NZ firms linked to money laundering

by MICHAEL FIELD

Criminals are using shell companies set up under New Zealand's lax company laws to launder money.

Companies created by an Auckland firm operating out of Queen St have been linked to Russian crime, a Mexican drug cartel and Romanian extortion.

A 16-month Fairfax Media investigation has also tied companies created by Geoffrey Taylor and his sons Ian and Michael, who work out of 363 Queen St, to a company that smuggled arms out of North Korea.

The government admits there is a problem but says it has had other priorities.

The Taylor operation is not illegal, but the companies they create are connected to serious crimes in a number of countries.

They set up a shell company, Bristoll Export Ltd, that helped move part of the proceeds of a $245 million Russian tax fraud out of Moscow and into Swiss bank accounts. London-based Hermitage Capital Management hired a lawyer to find out what happened, but he died in a Moscow jail.

Hermitage chief executive Bill Browder told the Sunday Star-Times he was "highly motivated to make sure all aspects of this story see the light of day", and that he had a "treasure trove of information" about New Zealand companies' ties to the scandal.

The Taylors set up complex webs of companies, and one of them, linked to Russians in Cyprus, is administered out of a home in Albany near Auckland.

A United States Justice Department investigation into the banking giant Wachovia, also tied Taylor-linked companies to the movement of drug money. Wachovia was fined more than $202m for helping disguise the illegal origins of up to $479 billion for Mexican drug lords, predominantly the murderous Sinaloa cartel. Four Taylor companies "filtered" $50m in drug money through banks in Latvia and on to Wachovia. Each of the companies had just one director – Stella Port-Louis, 32, of the Seychelles, until recently a director of around 300 New Zealand companies.

Canada's Financial Transactions and Reports Analysis Centre, which assessed Wachovia, identified the "exploitation of New Zealand's weak company registration laws" as a problem.

International expert Martin Woods said shell companies were "ideal vehicles for money launderers, tax evaders and arms traffickers".

In 2009, a Georgia-registered cargo plane flew from North Korea to Bangkok and was found to have 35 tonnes of arms on it. The plane was chartered by SP Trading Ltd, a company set up by the Taylors.

The company's director was a Burger King cook named Lu Zhang, 29, who was later convicted of 75 breaches of the Companies Act for giving false addresses on registration forms, something she described in court as "one little mistake".

She is also a director of companies linked to Romanian Lorenzo Kiss, who is under arrest over an alleged $14.5m embezzlement.

Ian Taylor told the Sunday Star-Times media reports connected dots that weren't there.

PricewaterhouseCoopers Auckland's forensic services director Alex Tan said using company service providers had become common here.

"The money-laundering and even terrorist financing risks associated with them are high, particularly considering they can be set up over the internet."

Source: Sunday Star Times

Cyprus’ anti-terror infrastructure ‘weak’ says US

The buffer zone separating the island’s divided communities is vulnerable to penetration by terrorist groups, a United States government report said.

“The largely porous, lightly-patrolled “green line” separating the two sides is routinely exploited for trafficking people, narcotics, and other illicit goods, and is vulnerable to penetration by terrorist groups,” the State Department 2009 Country Reports on Terrorism said.

“This de facto division has precluded counterterrorism cooperation between the two communities’ law enforcement authorities, and between Cyprus and Turkey.”

The report said the regular ferry service between Latakia, Syria and Famagusta, in the Turkish-occupied north, has facilitated increased illegal migration into Cyprus and the wider EU.

Cyprus continued to be an ally of the US in its fight against terrorism and the government was responsive to efforts to block and freeze terrorist assets, the State Department.

In January, Cypriot authorities detained the Cypriot-flagged MV Monchegorsk which was chartered by the Islamic Republic of Iran Shipping Lines and contained Iranian-origin weapons components allegedly headed for Hezbollah in Lebanon.

The components were confiscated by Cypriot customs officials after the Government of Cyprus determined the shipment was in violation of United Nations Security Council resolutions.

Cyprus also “continued to allow blanket overflight and landing rights to US military aircraft supporting operations in Iraq and Afghanistan,” the report said.

But the island’s legal framework for investigating and prosecuting terrorist-related activity remains relatively weak, the State Department said.

The two countries cooperated closely on terrorist financing and money laundering issues with Cyprus maintaining a “Prevention and Suppression of Money-Laundering Activities Law” that contained provisions on tracing and confiscating assets.

“In the Turkish Cypriot-administered area, issues of status and recognition inevitably restricted the ability of authorities to cooperate on counterterrorism,” the report said.

Turkish Cypriots cannot sign treaties, UN conventions, or other international agreements, and lack the legal and institutional framework necessary to combat money-laundering and terrorist financing effectively.

“Within these limitations, Turkish Cypriots cooperated in pursuing specific counterterrorism objectives.”

By George Psyllides Published on August 7, 2010

Source: Cyprus Mail

Cyprus: The inside track on money laundering

By Jean Christou

WHO better to teach you about money laundering than a reformed money launderer?

Cypriot banks, lawyers and financial crime officers are to be given the inside scoop on the ‘tricks of the trade’ tomorrow and on Tuesday in Nicosia and Limassol respectively.

Miami-based Kenneth Rijock, 59, a decorated Vietnam vet, is a former lawyer who spent the best part of the eighties engaged in money laundering, but was jailed in 1990 for two years.

When he was released, he put what he learned to better use and now acts as a consultant on financial crime.

This week, he will give presentations to representatives from the Cyprus Financial Intelligence Unit (MOKAS), the International Bankers’ Association, the Law Association, the Cyprus Bar Association and the Association of Cyprus Banks.

