12° Nicosia,
22 June, 2024

It's surprising how little was frozen

Transparency International expresses concern about sanctions evasion within the EU due to lack of coordination and thorough control

George Kakouris

George Kakouris

Upon his arrival at Larnaca airport last Wednesday, Justice Commissioner Didier Raeder brought with him two pressing questions. Firstly, how is it that a country like Cyprus, which has been heavily infiltrated by Russian capital for several years, has only managed to freeze a mere 104 million euros worth of assets belonging to oligarchs under EU sanctions? And secondly, why do Cypriot authorities continue to refuse to withdraw their "golden passport" legislation? Despite the fact that his official visit was primarily intended for regular consultation with member states on the Commission's annual Rule of Law Report, the Belgian commissioner did not shy away from raising these issues publicly in statements and interviews. In fact, during an interview with the Cypriot news agency, Mr. Raeder drew a connection between the legacy of the Cyprus Investment Programme and the frozen assets of oligarchs in Cyprus.

The question of why more assets have not been frozen in Cyprus has also been raised by international organizations, which have criticized member states and the Commission for failing to thoroughly investigate the oligarchs' links to the EU. "Given what we know about the investments that have been made, the amounts frozen in Cyprus appear to be very small," commented Myra Martini, an analyst on issues related to the flow of dirty money at Transparency International, speaking to K. "We must take into account that many known oligarchs subject to sanctions have links to Cyprus," she added.

Cypriot authorities have frequently pushed back against criticism that they have only frozen €1.5 billion in assets, as former finance minister Konstantinos Petrides stated in January. In fact, the director general of the ministry reiterated on Friday in a statement to Politis that the €96 billion figure mentioned in public statements referred to transactions made through Cyprus, not actual investments.

However, according to the latest official information obtained by "K," the Commission was informed that the amount of frozen assets in Cyprus only amounted to €104 million, not €1.5 billion. Given the existence of this intricate web of investments and transactions, as well as the ambiguity surrounding the number of assets that have been frozen, it comes as no surprise that Mr. Raeder sought to obtain precise details during his visit regarding the individuals and entities in Cyprus that were added to the US and UK sanctions list for allegedly assisting oligarchs in evading international sanctions.

Pan-European ambiguity

In an interview with K, Myra Martini revealed that earlier this year, Transparency International requested data on the total value of assets frozen under sanctions for the Russian invasion from the EU and member states, using freedom of information procedures. Martini pointed out that "you would be shocked to see that many member states do not even have this information." She explained that the implementation of sanctions is so decentralized that most member states do not collect the necessary data. Currently, Transparency International is still waiting for a response from several member states, including the Commission.

Martini emphasized the need for better collection and analysis of data, especially concerning the amounts that member states report to the Commission. Last November, the Commission urged capitals to update this data, but it does not seem to be progressing very quickly.

Double reports...

Martini also informed K that in some cases, large increases in the value of frozen assets reported by member states after pressure from the Commission, such as the case of Hungary, which initially reported €3,000 and later increased it to €870 million, may be due to double reporting. For instance, she explained that if a service provider in Cyprus manages the assets of a client who also has assets in France, and if France freezes those assets in its territory and informs Cyprus, it is possible that the country where the provider is located may re-report the frozen assets as assets frozen in that country.

Insufficient investigation

However, Martini continued to explain that this does not necessarily mean that all assets have been declared. In such cases, assets and connections of individuals added to the sanction lists are not thoroughly investigated beyond those that can be easily identified. He noted that very few countries other than the US investigate to identify these connections and that the amounts frozen in Cyprus appear to be very small given what is known about the investments. Martini also pointed out that the data provided by Cypriot authorities in the recent "60 Minutes" report lacked consistency.

When asked about the position that an investor's Russian citizenship does not necessarily imply money laundering or sanctions for the invasion of Ukraine, Martini acknowledged that this was true but emphasized that connections exist. She stated that many known oligarchs subject to sanctions have links with Cyprus and that, given the number of applications for "golden passports" and cases of laundering, larger amounts of frozen assets should be expected than what the Commission is reporting.

Martini countered the Cypriot government's position that Russian deposits have decreased by stating that the deposits of Russian interests remain high while the percentage of frozen assets is low. She stressed the need for more work to ensure that nothing is hidden and that authorities proceed with asset tracing.

Oversight needed

Since March 2022, Transparency International has been calling for an open letter and signature collection from banks and governments worldwide to crack down on the involvement of accomplices and intermediaries in money laundering from Russia. Martini acknowledged this effort and commended the recent addition of such agents to US and UK sanctions. However, he also mentioned recent revelations by the Guardian and the OCCRP regarding companies in Cyprus providing these services to individuals on sanction lists. This raises questions about whether the appropriate checks are being carried out, which national authorities should answer. Martini emphasized that the authorities should oversee the situation and enforcement cannot be left solely to the private sector. Implementing sanctions should be a part of the state's responsibility.

The responsibilities of the European Union

When asked what measures Brussels can take against individuals and organizations within member states who circumvent sanctions, Martini pointed out that there can be a weak link within the EU. He suggested that defining the evasion of sanctions as an EU-wide crime, as proposed by the Commission, would be a positive development. However, he also noted that Brussels already has more tools to deal with money laundering cases. For example, it can check whether member states are complying with their obligations, and the European Banking Authority can scrutinize whether any weaknesses in member states could make them vulnerable to money laundering.

Martini mentioned that consultations between the institutions are scheduled to begin next week to develop a proposal, which includes the creation of a common anti-money laundering authority at the EU level. However, it remains to be seen whether such an authority would also have jurisdiction over the enforcement of sanctions.

[This article was first published in Kathimerini's printed Sunday edition and translated from its Greek original]


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