Cyprus: A Mediterranean Bank

Just a few short months ago in April 2017, Rep. Mike Quigley (D-Ill.) said that he visited Cyprus as part of the House Intelligence Committee’s investigation on Russian interference in the 2016 election. This comes after reports in March about Paul Manafort’s bank accounts in Cyprus that were being investigated. Quigley stated that the Mediterranean country has a reputation for being a “laundromat” for Russians trying to avoid sanctions.

This isn’t the first time Cyprus has been brought up in the context of Russian finances.

In 2013, Tim Worstall wrote an opinion piece for Forbes on Russian money in Cyprus. The question he was trying to answer was “…why would someone earn money in Russia, move it to Cyprus, in order to reinvest it in Russia again?” His perspective on this was slightly different from other writers on the subject, where he blamed neither Russian taxes nor money laundering for the move to Cyprus, but rather an underhanded, political climate in Russia that is hostile to corporate ownership.

Worstall supports his contention by suggesting that taxes in Russia aren’t outlandish enough to warrant the theory that Russians park money in Cyprus to evade high taxes in Russia itself. Rather, it has to do with rule of law and property rights. He cites an occasion in the early 90s when, after opening a small company and bank account in Russia, a man came to his door with his bank information in hand and demanded payment for a ‘krisha tax’. Worstall soon discovered that it was common practice for new business accounts to be leaked to people who would charge additional sums for krisha. This, coupled with the cases of Sergei Magnitinsky and Mikhail Khodorkovsky suggest that corporate ownership in Russia may not be entirely secure.

Furthermore, an additional benefit of taking money out of Russia and reinvesting it as foreign capital means that you can choose where arbitration and legal cases are to take place, and very few people choose anywhere in the Russian Federation for this. Overall, Worstall’s argument is about the greater security in keeping money in places like Cyprus over Russia itself.

And there is a lot of money of Russian origin in Cyprus, indeed. A BBC article says the financial relationship between Cyprus and Russia dates back to the early 1990s after the breakup of the USSR, when individuals coming into new wealth were looking for new places to put their money. In 2013, before the bailout, Russian money accounted for an estimated one-third to one-half of all bank deposits in Cyprus.

This economic connection was tested when part of the deal for the bailout meant that Cyprus had to agree to a ‘bail-in’ for it, where the Popular Bank of Cyprus had to impose a levy on uninsured deposits over 100,000 Euros. This was an act that would primarily affect all that Russian money in Cypriot banks and the wealthy people who put it there. That said, although the bail-in definitely was a controversial shake-up between the two countries, economic relations seem to have stabilized as Limassol, Cyprus in 2017 is still very much a ‘Moscow in the Mediterranean.’

Lawful reasons for high Russian investment into Cypriot banks include a 10% corporate tax rate as well as a tax treaty between Russia and Cyprus that says firms will not be taxed in both places. However, others suggest darker reasons; back in that BBC article, the chief economist at Renaissance Capital said that wealthy Russians probably park their money in Cyprus to avoid close government attention, and the director of the Moscow office at Tax Consulting UK pointed toward the idea that Cypriot banks have precious few questions about the origins of money they receive.

Cyprus refuted these claims, citing their Anti-Money Laundering legislations, which encompass predicate offenses regardless of jurisdiction, so when the time comes for the crackdown, they don’t discriminate by where the offense took place. The problem with Cypriot policy, however, arises from defining what is and isn’t a predicate offense for money laundering.

AML policy has evolved over time, from when it was introduced in the 1980s to combat the proceeds of drug trafficking being introduced into the legitimate economy to the post 9/11 world, where AML policy expanded to include terrorism financing, and not only criminal origin of funds – but also their use for illegal purposes. In 2015, the EU gave a directive to include serious tax offenses under this umbrella. Although that 2015 directive has yet to make it into Cyprus’ domestic legislation, it might be possible to be charged with a money-laundering offense in Cyprus as a result of tax evasion due to the combined effect of various provisions in the country’s law. Criminal offenses related to taxation include fraudulently submitting incorrect information on tax returns and omission of information or deliberate delay in the payment of assessed taxes. These are offenses that can result in fines or imprisonment. So, while Cyprus’ AML law does not specifically say that tax crimes are predicate offenses for money laundering, it’s arguable that tax crimes could become a predicate offense as they are included under the “all criminal offenses” part of the AML law.

Now, some might look at this information and say that because Cyprus doesn’t specifically define tax evasion in its anti-money laundering legislation, it’s creating a loophole for maligned people to get through. Others might see the information and decide that the policy is there in all but explicit statement. What we do know, however, is that regardless of what loopholes exist in Cypriot taxation, apparently there are enough of them that a debate exists over what qualifies as lawful tax avoidance and what is illegal tax evasion. An in-cyprus article suggests that the line between the two is so blurred that it “…creates problems for lawyers, accountants and tax professionals in identifying and reporting suspicious transactions…” Taken in regard to its financial reputation, it remains to be seen how Cyprus will handle the new EU directive.

