Posts Tagged ‘cyprus’
Fate of Europe’s common currency linked to murder
EU faces a dilemma — prop up Cyprus despite it role as a money-laundering tax haven for Russian robber barons or risk collapse of the euro
In an extraordinary twist in the story of the European Union’s troubled common currency, the fate of the euro is now linked to the murder of a Moscow lawyer and the laundering of billions of dollars in ill-gotten money by Russian oligarchs through their favourite tax haven, the Mediterranean island of Cyprus.
For months, the Communist president member Cyprus, Demetris Christofias, has been appealing for the equivalent of $22.7 billion to bail out his island’s troubled economy, which like 16 other members of the 27-member European Union uses the euro as its currency.
But there is mounting resistance among EU governments to coming to the aid of the Cyprus government because of the island’s role as a tax haven and money laundering route for Russian billionaire oligarchs.
European governments are also outraged by the story that a Russian lawyer, Sergei Magnitsky, was tortured to death in a Russian prison in 2009 after revealing that Russian tax authorities bilked a British investment fund of $230 million and laundered some of the money through Cyprus.
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Europe’s Mounting Reluctance to Bail Out Cyprus
There is growing resistance in Europe to the planned aid program for Cyprus, because it would also benefit illegal Russian money parked in bank accounts in Cyprus. The government in Nicosia is willing to make concessions, but Brussels is demanding more reforms.
It was a long way to go to deliver a short message. German Chancellor Angela Merkel flew almost four hours last Friday to Cyprus, where she spent a few minutes campaigning for the conservative presidential candidate in the February 17 election, Nikos Anastasiades. Speaking in the city of Limassol, Merkel praised Anastasiades, saying that she had known him for a long time and valued his openness to change, and that the country urgently needed “structural reforms.”
After smiling for the cameras, Merkel returned to wintry Berlin.
Her destination in the eastern Mediterranean has a smaller population than the little German state of Saarland, but that hasn’t stopped it becoming one of the biggest trouble spots in global politics at the moment. The question of whether the government in Nicosia should be allowed to bolster its ailing banks with more than €17 billion ($22.7 billion) from Europe’s bailout funds is dividing the euro zone, causing uncertainty in international markets and adding to the woes of the coalition government of Chancellor Angela Merkel, made up of her center-right Christian Democratic Union (CDU), its Bavarian sister party, the Christian Social Union (CSU), and the business-friendly Free Democratic Party (FDP). Now that the center-left Social Democratic Party (SPD) and the Green Party have announced their opposition to the plan, Merkel’s coalition could for the first time fail to muster a parliamentary majority on an important decision relating to the euro crisis.
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Whatever happened to the Magnitsky money?
Efforts to track down hundreds of millions of stolen dollars from one of Russia’s loudest scandals suggest it’s just the tip of the iceberg.
Sergei Magnitsky’s brutal death in a Moscow prison in 2009 has come to symbolize the confluence of corruption, repression and human rights abuse that’s flowered under President Vladimir Putin. His imprisonment and torture, detailed in a documentary film and many journalistic accounts, have brought the Kremlin condemnation from around the world.
But one key part of the scandal remains unsolved: What happened to the $230 million Magnitsky claimed bureaucrats had embezzled?
Now a recent investigation by a media NGO called the Organized Crime and Corruption Reporting Project, together with Barron’s and the independent Russian newspaper Novaya Gazeta, has gathered documentary evidence apparently tracing some of the stolen money to two well-connected businessmen.
A workaholic lawyer hired by the London-based fund Hermitage Capital Management to track down money stolen in its name, Magnitsky was jailed by same police he had accused of taking part in Russia’s largest tax fraud.
He died a year later at age 37, alone and in a pool of his own urine after being beaten by prison guards, allegedly to make him recant his accusations. He had been refused medical aid for the pancreatitis he developed in prison.
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Magnitsky Investigation Expands to Cyprus
The government of Cyprus opened an investigation last month into whether stolen Russian tax money was laundered through its banks. It has done so with reluctance after Magnitsky’s former employer Hermitage Capital Management submitted paperwork in July 2012 showing that $31 million of this stolen money was moved out of Russia using five Cypriot banks: Alpha Bank, Cyprus Popular Bank, FBME Bank, Privatbank International and Komercbanka. It also pointed a finger to Dimitry Klyuev as the alleged ringleader in the corruption case who owns a Cyprus-based firm called Fungamico, and who was in Cyprus with his associates at the time the money went missing. Cyprus government officials delayed starting an investigation telling Hermitage Capital representatives that they first must consult with Russian officials to determine if money was really stolen before they could start an investigation.