“Mr Rijock’s presentation will… feature money laundering tradecraft and insider tips of the trade to assist Money Laundering Reporting officers in their daily activities,” said Marion Willson Corporate Communications Manager of World-Check, an informational organisation for financial institutions.

World-Check says Rijock is believed to be the only former banking lawyer-turned career money launderer who actively consults with law enforcement and the financial community.

While serving a federal prison sentence for racketeering and money laundering, he assisted with the first joint Swiss-American money laundering investigation of bankers and lawyers, which resulted in a major seizure of the proceeds of crime.

Since 1992, Rijock has provided extensive professional anti-money laundering services, including testifying three times, in 1999 and 2000, before committees of the US Congress in favour of anti-money legislation that was later included in the Patriot Act of 2001.

Rijock introduced himself to Congress saying: “My name is Kenneth Rijock, and I am a veteran of over one hundred domestic and international bulk cash smuggling operations, all of them successfully completed. These activities were conducted by me in direct support of narcotics smuggling and trafficking operations that distributed most of their drugs in the New York-New Jersey metropolitan area.”

He said his trips involved sums of currency ranging from several hundred thousand dollars to six million, although he did not keep a personal record for obvious reasons.

Rijock also said the ever-expanding web of bank reporting requirements had caused many criminals to avoid the domestic financial sector entirely, and to rely upon an underground pipeline to export their net cash profits.

“Cash smugglers are only limited by the scope of their imaginations in contriving unusual and complex techniques in practicing their trade,” he said to Congress.

Some of the tactics used hiding cash in new computers being shipped or inside the padding of a hockey shirt.

“My personal methods of preference included the use of business jets carrying millions of dollars of drug cash, small, twin-engine aircraft owned by an affiliated charter service, taking scheduled airline service, meaning that I carried the cash right past the noses of airport security staff, and even small boats and water taxis,” he said.

Since giving up his criminal career, Rijock has also trained undercover agents for the Royal Canadian Mounted Police, acting as a money launderer in an undercover role on behalf of law enforcement in Florida, and on behalf of network television in the tax havens of the Caribbean, and acting as consultant in money laundering tactics for a major Hollywood motion picture studio.

Source: Cyprus Mail

UK Treasury backs warning of "serious threats" to international finance

The UK's Treasury has backed warnings from the Financial Action Task Force (FATF) that the international financial system could face "serious threats" from deficiencies in the anti-money laundering (AML) and counter-terrorist financing (CTF) systems of countries including Iran and Pakistan.

Uzbekistan and Turkmenistan were also flagged up by the FATF as countries that face AML and CTF deficiencies, along with the island of Sao Tome off the coast of west Africa and the northern part of Cyprus.

As a result of the warnings, the Treasury has advised all UK businesses covered by the Money Laundering Regulations 2007 to treat transactions from Iran and Uzbekistan as "situations that by their nature can present a higher risk of money laundering or terrorist financing" and therefore require increased scrutiny.

People operating under the authorisation of the Financial Services Authority should also consider the advice when developing their counter-financial crime systems in order to minimise risk, it added.

The FATF is an inter-governmental body that seeks to develop nationally and internationally adopted anti-money laundering and counter-terrorist financing policies.

Source: Bobsguide

Cyprus: Money laundering law to EU standards

The Turkish Cypriot Parliament approved the ‘Money laundering crime prevention Law’ at Monday’s sitting

The National Unity Party (UBP), who has ended its Parliamentary boycott, also voted for the law. The draft bill was created using the current ‘Money laundering crime prevention Law’ as a basis and included suggestions from the European Union (EU) adjustment works and the negativities in the current practice. The law, which was passed by a majority, defines the procedures and principles to prevent the laundering of income from crime and the financing of terrorism.

EU standards will be ensured
Minister of Finance Ahmet Uzun, who gave the first speech during the debate on the draft bill in the Parliament General Assembly, said that they are aiming to overcome the inadequacies of the current procedure. Uzun stated that last year the EU Financial Action Task Force (FATF) committee was planning to show northern Cyprus as being amongst the countries laundering money but they did not use the fact that there are no financial police operating to EU standards; and following that there was 1½ year’s worth of work to be done by officials and professionals from Turkey. After the draft bill is approved the second step will be to set up a financial police organisation. The Minister said that in this way EU standards will be ensured in the prevention of ‘laundering’ of tainted money.

Committee studies
While answering those claiming that the draft bill is still immature CTP MP and President of Economy, Finance, Budget and Planning Committee Alpay Afsaroglu said that the committee had held 5 meetings already concerning this draft bill in addition to 4-5 study sessions. He stated that one incident concerning a person convicted in Britain for drug smuggling was dealt with in the framework of ‘The law for the prevention laundering of criminal gains’ and gave information regarding the incident. The bill, he said, will prevent crimes. This is also the general understanding around the world: “It seems that in this way it will be easier to fight against this crime.”
They had examined legislation from many countries including Turkey, Afsaroglu said, and they were not expecting serious problems to come up in the draft though if problems did surface they can be fixed. He continued to say that after the September 11 attack in the US the financing of terrorism was also included in the compass of the law and said that “laundering of criminal income” will be determined by the courts and that the new law also defines the “financing of terrorism” which is almost standard in many countries.