This article was written by Kristina Weber, Content Supervisor of Centry Ltd.

Centry’s Worldwide Guide

Working for Centry takes you across the globe. Check out these updates from our professionals abroad!

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Yemen

The cholera outbreak in Yemen marked a grim milestone on July 10th, as the International Committee of the Red Cross announced there are now more than 300,000 suspected cases of the disease in the country.

Afghanistan

Given wide-ranging authority by the Trump-Administrated White House to determine its own course of action, the Pentagon is now considering troop levels in Afghanistan. But as the U.S. administration decides on a military strategy, the last 16 years have shown that Washington cannot rely solely on its troops to secure the Afghan state or stop groups like the Taliban from using the country as a base for attacks against the West.

Venezuela

At least 123 members of Venezuela’s armed forces have been detained since anti-government unrest began in April on charges ranging from treason and rebellion to theft and desertion, according to military documents seen by Reuters.

The list of detainees, which includes officers as well as servicemen from the lower ranks of the army, navy, air force and National Guard, provided the clearest picture to date of dissatisfaction and dissent within Venezuela’s roughly 150,000-strong military.

Turkey

Turkey’s main opposition leader told a huge protest rally on July 9th that the country was living under dictatorship and pledged to keep challenging the crackdown launched by the authorities after last year’s failed military coup.

India

India has expanded its anti-terror and de-radicalization partnership with the Philippines, which is battling a three-week siege by Islamic State-affiliated militants in the city of Marawi, about 800 km south of capital Manila.   As part of the move, the BJP-led government has rushed a financial assistance of $500,000 for rehabilitation of Marawi citizens, who are mainly Muslims. India is currently conducting cyber security training with a special emphasis on de-radicalization for the Philippine security personnel.

Algeria

Algeria National People’s Army is ranked 24th among the most powerful armies in the world, in the Global Firepower magazine, which specializes in defense affairs. It’s ranked 3rd among Arab armies, just after the Saudi and Egyptian armies. Here the Algerian National People’s Army is photographed with a confiscated weapons cache.

Iraq

While retaking the last blocks of Mosul, the Iraqi military happened upon piles of discarded hair. Many ISIS fighters had shaved their beards and disappeared back into the community.

Whilst the battle for Mosul is over, Iraq’s future is far from clear.

For more information like this, follow @CentryLtd on Twitter. All photos were taken by Centry employees.

Centry Ltd. Appointed TAPA Service Center in Thailand!

CENTRY PRESS RELEASE

We are happy to announce that Centry has been appointed the Thailand TAPA Service Center! This prestigious appointment allows us to serve TAPA members and customers operating in the Thailand area in securing their supply chains.

Attached to the link above is our press release with statements from our Managing Director Mr. Petri Kelo, and the Chairman of TAPA APAC, Tony Lugg.

The Transported Asset Protection Association (TAPA) is a unique forum that unites global manufacturers, logistics providers, freight carriers, law enforcement agencies and other stateholders with the common goal of reducing losses in international supply chains.

TAPA is one of the main forces behind securing global supply chains. One of the ways it does this is via their gloally recognized security requirements, which are viewed as an industry standard for warehouses, transportation units, and secure parking.

As a Service Center, we are now the main provider for anything TAPA related including training or other information services in Thailand. Centry is now one of the main private authorities on supply chain security in Thailand.

For any questions or comments, feel free to email us at info@centry.global!

Centry Insights: Sahel Insurgencies & Yemen Crisis

Gain perspective on political, military, and social developments in regions abroad with information from Centry professionals. Read on for some of our insights around the globe.

SAHEL REGION, AFRICA

One of the newest jihadi groups in the Sahel is the Group to Support Islam and Muslims (GSIM). It was formed on March 2nd, 2017 as a new alliance between al-Qaeda in the Islamic Maghreb, Ansar Dine, Macina Liberation Front, and al-Qaeda in West Africa. Although these groups have been in cooperation for a long time, it is suspected that the merger is the result of an attempt to strengthen the presence of al-Qaeda in the Sahel region, particularly against ISIS affiliated groups in the area.

However, local level agreements between al-Qaeda and IS are not out of the question – on April 23rd, al-Qaeda’s leader Ayman al-Zawahiri made a statement that caused speculation about whether the terrorist organization may be open for ‘peace talks’ with ISIS: “…unite and close your ranks with your Muslim brothers and mujahideen, not just in Syria but the entire world, for it is a single Crusader campaign being waged against Muslims the world over…” A statement like this leaves the possibility for a united front open, and there have been warnings of a new extensive terrorist network being formed.

The main point to be aware of with this merger is that it has the potential to attract a broader group of members from the different populations of the region. GSIM, with its new breadth, may draw support from Tuareg to Fulani, with wider support from local indigenous groups.

