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anti-money-laundering, Central Bank, Cyprus, Cyprus, EU, eurozone, finance ministers, IMF, Joroen Dijsselbloem, summit

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Finance minister Vassos Shiarly and ECB head Mario Draghi

A SUMMIT of eurozone finance ministers decided yesterday that a private-sector auditor would probe Cyprus’ compliance with anti-money-laundering regulations but the island drew no clear support from  its partners on its refusal to impose losses on bank depositors as part of a bailout programme.

Speaking at a press briefing in Brussels last night, Eurogroup president Jeroen Dijsselbloem said the private firm would investigate both the legal framework in place as well as enforcement.

Cypriot authorities and the troika - a team of EU, IMF and European Central Bank experts - would jointly select the auditor and determine its terms of reference.

EU officials want Cyprus to pick the company as quickly as possible, inside of a week so that a report is ready in time for a bailout deal, mooted for March.

 Asked by reporters if he could exclude the idea that depositors in Cyprus would lose money under the bailout, Dijsselbloem avoided a direct answer. "Tonight where Cyprus is concerned we zoomed in on the issue of anti-money laundering and didn't go into any possible, or not possible, elements of a programme so I can't go into these elements with you,” he said.

"We agreed that an independent assessment conducted by a private sector firm is required and we requested the troika and Cyprus to agree on the terms of reference for such an assessment within a week,” he added.

There was no immediate reaction from the government on either issue after the meeting.  But beforehand, Finance Minister Vassos Shiarly said the issue of imposing losses on depositors was not acceptable under any circumstances.

He did, prior to the meeting, reiterate that Cyprus welcomed an independent audit into its anti-money-laundering system, but insisted the probe be assigned to international institutions.

“Our position is very clear: we have nothing to hide, we shall accept checks, just as we have agreed to checks from the International Monetary Fund, Moneyval and the Financial Action Task Force (FATF), international organisations that are ordained to carry out such checks,” Shiarly said. 

He added: “We are open to these international organisations at any time, even today, whenever they want.” By allowing Nicosia a say in picking the auditors, it appears a face-saving solution was achieved for all concerned at yesterday’s Eurogroup meeting.

Cyprus, which recommended the audit, was averse to a subsequent counter-proposal made by eurozone officials that the probe be assigned to a private sector auditor.

Such a move could raise questions about bank data confidentiality and scare foreign depositors away, the government said.

Some EU officials acknowledge that Nicosia has nothing to conceal, but say an audit by a private firm would help clear the air and thus overcome reservations among bloc members to endorsing financial assistance for the island.

Last week senior eurozone finance ministry officials told Cyprus it should “rapidly” order an independent audit into its anti-money laundering system.

Should the audit show that the country needs to do more in “two or three areas” to improve its practices in fighting money laundering through its financial system, the shortcomings could be introduced into the memorandum of understanding for Cyprus's bailout,  an EU official was quoted as saying. The audit could be quickly conducted by a private sector company and clear the air on those money-laundering allegations, the same official had said.

Eurozone officials have reportedly cited two reasons for a private firm taking the job: first, the audit could be speedily completed in time for a bailout deal, mooted for March; and second, organisations such as Moneyval focus more on the legal framework in place and less on the actual enforcement of measures to combat money laundering.

Cyprus has been in talks with the EU and the IMF for seven months to secure a much-needed bailout. Concerns about the country's links to Russian money and its reputation as a money-laundering and tax haven have hampered the talks and made the bailout deal politically controversial, especially in Germany.

Nicosia vehemently denies the money laundering allegations, citing recent assessments by the IMF and Moneyval which gave the island high scores.

Moneyval is a Council of Europe committee of experts which assesses its members’ compliance with all relevant international standards in the legal, financial and law enforcement sectors through a peer review process of mutual evaluations.

Moneyval’s aim is to ensure that its member states have in place effective systems to counter money laundering and terrorist financing and comply with the relevant international standards in these fields. 

Such standards are those contained in the recommendations of the FATF, including the Special Recommendations on Terrorist Financing, the 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, and the United Nations Convention against Transnational Organised Crime.