Prime Minister’s speech
In his speech, General President of CTP/BG, Prime Minister Ferdi Sabit Soyer congratulated the members of the committee and everyone who contributed to the law for their hard work.
Soyer explained that in time the law for the ‘Prevention of money laundering’ will be accepted in north Cyprus as after September 11 terrorism has been discussed around the world and certain rules were laid down first in the UN and then in the EU. The PM reported that the Greek Cypriot side makes propaganda against northern Cyprus by saying that it is “a paradise for the laundering of criminal money.” The government has now shown that it is serious in its intent to prevent tainted money entering the country, that they attend meetings of international institutions with the Turkish delegation, that they have reached a certain point in the works and that the draft has been prepared in this framework.

Soyer said that they will go to FATF’s meeting in the middle of February with this new law and will show that northern Cyprus has laws conforming to UN and EU standards.

http://www.observercyprus.com/observer/NewsDetails.aspx?id=2618

FATF Statement - 16 October 2008

IRAN
The FATF welcomes Iran’s recent engagement with the international community on anti-money laundering, notes the initial steps taken towards remedying the deficiencies in this area, and urges Iran to address the remaining weaknesses.

The FATF is particularly concerned that the lack of corresponding effort by Iran to address the risk of terrorist financing continues to pose a serious threat to the integrity of the international financial system. Urgent action to address this vulnerability is necessary.

The FATF calls on its members, and urges all jurisdictions, to strengthen preventive measures to protect their financial sectors from this risk.

The FATF is prepared to engage directly in assisting Iran in decisively addressing the weaknesses in its AML/CFT regime.

UZBEKISTAN
The FATF takes note of the action plan prepared by Uzbekistan to address deficiencies in its AML/CFT regime.

The FATF is increasingly concerned that the continuing failure by Uzbekistan to restore its AML/CFT regime poses a serious threat to the integrity of the international financial system. Urgent action to address this vulnerability and to meet international standards is necessary.

The FATF calls on its members, and urges all jurisdictions, to strengthen preventive measures to protect their financial sectors from this risk.

The FATF, along with the Eurasian Group, is prepared to engage directly in assisting Uzbekistan in developing a robust AML/CFT regime.

TURKMENISTAN
The FATF notes Turkmenistan’s efforts towards adopting AML legislation. However, financial institutions should be aware that the lack of an AML/CFT regime in Turkmenistan constitutes a money laundering/terrorist financing vulnerability in the international financial system. Turkmenistan is urged to continue its efforts to establish a comprehensive AML/CFT regime that meets international AML/CFT standards and to work closely with the Eurasian Group and the International Monetary Fund to achieve this.

PAKISTAN AND SAO TOME AND PRINCIPE
The FATF reaffirms its public statement of 28 February 2008 regarding the money laundering and financing of terrorism risks posed by Pakistan and Sao Tome and Principe.

AML/CFT IMPROVEMENTS IN THE NORTHERN PART OF CYPRUS
The FATF welcomes the significant progress made in the northern part of Cyprus and notes that the northern part of Cyprus has substantially addressed the AML/CFT deficiencies that the FATF had identified. FATF encourages the northern part of Cyprus to continue to improve its AML/CFT system. Implementation will be monitored through appropriate mechanisms.

Source: FATF Website

Russia, Cyprus to cooperate in bank supervision

Central Banks of Russia and Cyprus have singed a memorandum of understanding on the basis of recommendations made by the Basel Committee on Banking Supervision concerning consolidation and cooperation in banking supervisory matters, the Bank of Russia indicated in a statement today.

The two banks are planning to exchange information on licencing procedures, combat money laundering and sponsorship of terrorist organizations, supervise the development of the banking sectors in accordance with national laws, among other things.

http://www.rbcnews.com/free/20080115133643.shtml

Recognition issue restricts N. Cyprus's ability to fight terrorism

Turkish Daily News


The Kurdistan Workers' Party (PKK) groups has a presence on both sides of Cyprus, the United States said in its 2007 report on terrorism, daily Cyprus Mail reported Friday. "However its activities generally were limited to fundraising and transit en route to third countries; authorities believed there was little risk the group would conduct operations there,” it said.The report emphasized that issues of status and recognition inevitably restrict the ability of Turkish Cypriot authorities to cooperate on counterterrorism. “Turkish Cypriots cannot sign treaties, U.N. conventions, or other international agreements, for example. Moreover, the Turkish Cypriot-administered area lacked the legal and institutional framework necessary to meet minimum standards on combating money laundering and terrorist financing effectively,” it said. Although the Turkish Cypriot community's financial sector was vulnerable to abuse by criminals and terrorists but that within the limitations, Turkish Cypriots cooperated in pursuing specific counterterrorism objectives, according to the report.

As for the South, the report said legal framework for investigating and prosecuting terrorist-related activity remained relatively weak. It also said the large volume of container traffic moving through Greek Cypriot ports in the government-controlled area made Cyprus “an attractive and convenient venue for terrorist organizations seeking transshipment points for weapons and other items of concern.”

“While Cypriot agencies responsible for non-proliferation assess only a small risk of illicit materials moving through transit cargo, the United States continued to push for increased maritime cooperation,” said the report.

Three years ago, Greek Cyprus was the first EU member state to sign a ship boarding agreement with Washington, which provides the United States with the authority to board sea vessels suspected of carrying illicit shipments of weapons of mass destruction, their delivery systems, or related materials.

In addition, during 2007 the U.S. embassy in Cyprus organized and executed training programs to assist Cyprus to create a stronger export control regime and to pursue more proactive non-proliferation enforcement.

http://www.turkishdailynews.com.tr/article.php?enewsid=104084

Money laundering hotspots could see advisers get burned

The notice regards what the FSA warns is the lack of comprehensive anti-money laundering and combating terrorist financing systems in Uzbekistan, Iran, Pakistan, Turkmenistan, Sao Tome and Principe and the northern part of Cyprus.

