A look at Cyprus banks, now tied to ex-Trump campaign chief

AP News
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Posted: Mar 23, 2017 6:00 PM

NICOSIA, Cyprus (AP) — Federal investigators have been examining financial transactions in Cyprus related to President Donald Trump's former campaign manager, Paul Manafort. Here is some history behind the island nation's once-notorious label as a haven for lax financial oversight:

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TAX HAVEN

Cyprus' reputation as a money laundering haven came to the fore in the 1990s, when rumors were rife that the late former ruler of Yugoslavia, Slobodan Milosevic, used the island's banks to siphon tens of millions out of his imploding country. Talk of luggage bulging with cash at airports was widespread.

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EU RULES

With Cyprus' entry into the European Union in 2004, the island inevitably had to clean up its act by putting in place a host of stringent anti-money laundering regulations to avoid running afoul of the bloc's rules and incurring the wrath of other EU members. Cypriot banks sticking to EU rules took on heightened importance when Cyprus started using the euro currency in 2008.

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THE RUSSIANS ARE COMING

The sun-drenched island's allure as a business-friendly EU member state brought a steady stream of Russian cash to fill Cypriot bank coffers. All that money used primarily for business transactions touched off rumors that the island was fast becoming a major cash laundromat for Russian oligarchs. Cypriot authorities strenuously denied the charge that peaked just as the island was fighting to stay solvent in early 2013, when a banking crisis brought it to the verge of bankruptcy. Government officials insisted the island passed strenuous vetting by EU anti-money laundering bodies. The island's then-Central Bank Chief, Panicos Demetriades, told The Associated Press in an interview at the time that the charges were "greatly exaggerated," attributing them to "political considerations" in other countries.

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BAILOUT TOUGH

Anti-money laundering laws and regulations got even tougher on the orders of Cyprus' creditors as part of a multibillion-euro rescue deal that saw savings in the island's two largest banks being seized to prop up a wobbly banking sector. The second-largest lender was shuttered as part of the deal. With a low corporate tax and solid legal system inherited from its British colonial rulers, Cyprus still sees a high number of companies being registered. But banking officials now say thorough checks are increasingly weeding out companies that appear to be money-laundering fronts.

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OPEN ECONOMY

Cyprus' small, open economy, to which the services sector still contributes a sizable chunk, is vulnerable to money laundering allegations, and Cypriot authorities are keen to fend off such charges. The Cypriot economy and the island's banking system — which is still getting back on its feet — could ill afford "laundromat" charges.