            In March 2002, Mladjan Dinkic, the Yugoslav central bank governor carried out an investigation on South Cyprus about Milosevic's money laundering activities. "4 billion US Dollars were channelled to Europe through Cyprus illegally from Yugoslavia." (Cyprus Mail, March 3, 2002)

            The Greek banking ethics of this "perfect candidate" has made Southern Cyprus a haven for smugglers, mafia and money launderers to deposit their illegally gained proceeds.

            The former President of the Yugoslav Republic,  Slobodan Milosevic, responsible for the mass murders of thousands of people in Bosnia, who enforced a policy of ethnic cleansing by expelling Bosnian Muslims from the country, also laundered millions of dollars in South Cyprus.

            Greek Cypriot banks were utilised by the "official smuggling ring" organised by Yugoslavia to violate the internationally imposed sanctions against it during the Bosnian war.

            Slobodan Milosevic headed a secret financial network spanning 50 countries, according to a report by prosecutors to the UN court in The Hague where he is on trial for war crimes.

            In a 58-page report prepared by Morten Torkildsen, an investigator at the United Nations war crimes prosecutor's office, it was stated that accounts held by companies and individuals located in more than 50 countries received funds from the Cypriot companies. The report stated that the former Yugoslavian President Slobodan Milosevic used South Cyprus as an international money laundering centre in order to break the embargoes imposed upon the former Yugoslavia. According to this report the Law Bureau of the leader of the Greek Cypriot political party, the Democratic Party (DIKO), Tassos Papadopoulos's registered off-shore companies belonged to Milosevic's brothers.

            The report also added that "Popular (Laiki) Bank, the island's second largest bank, allowed a group of Yugoslav-controlled front companies to operate in defiance of UN sanctions. These companies supplied Mr. Milosevic's government with fuel, raw materials, spare parts and weapons to pursue wars in Bosnia in 1992-1996 and in Kosovo in 1998-1999." (Financial Times, July 25, 2002)

            During the years 1992 and 1994 it is estimated that as much as 4 billion US Dollars was transferred to South Cyprus, with the funds being deposited in the Popular Bank and its Greek subsidiary, European Popular Bank.

            Inspite of all these allegations the Greek Cypriot authorities have kept their silence. "... instead of taking measures against Yugoslav sanctions-busting, leading members of Cyprus's close-knit elite facilitated the transactions. They included Afxentios Afxentiou, governor of the central bank; Kikis Lazarides, chairman of Popular Bank; and Tassos Papadopoulos, a prominent lawyer and leader since 2002 of the Democratic Party, the island's second biggest political party." (Financial Times, July 25, 2002)

            Papadopoulos is a candidate in the Presidential elections to take place in South Cyprus in February 2003. According to the opinion poll by the Greek Cypriot research organization, "RCI", Papadopoulos got 46.6% of votes. (Simerini, August 4, 2002). It is possible to say that Papadopoulos will be the president of the "Cyprus Republic" while the GCA will become a member of the EU. However, in the latest Milosevic money laundering operation, when sanctions were imposed on Yugoslavia by the UN, and innocent people were put in front of a firing squad, the person most responsible for defying the UN sanctions was Papadopoulos.

            Greek Cypriot authorities kept issuing denials while the Torkildsen report makes it quite clear that Cyprus was at the centre of those operations. "Why are the Attorney- general's office and the Central Bank keeping quiet about very serious allegations, made by Liljana Randenkovic and Radmila Budisin, which are mentioned in the Torkildsen report? The two women claimed they had been made beneficial owners without their knowledge of two of the companies that played a leading role in the money laundering; both companies were registered in Cyprus." (Loucas Charalambous, Sunday Mail, July 28, 2002)

            The Greek Cypriot bankers and politicians involved sound embrassed rather than repentant.

            The Executive Chairman of Laiki Bank, Kiki Lazarides: "We did nothing illegal. After all, banks are in the business of making money." (Financial Times, July 25, 2002)

            Tassos Papadopoulos: "We are not talking about the laundering of dirty money. It was the money of the Yugoslav state which the companies were transferring to break the US embargo." (Sunday Mail, July 28, 2002)

            Attorney-General Alecos Markides: "The money might have come to Cyprus, but didn't stay in Cyprus." (Sunday Mail, July 28, 2002)

            Kikis Lazarides: "Because the amounts of cash arriving from Yugoslavia were quite large, we always checked with the Central Bank to get their permission on a case-by-case before we accepted them." (Sunday Mail, August 4, 2002)

            All these statements also show that Greek Cypriot officials have confessed that during much of the 1990s when the international community shunned Yugoslavia and despite the UN sanctions imposed, it assisted in the transfer of money belonging to ex-Yugoslav President Slobodan Milosevic from Yugoslavia to South Cyprus, where it was laundered.

From Milosevic to Laden: The Greek Cypriot Side a Haven for Money Laundering

           Money laundering in South Cyprus is not limited with this. It has now become clear that the Greek Cypriot authority has laundered millions of dollars more for Saudi terrorist Osama Bin Laden.