The warning was issued by the Financial Action Task Force, an inter-governmental body established by the G7 countries in 1989. The UK is holder of the rotating FATF presidency until this summer.

A year ago the government published a document 'The financial challenge to crime and terrorism'. It set out its approach to using financial tools to deter crime and terrorism; detect it when it happens; and, disrupt those responsible and hold them to account for their actions.

The FATF is recommending that all UK businesses within the financial sector factor this heightened risk into account and consider applying increased scrutiny and due diligence to any transactions associated with Uzbekistan, Iran, Pakistan, Turkmenistan, Sao Tome and Principe and the northern part of Cyprus.

Last autumn the FSA said it had identified areas where the practices of mortgage advisers could lead to an increased risk of fraud and money laundering.

In one of a series of reviews undertaken by the FSA it examined sales of self-cert mortgages. During the course of the review it found many serious failings, including readiness to proceed with arranging a mortgage despite doubting the accuracy of financial information customers were giving them.

Stephen Bland, director of small firms for the FSA, said: "During the reviews we saw a number of good advisers who are meeting the required standards and they are being undermined by the negligence or wilful non-compliance of others. We also saw some who despite having some way to go, were willing to engage with us and be helped to improve their performance, which is why we are providing so much guidance following these reviews. However there are still an unacceptable number of firms unwilling to change and they are damaging the rest of the industry.

"We found some firms willing to offer mortgages they know to be unaffordable and to accept self-cert business even where they had concerns that the financial information provided by the customer was implausible. These practices are completely inconsistent with treating customers fairly - hence the large number of enforcement referrals and other regulatory actions.

"Overall there is a need for a big improvement in senior management's use of management information to help achieve the fair treatment of their customers to achieve the progress we and the industry as a whole want to see."

The main areas identified in the reviews as needing improvement include the assessment of affordability, the collection of customer information to establish clients' needs supervision and assessment of advisers' competence and the use of management information. The reviews also identified areas where firms' practices could lead to an increased risk of fraud and money laundering."

http://ftadviser.com/MortgageAdviser/Mortgages/News/article/20080312/ae5a58c0-e9ed-11dc-a231-0015171400aa/Money-laundering-hotspots-could-see-advisers-get-burned.jsp

US generally pleased with terrorism co-operation from Cyprus

CYPRUS' legal framework for investigating and prosecuting terrorist-related activity remains relatively weak, the US said in its 2007 report on terrorism.

It also said the large volume of container traffic moving through Cypriot ports in the government-controlled area made Cyprus “an attractive and convenient venue for terrorist organisations seeking transshipment points for weapons and other items of concern”.

“While Cypriot agencies responsible for non-proliferation assess only a small risk of illicit materials moving through transit cargo, the United States continued to push for increased maritime co-operation,” said the report.

Three years ago, Cyprus was the first EU member state to sign a ship boarding agreement with Washington, which provides the US with the authority to board sea vessels suspected of carrying illicit shipments of weapons of mass destruction, their delivery systems, or related materials.

In addition, during 2007 the US embassy in Cyprus organised and executed training programmes to assist Cyprus to create a stronger export control regime and to pursue more proactive non-proliferation enforcement.

On terrorist financing, the report said the two countries co-operated closely. It said the Cypriot Anti-Money Laundering Authority (MOKAS) implemented new decisions immediately and informally tracked names listed under US Executive Orders.

“Cyprus was responsive to international efforts to block and freeze terrorist assets, implemented the Financial Action Task Force’s (FATF) recommendations, and conformed to EU counterterrorism directives,” the report said, but added: “Cyprus' legal framework for investigating and prosecuting terrorist-related activity remained relatively weak.”

As far as other support to the US in 2007, Cyprus continued to allow blanket overflight and landing rights to US military aircraft supporting operations in Iraq and Afghanistan, the report said.

It also referred to the presence of the Kurdish PKK group on both sides of the island. The US considers the PKK to be a terrorist organisation.

“The KGK/PKK has a presence in Cyprus, although its activities generally were limited to fundraising and transit en route to third countries; authorities believed there was little risk the group would conduct operations there,” said the report.

“Cyprus maintained that it was fulfilling all responsibilities with respect to the EU designation of the KGK/PKK as a terrorist organisation.”

In reference to the north, the US report said issues of status and recognition inevitably restricted the ability of authorities there to co-operate on counterterrorism.

“Turkish Cypriots cannot sign treaties, UN conventions, or other international agreements, for example. Moreover, the Turkish Cypriot-administered area lacked the legal and institutional framework necessary to meet minimum standards on combating money laundering and terrorist financing effectively,” the report said.

It said the Turkish Cypriot community's financial sector was vulnerable to abuse by criminals and terrorists but that within the limitations, Turkish Cypriots co-operated in pursuing specific counterterrorism objectives.

Copyright © Cyprus Mail 2008

EU to embrace Croatia despite reports of gang crime and corruption

An increase in criminal gang violence and killings has done little to delay Croatia's accession to the European Union, raising fears that another Eastern European country will be admitted before it brings organised crime under control.

The country was told yesterday that it was still on track for membership and was given a timetable to complete the entry process by the end of next year, with another year for ratification by the 27 EU states. The news came despite an annual review into EU hopefuls stating that corruption and organised crime were still widespread in Croatia.

The rush to embrace Croatia is causing alarm that the EU will repeat the mistakes it made over Bulgaria and Romania, both of which were allowed in last year despite the continued influence of organised crime that is now holding up millions of euros in development aid.