The timing of Cyprus’ Magnitsky probe is terrible for a country that relies heavily on its Russian clients and their large amounts of money deposited in its banks, but that also is waiting on a €17 billion ($22.4 billion) bailout from the European Union (EU) and the International Monetary Fund. If the Cypriot government finds its own evidence that its banks laundered stolen Russian currency, there could be a push from the the rest of the EU for further investigations of all of its Russian banking clients. Der Spiegel reports through a German intelligence (BND) source that Cyprus banks could hold $26 billion in its Russian client accounts. Approximately 50,000 Russians live in Cyprus.
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Cyprus launches probe into Russian mafia money
Cyprus has opened an investigation into evidence that stolen Russian tax money linked to the murder of Sergei Magnitsky was laundered through its banks.
Mokas, its anti-money-laundering unit, in an email to EUobserver on Thursday (13 December), said: “At this point … in Cyprus there is an open investigation on this matter.” It noted: “Mokas is conducting the investigation, which functions within the office of the attorney general.”
It added that the probe already began some time ago.
But it went ahead with some reluctance.
Magnitsky, a 37-year-old Russian accountant, was killed in jail in 2009 after he exposed a huge tax embezzlement by a criminal gang – “the Klyuev group” – involving high ranking officials in the Russian interior ministry and its internal intelligence service, the FSB.
Lawyers for his former employer, the UK-based Hermitage Capital investment fund, submitted evidence to Cyprus’ attorney general in July.
Its papers, including copies of financial transfers – seen by this website – show that $31 million of the tax money was moved out of Russia using five Cypriot banks: Alpha Bank, Cyprus Popular Bank, FBME Bank, Privatbank International and Komercbanka.
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Shuvalov Says Magnitsky Response Won’t Affect Trade
First Deputy Prime Minister Igor Shuvalov assured investors in New York on Tuesday that Russia’s response to the Magnitsky bill would not affect trade.
Although Russia is preparing measures in response to the U.S. list of suspected human rights abusers in Russia, these measures only concern political relations between the two countries, Shuvalov told a group of international investors during a visit to the New York Stock Exchange, Interfax reported.
“I hope that this will mean absolutely nothing for businessmen,” he said. “Maybe this will affect officials, but it won’t affect businesspeople engaged in mutual trade.”
The U.S. Senate is considering the Magnitsky bill after it was passed by the House of Representatives in November, and President Barack Obama is expected to sign it into law by the end of the year.
The bill would implement a visa ban and asset freeze on a list of Russians involved in human rights violations such as the prison death of Hermitage Capital lawyer and whistle-blower Sergei Magnitsky, while also establishing permanent normal trade relations with Russia.
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Cyprus bail-out doubts over Russian money laundering
Politicians across Europe are urging their governments to demand a crackdown on alleged Russian money-laundering in Cyprus as a condition of any bail-out for the troubled eurozone member.
Cyprus is close to securing a €17bn (£14bn) rescue package but MPs in the UK, Finland and the Netherlands want tough questions to be asked of the country’s banks before a deal is signed and any funds are released. German politicians are believed to be looking at making similar demands.
The moves follow revelations that the Cypriot authorities refused to investigate claims that criminals linked to a $230m (£145m) alleged Russian tax fraud laundered $30m through the country’s banks. The case has been linked to a number of suspicious deaths, including that of Alexander Perepelichny, the 44-year-old whistleblower living in Surrey who died while out jogging last month.
The supposed criminal conspiracy involving police and tax officials was uncovered by Sergei Magnitsky, a lawyer working for UK-based hedge fund Hermitage Capital Management, who died in 2009 after a year in pre-trial detention on unproven charges of tax evasion. The US has since banned entry to 60 Russians linked to the fraud and death.
In July, Hermitage wrote to Cyprus’s attorney-general, Petros Clerides with evidence that banks had received stolen money. Mr Clerides said he could not investigate without a request from the Russian authorities, even though similar allegations are being looked at by Switzerland, Latvia, Lithuania, Finland and Estonia.
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