Overall, the number of attacks in the Sahel region fluctuated between 2014 – 2016. 2014 experienced 289 attacks, while in 2015 it decreased to 206, and in 2016 rose again to 235.

Historically, GSIM affiliated groups operated in the northern parts of Mali, but recently they have shifted focus to the south. Based on the locations of the first attacks formally conducted by GSIM, their interest is in the central parts of Mali, Burkina Faso, and Niger. These targets may yet expand to other countries, as there were reports of high-ranking GSIM members recruiting in other Sahel countries.

For the most part, the targets of GSIM attacks have been different military forces, including those of the UN. It is possible that the international effort and subsequent military presence to stabilize the Sahel may be the primary target of future GSIM operations. In situations where Westerners have been targeted, these attacks have been more coordinated and uniformly conducted with multiple casualties. These attacks are always ruthless, with the goal of garnering as much international attention as possible.

YEMEN

The Republic of Yemen has experienced political conflict for most of its existence. The country is heavily organized around the family with allegiance towards stronger families that provide their support to factions they deem suitable.

Religious matters also heavily influence the country’s politics, as both Shia and Sunni Muslims have a strong presence in the country. This has caused it to be an area where the conflicts between these two major sides of the Muslim world collide.

The country has been in a more defined state of political crisis since 2011, and civil war since March 2015. There are multiple parties with complicated ties with each other.

For the ease of the reader, the main factions that play the largest role in the political conflict are as follows:

  • HADI ­– Internationally recognized Abdrabbuh Mansur Hadi led government
  • HOUTHI – The coalition of former president Saleh and the Houthi rebels
  • Transitional Political Council for Southern Yemen – Announced on May 11th, 2017 and led by the former governor of Aden, Aydarus al Zubaidi, who was ousted by Hadi.
  • Al Qaeda in the Arabian Peninsula (AQAP) – Gaining support in small communes and establishing a greater network of operations

The balance of power between these factions is volatile, with support and balance shifting between them. International support for the Hadi faction has diverted to the Houthi-Saleh group, and also to the TPCSY.

The political conflict started with street protests against poverty, unemployment, corruption, and protest against Former President Saleh’s plan to change the constitution to eliminate the presidential term limit. President Saleh ended up stepping down and the presidency was transferred to then-Vice President Abd Rabbuh Mansur Hadi, who was formally elected president on February 21st, 2012 in a one-man election. The transitional process was disrupted by conflicts between the Houthis (now backing ousted President Saleh) and the Al-Qaeda insurgency. In September 2014, the Houthis took over Sana’a, and later declared themselves in control of the government. In November 2016, Saleh and the Houthi movement officially declared a government in Sana’a that represents Northern and Central Yemen.

The conflict escalated again in March 2015, when the Saudi-led coalition forces intervened on the civil war and backed up the internationally recognized Hadi government in an attempt to stabilize the situation. The US also officially declared support for the Hadi government. These efforts have not been successful and in reality, have now further divided the country.

According to Centry sources from the ground, the Emirates armed forces at least partially support the Government of Southern Yemen faction. Saudi Arabia and USA have not yet stated any actions against this or to support it. However, al-Qaeda has conducted attacks in the regions of ‘Southern Yemen’ after a long time of silence, and al-Qaeda is known to fight alongside the Saudi Arabian led forces against Houthi coalition.

For more information like this, follow @CentryLtd on Twitter.

Centry joins the UN Global Compact!

We are happy to announce that as of June 30th, 2017, Centry Ltd. is a registered participant of the United Nations Global Compact! In honor of this commitment to the world’s largest corporate sustainability initiative, our blog update today will dive into what it means to be part of the UNGC.

With over 12,000 participants across 170 countries, the UNGC is a vast initiative to utilize business as a force for good, by aligning their strategies and operations with ethical principles on issues such as human rights, labour, environment and anti-corruption. By operating according to these principles, we can ensure positive business impact on society as a helpful enabler, commodity, or service provider.

These Ten Principles of the UNGC are listed on their website as follows:

“Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and

Principle 2: make sure that they are not complicit in human rights abuses.

Labour

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition of child labour; and

Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility; and

Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.”

The ideal of the UNGC goes further than that yet, with a commitment to advancing sustainable development by 2030. Over the next thirteen years, with sustainable development goals in mind, countries and companies in pursuit of these goals will direct efforts to end poverty, fight inequality, and mitigate climate change, while making sure that no one is left behind.

In our letter written by Centry’s Chairman, Risto Haataja, to the Secretary-General H.E. António Guterres of the United Nations, we promised our commitment to implement the UN Global Compact and its principles into the strategy, culture, and day-to-day operations of our company, as well as engaging in collaborative projects that advance the broader development goals of the United Nations, particularly the Sustainable Development Goals.

We look forward to a bright future with the UNGC and our joint endeavors!

For any questions or comments, please feel free to email us at info@centry.global.