It is even possible that key parts of the Lisbon Treaty could be woven into the country's accession agreement if the Irish people again vote “no” to the document in a referendum next year.

Olli Rehn, the Enlargement Commissioner, denied that the EU was offering Croatia a “blank cheque”. “The ball is in Croatia's court,” he said. “The conditional road map for Croatia should be seen as an encouragement for the country to press on with reforms. Success depends on Croatia's ability to meet the conditions for EU accession.”

The section of the report on Croatia's anti-corruption policy, however, made grim reading. “Corruption still remains widespread. The administrative capacity of state bodies for fighting corruption continues to be insufficient,” it said.

“The police need to become more effective in the fight against corruption and organised crime. Implementation of anti-corruption efforts has continued to lack co-ordination and monitoring. While the total number of corruption cases investigated so far has increased, the actual number of prosecutions remains low.”

In general the review was positive towards the Balkan countries; for the first time it suggested that Serbia could open its formal application process next year after the arrest of Radovan Karadzic. It was critical of Turkey, another country with ambitions of joining the EU, and urged it to get back on the road to reform.

Turkey started EU entry talks in 2005 — as did Croatia — but they have stalled over its refusal to normalise relations with Cyprus and the internal turmoil that led to the ruling party being taken to court for alleged unconstitutional behaviour.

Mr Rehn said: “Turkey has faced an annual political or constitutional crisis [over the last few years] which has consumed a lot of energy and caused stagnation in the essential reforms that are needed to make progress in the EU accession negotiation. The road to EU membership goes not through excuses but concrete steps.”

Ali Babacan, Turkey's Foreign Minister, said he thought that some of the EU criticisms were unfair but would issue a detailed reaction next week.

The EU enlargement review said that the other candidates — Albania, the Former Yugoslav Republic of Macedonia, Bosnia, Montenegro and Kosovo — were making limited progress on the reforms that they needed to make.

Source: TimesOnline

Cyprus FIU denies it refused to co-operate in monastery probe

CYPRUS’ Unit for Combating Money Laundering (MOKAS) yesterday denied claims that it has refused to co-operate with its counterpart in Greece in investigating the Vatopedi scandal.

The 1,000-year-old Vatopedi monastery is accused of cheating the Greek government out of millions by underhandedly swapping cheap land for prime real estate.

At the centre of the corruption scandal is Father Ephraim, the abbot of the monastery and brother of Greek Cypriot politician Nicos Koutsou.

A parliamentary inquest is currently underway in Greece, where it has been revealed that the monastery has a substantial stake in two Cyprus-based companies.

It also emerged that the monastery owns a 51 per cent majority stake in a property company which bought many of the properties around Thessaloniki that Vatopedi was given as part of the land exchange with the state.

The scandal has hurt the ratings of the conservative New Democracy government and forced the resignation of three ministers. Meanwhile, opposition party PASOK has ratcheted up the heat with accusations that a cover-up is in progress. The socialists are airing suspicions that the Greek government is seeking to quash the case in its infancy, in order to avoid a full-blown judicial inquiry.

It was along those lines that earlier this week a PASOK deputy told the examining committee that Cyprus’ money-laundering unit had turned down a request for assistance from the corresponding agency in Greece.

MOKAS is the Financial Intelligence Unit (FIU) of Cyprus. It is the national centre for receiving, requesting, analysing and disseminating disclosures of suspicious transactions reports and other relevant information concerning suspected money laundering and terrorist financing.

But MOKAS head Eva Papakyriacou speculated yesterday that the Greek MP was most likely misinformed.

“It’s probably a misunderstanding. We never received a formal request for assistance from Greece,” she said.

Instead, Papakyriacou said, the request had been made verbally, on the phone.

“When criminal proceedings are underway in another country, the relevant evidence is obviously available in that country. So we cannot open an investigation here unless we receive the proper briefing and information.

“No such official briefing took place,” she added.

According to Papakyriacou, in mid-October MOKAS had contacted their Greek counterpart asking if there was any way they could assist with investigating the Cypriot angle.

Commenting on the same, Justice Minister Kypros Chrysostomides told reporters that the Greek agency’s request had been made on Wednesday, not in writing but over the phone.

He said then MOKAS explained that there was a certain procedure to be followed before such help could be given.

However, Chrysostomides did not seem to be crystal-clear on when Cypriot authorities had an obligation to work with foreign agencies.

“If a request is made in the proper way, then certainly MOKAS will respond. But if there is any doubt whatsoever, we will seek the legal opinion of the Attorney-general,” he said.

Source: Cyprus Mail

Money laundering expert urges vigilance on Russian cash

ONE of the world’s leading experts on money laundering yesterday warned that Cyprus was a magnet for Russian mafia and that local bankers needed to be extra vigilant of Russian money.

Kenneth Rijock, a former banker and lawyer turned money launderer, who joined the lawful side of the fence after spending two years in jail, also said Cyprus had not quite shaken off its image as a money laundering haven, but was moving in the right direction.

Rijock was speaking yesterday at a seminar for local bankers, lawyers and anti-money laundering officials, advising them what to look for and warning them to be always vigilant.

He said Cyprus now had a “fairly good” anti money laundering machine and a good regulatory body. “Like all countries everyone’s got a long way to go but they [Cyprus] are going in the right direction,” Rijock told the Cyprus Mail.

He said the concern with Russia was not just limited to Cyprus.

“But Cyprus is a target of opportunity for Russian organised crime and as long as the particular bank has a good anti money laundering-complaint staff they’ll keep it out of there,” he said.

But he said if anyone’s “sloppy or lazy”, the launders would get in.

