Author: Claire Vanner
5 Mar 2013
Cyprus has reluctantly agreed to an independent review of what steps they are taking to battle money-laundering in order to secure the bailout. Concerns had been raised by Germany and France that Cyprus’s banking system has become a channel for money-laundering, particularly from Russia: the Mediterranean island is Russia’s largest source of foreign investment.
Eva Roussidou-Papakyriacou, head of Cyprus’s anti-money-laundering agency, told the Wall Street Journal that Cyprus was doing a lot more than other countries to combat illegal financial activity. “We’ve done everything,” she said, referring to the anti-money-laundering laws passed in December. Among them are laws that submit corporate-service providers to closer regulation and require shell companies to maintain ownership records.
This should stand Cyprus in good stead as investigations take place as they seek a bailout of up to €17bn – a total equal to Cyprus’s annual economic output.
Newly elected Cypriot President Nicos Anastasiades was sworn in last Friday and vows to make the bailout his top priority. The country originally requested a bailout last June, but an agreement could not be reached by the last communist government lead by Demetris Christofias, who’s four years of deficits from free-spending have eroded public finances. This, coupled with an ill-advised investment in Greece as its debt crisis loomed has lead the Cypriot economy to the edge of ruin.
“With the new government now in place in Cyprus, the Eurogroup is confident that a swift conclusion of the negotiations towards a Memorandum of Understanding can be reached,” said the eurozone finance ministers, Eurogroup, in a statement yesterday. “For its part, the Eurogroup reiterates its readiness to assist Cyprus in its adjustment effort, including of its banking sector, in order to bring the economy to a sustainable growth path with sound public finances and to safeguard financial stability.”
In order to ensure Cyprus can repay the bailout, ministers are recommending privitisation of state assets. State owned telecoms company Cyta could raise up to €1.5bn. Cyprus also needs to streamline the distended banking sector, which has assets eight times larger than the island’s €17bn economy.