            Osama Bin Laden: he is one of the CIA's most wanted men. He and his associates were already being sought by the US on charges of international terrorism, including a connection with the 1993 World Trade Centre bombing; 1996 killing of 19 US Soldiers in Saudi Arabia; Nairobi and Dares Salaam bombings; Attack on USS Cole in Yemen in 2000; 2001 September 11 Attacks on the Twin Towers.

            Fugitive Saudi billionaire Osama Bin Laden has bank accounts in South Cyprus to finance these terrorist activities. "Bin Laden's group maintains bank accounts in Nicosia. Bin Laden also used Cyprus as a transit point to export Sudanese exports such as peanuts, to Europe. ... Cyprus has been identified as a leading location for money laundering by orginized crime." (World Tribune.com, April 10, 2001)

            "Former State Department official Jonathan Winer included Cyprus in a list of countries whose alleged inaction in the freezing of accounts was giving time to suspected terrorists to move their money to a safer haven." (Cyprus Mail, October 3, 2001)

            Former CIA chief James Wolsey has told Italian newspaper La Repubblica that the Greek Cypriot side has been harboring funds manipulated by Osama Bin Laden. Wolsey said: "The worst country of all is the Greek Cypriot State. They want to enter the EU and we have advised our friends in Brussels to visit the island and say: you will enter the EU but only 400 years later unless you hand over information concerning Bin Laden's money straight away." (La Repubblica, September 18, 2001)

            It was also stated by the former NATO Supreme Commander in Europe, General Wesley Clark, to CNN that South Cyprus was supporting terrorism and at the same time became a place for money laundering.

Russian Mafia in South Cyprus

            The Russian Mafia also benefits greatly from its extensive operations in South Cyprus. The murder of a Russian banker in Limassol in February 1997, unearthed a "well-organized gang of burglars" (Cyprus Mail, editorial, February 15, 1997) and highlighted the prevalence of Russian Mafia activity in Southern Cyprus. Furthermore, its pervasive and powerful influence in the Russian banking system (Cyprus Weekly, July 11-17, 1997), has allowed the Russian Mafia to increase its connections in Southern Cyprus where it controls an extensive operations network in many Greek Cypriot off-shore companies and banks.

            The Greek Cypriot Central Bank has also been severely criticised by Greek Cypriot MP's for failing to prevent the widespread practice of money laundering. (Cyprus Mail, March 22, 1996)

            "Pavel Borondin, advisor of former Russian President Boris Yeltsin, transferred millions of dollars acquired from illegal activities in Moscow to off-shore corporations in other countries through South Cyprus. ... The Geneva Prosecution investigating this issue included South Cyprus regarding money laundering. The Geneva Prosecution stated that 'Cyprus on many accounts has been used as an intermediary station for transferring millions of dollars to other countries'." (Simerini, April 12, 2001)

Conclusion

            The European Union tries to provide the basis for Member States to prevent criminal money entering the financial system, which is a crucial part of the campaign against drugs trafficking and organised crime in general. For this purpose the money laundering Directive of EU (91/308/EEC) has been announced. However, there is a paradox from the EU point of view. On the one hand the EU tries to prevent the entrance of dirty money in to their financial system. On the other hand it is prepared to accept the GCA, which is a centre for money laundering, as a full member. Yet this "perfect candidate" of the EU is not only a money laundering centre but also a great supporter of terrorism and war crimes. 

            As we discussed in the previous sections, it is clear that the GCA has a centre role in supporting illegal activities. The Greek Cypriot side has a history and experience with the underground organisation called EOKA which started a campaign of violence in the mid-1950s in order to annex the island to Greece (Enosis) and committed a genocide against the Turkish Cypriots during 1963-1974.

            Today, Greek Cypriot involvement and support for international terrorism and money laundering has become all the more obvious. Recent reports of UN authorities stated that the former President of the Yugoslav Republic, Slobodan Milosevic, responsible for the mass murders of thousands of people in Bosnia, used South Cyprus as an international money laundering centre in order to break the embargoes imposed upon the former Yugoslavia.

            The Greek Cypriot authorities assisted the genocide in Bosnia and crimes against humanity by laundering this dirty money of Milosevic.

            Like the Russian Mafia, Osama Bin Laden, who is responsible for international terrorism, used South Cyprus as a location for his money laundering activities. He has bank accounts in South Nicosia for money laundering activities and used these banks to finance his terrorist activities.

            As mentioned before, the law firm of DIKO Leader, Tassos Papadopoulos, the candidate for the 2003 presidency elections in the GCA who has the highest possibility to win the elections, facilitated the transactions of Milosevic’s dirty money. Thus, it is possible that the GCA will become a full EU member under the leadership of Papadopoulos as representing the "whole" of the island.

            While South Cyprus has been identified as a leading location for money laundering by organized crime, we wonder how the GCA fulfills the EU criteria regarding dirty money. How can the EU accept the GCA as being "the best candidate" while she is the main actor for money laundering, and a supporter of terrorism?