“Because if you don’t do your homework and you don’t vet the client and his source of funds, you’ll end up taking money that looked good but you find out later when the person is arrested in another country, that it wasn’t so good,” he added.

“Cyprus unfortunately still has a little bit of a reputation in the global financial community as being a refuge for some Russian organised crime money. I think it will take a couple of years for that association to go away but it will go away,” said Rijock, a Russian American.

Earlier, he told bankers that Russian organised crime was a “constant threat”.

“And you live in a place which is safe and convenient to the Russian market. It makes your financial industry very attractive but especially for Russians,” he said.

He said if Cyprus had only local banks the money would be easier to track, but the presence of other European banks gave launderers an outlet to move the money into the global financial system.

“The more stops and hits they can make between A and B, the more easy it is for them to defy investigators,” said Rijock.

“I’m not here to preach doom and gloom about Russian business. A lot of it is legitimate,” he added.

Vigilance was the key to spotting possible money launderers, and bank staff should try not to be distracted by personal or other issues when dealing with clients, he said. Launderers nearly always acted late on Fridays, early on Mondays and holiday weekends, during the World Cup when staff might be distracted, or when junior staff were on the counter.

“When you’re at your worst, money launderers are at their best,” Rijock said. “Their job is to make sure they succeed where you are failing.”

Since giving up his criminal career, Rijock, 59, has also trained undercover agents for the Royal Canadian Mounted Police, acting as a money launderer in an undercover role on behalf of law enforcement in Florida, and on behalf of network television in the tax havens of the Caribbean, and acting as consultant in money laundering tactics for a major Hollywood motion picture studio.

Rijock has written around 4,000 articles and currently works with World-Check, an informational organisation for financial institutions, which is organising the Cyprus seminar.

Source: Cyprus Mail

MONEYVAL AML warning for Azerbaijan

The Cyprus Securities & Exchange Commission has forward a public statement of the Committee of Experts of the Council of Europe on the Evaluation of Anti-Money Laundering and the Financing of Terrorism (MONEYVAL), regarding the deficiencies in the anti-money laundering and combating the financing of terrorism regime in Azerbaijan.

Therefore, Cyprus Investment Firms have been requested to pay special attention by applying enhanced due diligence to transactions with persons from Azerbaijan.

Source: Financial Mirror

UK: HM Treasury warns businesses of serious threats posed to the international financial system

This notice constitutes advice issued by HM Treasury about serious threats posed to the integrity of the international financial system. The Money Laundering Regulations 2007 require firms to put in place policies, procedures or systems in order to prevent money laundering or terrorist financing. Regulated businesses are also required to apply enhanced customer due diligence and enhanced ongoing monitoring on a risk-sensitive basis in certain defined situations and in "any other situation which by its nature can present a higher risk of money laundering or terrorist financing".

On 25th February 2009 the Financial Action Task Force (FATF) issued a statement drawing attention to deficiencies in several jurisdictions of concern. The UK fully supports the work of the FATF on these matters and HM Treasury agrees with the FATF's assessments.

The UK additionally draws attention to, and supports, the public statement of MONEYVAL (a FATF style regional body under the auspices of the Council of Europe) of 12 December 2008 in respect of Azerbaijan.

The substance of the FATF statement is attached as an Annex.

Iran
The FATF announced that it remains concerned by Iran's failure to meaningfully address the deficiencies in its anti-money laundering and combating terrorist financing (AML/CTF) regime, particularly in respect of terrorist financing and suspicious activity reporting.

The FATF has called on its members to consider effective countermeasures to protect their financial sectors from risks emanating from Iran, and to protect against the use of correspondent banking relationships to bypass or evade counter-measures and risk mitigation practices.

All UK businesses regulated under the Money Laundering Regulations 2007, whether financial institutions or other regulated persons should treat transactions associated with Iran as situations that by their nature can present a higher risk of money laundering or terrorist financing, and which therefore require increased scrutiny, enhanced due diligence, and ongoing monitoring, including in the case of correspondent relationships.

All other persons authorised by the Financial Services Authority should also take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

In the light of the call for countermeasures the UK is, in addition, considering what further action is required.

Uzbekistan
The FATF has also drawn attention to the continuing AML/CTF deficiencies in Uzbekistan.

The attention of UK financial institutions and other persons regulated for money-laundering purposes is therefore drawn to the FATF statement in respect of this jurisdiction, and the risk that it continues to present. They should take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

Turkmenistan, Pakistan, and Sao Tome and Principe
The FATF has also drawn attention to the continuing AML/CTF deficiencies in Turkmenistan, Pakistan, and Sao Tome and Principe.

The attention of UK financial institutions regulated for money laundering purposes is therefore drawn to the FATF statements in respect of those jurisdictions, and the risks that they continue to present. They should take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

The northern part of Cyprus
The northern part of Cyprus is no longer highlighted as a jurisdiction of concern, following improvements made to its AML/CTF regime.

Azerbaijan
MONEYVAL drew attention to deficiencies in the AML/CTF regime in Azerbaijan in December 2008.

The attention of UK financial institutions regulated for money laundering purposes is therefore drawn to the MONEYVAL statement in respect of this jurisdiction, and the risks that it continues to present.

This advice is effective immediately.

Source: eGov

EU event for Turkish Cypriots

On the Third Anniversary of the entry into force of the Financial Aid Regulation, the European Commission is organising a Reception together with Turkish Cypriot Counterparts and Beneficiaries. The event will take place at the EU Programme Support Office (38-44 Girne cad.) on 10 March 2009 at 17.30.

It is three years since the European Union Financial Aid Regulation for the Turkish Cypriot community entered into force. The aid programme includes a wide range of projects to help Turkish Cypriots to prepare to comply with EU standards and rules after reunification. In addition, the programme finances projects fostering reconciliation, confidence building measures, and support to civil society.

‘The European Commission was given € 259 million by the EU budgetary authorities in 2006 to implement the aid programme over a six year period. This is an enormous responsibility and a daunting challenge. Thanks to the hard work of my colleagues in Brussels and especially on the island, I believe we can say at this half-way stage that we are meeting that challenge – so far.’

Olli Rehn, Commissioner Responsible for Enlargement

* * *

FACTS AND FIGURES ABOUT THE EU AID PROGRAMME FOR THE TURKISH CYPRIOT COMMUNITY

In three years the European Commission tendered € 160 million (60% of the programme) and contracted € 78 million (30% of the overall programme). To begin with, contracts were primarily for services. Now the main focus is on grants. In the coming months the bulk of contracts (by value) will be for works and supplies.



The Commission recently signed the first works contract worth € 2.6 million on the replacement of asbestos cement water pipelines and four supply contracts for the amount of € 2.2 million on the equipment for energy metering and reactive power compensation.



Some 50 service contracts were signed, the most substantial ones in the environment sector (e.g. study on rehabilitation of Lefke mining area and water/wastewater capacity building). Last month, a service contract was signed for setting up an Information Point in the northern part of Nicosia.



The Commission awarded different types of grants to Turkish Cypriot individuals and organisations. Thirteen contracts (around € 0.5 million) have been signed with primary and secondary schools, funding the study visits for teachers to schools in EU member states, computer and language laboratories, and special education equipment. Also, the Commission awarded 133 scholarships worth € 2 million to students and university teachers providing an opportunity to study for up to one year in another EU member state.



The Commission awarded 26 grant scheme contracts (€ 0.5 million) to Turkish Cypriot farmers for improving dairy hygiene on sheep and goat farms. In the labour market sector, 11 contracts (€ 0.5 million) have been signed with the purpose of training unemployed people and upgrading workers’ skills. Eighteen contracts are in the process of being signed to support civil society and 7 contracts to support people-to-people contacts.



The Commission has also been active in supporting civil society, reconciliation and confidence building measures; funding has been provided for the Committee of Missing Persons (€ 1.5 million; via UNDP), and for the de-mining of the buffer zone (€ 4 million; via UNDP).



Through UNDP, the Commission is also implementing €15 million of support to urban upgrading in the three major towns of Nicosia, Famagusta and Kyrenia and selected villages. The flagship restoration of the Bedestan will be completed in the middle of 2009.



An important component of the programme has been constituted by the TAIEX assistance to the Turkish Cypriot community. 832 experts from 26 EU member states have provided technical support in the areas of environment, rural development, public expenditures management, legal capacity, anti-money laundering, statistics and Green Line trade based on the Programme for the Future Application of the Acquis. Also, the Commission has organised 380 workshops and conferences, involving 2559 Turkish Cypriot participants.

Source: Financial Mirror

Money-laundering ring broken in Russia

A $9 billion money-laundering operation partly run by several Russian bank employees has been broken up by police, the Russian Interior Ministry said.

Four Azerbaijani nationals were detained by police, accused of being involved in the operation laundering about $3 billion a year since 2008, RIA Novosti said Friday.

The currency was suspected to have been generated from illegal business operations, transferred to foreign outlets and smuggled back into Russia, the news agency said.

"It was established that the criminal scheme involved employees of Russian banks and other commercial structures: money was transferred to foreign organizations, cashed, and then smuggled back into Russia," a statement said.

The ministry said fake companies were registered in connection with the scheme in Lithuania, the United Arab Emirates, Azerbaijan and Cyprus.

Source: UPI

An Eastern European island getaway

For many, Cyprus is synonymous with sunny beaches and Mediterranean flair. Yet as a recent lawsuit by the natural gas trader Itera Group shows, the Greek half of the island is still mired in a post-Cold War shadowy world of Eastern Europeans laundering ill-gotten gains five years after it joined the EU.

Documents compiled by a law firm representing the Netherlands Antilles-based Itera - which has a long, but murky, history of trading gas in the former Soviet Union - claim that a notorious Russian businessman Valery Mikhailovich Korotkov has embezzled over $20m from Itera's various holdings, using 19 shell companies where he is the ultimate beneficiary. These shell companies are registered in Cyprus, Belize and other offshore tax havens, and all of them hold bank accounts in Cyprus.

According to Itera's lawyers, who have filed a complaint with the Cypriot Financial Intelligence Unit (Mokas) over the alleged unlawful activities of Korotkov in the country, all the 19 companies have no other assets other than the capital Korotkov has invested in them using funds allegedly stolen from Itera.

According to Russian police sources, Korotkov and his Russian partners are also under investigation by Russian civil and criminal authorities, who are looking into their alleged involvement in the theft of tens of millions of dollars through illegal transfers and unpaid loans, which were then transferred to offshore accounts in Cyprus and elsewhere.

Short arm of the law

Korotkov has a long history with the Russian authorities: in 1995, he was under investigation for allegedly organising fictitious shipments of crude oil to Belarus, Ukraine and Greece while he was head of TransKreditBank. The investigation revealed that in November of 1994 the Russian Ministry of Finance transferred RUB7.12bn (€166m in today's money) to TransKreditBank for use by the Ministry for Internal Affairs. Allegedly, Korotkov used this money to send fictitious deliveries of oil to refineries in Ukraine, Belarus and Greece. The proceeds of these alleged scams were deposited into Korotkov’s offshore bank accounts. Sources in Moscow say the investigation has been mysteriously suppressed, suggesting that Korotkov has powerful friends in high places. Indeed, Korotkov still resides in Moscow, where bne contacted him via telephone. On the Cyprus allegations, Korotkov tells bne that, "Everything is a misunderstanding and I am willing and able to clear up the entire matter with Russian and Cypriot investigators."

Russian law enforcement sources also tell bne that Korotkov has worked for other Russian and Ukrainian companies involved in the energy sector and for individuals in these companies who have close ties to top officials in the Russian government, to the senior management of Gazprom and, allegedly, to the Solntsevo organised crime syndicate.

Some of his associates have allegedly been involved in supplying pipes at grossly over-inflated prices for the Russian phase of the Blue Stream pipeline, a trans-Black Sea gas pipeline that carries natural gas from Russia into Turkey. While Turkish authorities arrested and convicted senior management of the state-owned crude oil and natural gas pipelines and trading company Botas for overcharging on the local construction phase of the project, nothing of the sort happened in Russia and business has gone on as usual.

Cyprus' Financial Intelligence Unit, Mokas, would neither comment on the Korotkov case specifically, nor on money laundering in general. Yet such activities still plague the new EU member state, which hosts a well-developed, complex web of offshore banking institutions offering a plethora of services including assistance in the creation of shell companies.

Although Cyprus ratified in March the Council of Europe's Convention on Money Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism, US and European intelligence and law enforcement officials say Cyprus remains a haven for shadowy enterprises ranging from Islamic terrorists to narco-gangsters, as well as for Russian and other citizens of the former Soviet Union seeking the perfect destination to park, clean and re-export billions in stolen cash. Cyprus has been one of, if not the, largest source of foreign direct investment (FDI) into Ukraine for over a decade. The overwhelming amount of this investment is, in reality, laundered money that was spirited out of the country and then reintroduced to the local economy via construction projects and other ventures.

According to a report published in 2005 by the European Council's anti-money laundering group, or Moneyval, "the money laundering situation has not changed in Cyprus in the last four years." The US government and Brussels have urged the Cypriots to tighten up their supervision of the banking industry, but the lure of easy money appears to be too strong despite the mounting international pressure.

Though the Cypriot government in 1996 established Mokas, headed by the country’s Attorney General, to combat money laundering, success in prosecuting such activities remains largely ineffective. A court in Nicosia in January 2007 freed Russian businessman Vladislav Kartashov who was wanted by the Russian Prosecutor General's Office in connection with the now-bankrupt Yukos oil company. Kartashov, who fled to Cyprus in 2003, allegedly headed three front companies that were accused of helping Yukos evade taxes to the tune of $13bn.

Source: BNE by Jiri Kominek in Prague

Warning over hotel website

Police yesterdayurged the public not to use hotel booking website http://www.bookinhotels.com/ following complaints from customers that they had to pay for their stay twice.

“The police urges the public not to use the above website for hotel bookings, since the behaviour so far of those responsible indicates suspicious transactions,” a police statement said.

Police said Cyprus’ Consumer Centre has received complaints from Cypriot citizens about the website.

The people complained that while making a booking through the website and paying for their stay at hotels in Cyprus and abroad, it ultimately transpired that no bookings were made and the people had to pay for their stay again. When they asked for explanation and refunds, the people responsible for the website did not respond.

Source: Cyprus Mail 2009

Serbian money laundering victim takes crusade against Cyprus to EU

PREDRAG Djordjevic, a Serbian businessman who claims that he lost $26 million in potential income under the Milosevic regime from money laundering in Cyprus, is reportedly planning to take his case to the European Court of Human Rights.

Djordjevic , who is a naturalised Cypriot, has lost two civil cases in Cypriot courts where he tried to prove that the then Cyprus Popular Bank was responsible for his lost money.

According to Alithia, Djordjevic is now trying to recover the amount of $10 billion, which he claims that Serbian dictator Slobodan Milosevic had transferred to Cyprus during a UN embargo on Serbia during the 1990s.

In 2006 Djordjevic had sued the Popular Bank accusing the lending institution of being an accessory to money laundering for its alleged failure to exercise due diligence in opening accounts that originated from the former Yugoslavia, despite the UN embargo.

Having failed to win the legal battle in Cyprus, Djordjevic, who has been living on the island since 1992, has expressed the intention to continue his crusade at the European level.

He has reportedly set up a meeting with the relevant department of the European Commission on 24 November. He also expressed his willingness to take his case to the European court of Human Rights.

In his case against the Popular Bank Djordjevic claimed that the bank had illegally held his money in the account of an offshore company called Antexol. In 1994 Djordjevic had attempted to ship cotton to Yugoslavia with a UN permit on humanitarian grounds. He claimed that a Bulgarian partner had wired money into his company’s account in Belgrade that was supposed to be transferred to Beogradska Banka in Cyprus. The transfer, however, was blocked preventing Djordjevic from closing his cotton deal.

During Djordjevic’s law suit in a Cypriot court, it had emerged that Antexol’s Popular Bank account mysteriously bore the same numbers as his account with Beogradska. Djordjevic claimed that because the two account numbers were identical, the Popular Bank assumed that the money transfer was directed to Antexol.

Antexol was identified by the International War Crimes Tribunal as one of the eight offshore companies that comprised a money-laundering network, while all of them had opened accounts in Cyprus with the Popular Bank and were registered in Cyprus by the Tassos Papadopoulos law firm.

Source: Cyprus Mail