The breakaway Turkish-held northern part of Cyprus which is administered by Turkish Cypriots lacks the legal and institutional framework necessary to prevent and combat money laundering, said the US State Department’s recently-released report on anti-money laundering (AML).
“Turkish Cypriot ‘authorities’ have taken steps to address some major deficiencies, although “laws” are not sufficiently enforced to effectively prevent money laundering. The casino sector and the offshore banking sector remain of concern,” the report also said.
“Because of international sanctions and the lack of recognition of the “TRNC,” the banking sector is largely isolated from international financial institutions. Banks operating in the area do not have access to the SWIFT system and have almost no correspondent banking relationships outside of Turkey,” it added.
The report also noted that almost no international central bank will conduct business with the “TRNC central bank.”
And that this isolation somewhat mitigates the money laundering risk, as moving illicit funds out of the area administered by Turkish Cypriots is difficult.
As of November 2019, there are 34 casinos in the breakaway area and local experts agree the ongoing shortage of law enforcement resources and expertise leaves the casino and gaming/entertainment sector poorly regulated and vulnerable to money laundering, according to the report.
The unregulated moneylenders and currency exchange houses are also of concern, it said.
“The offshore banking sector also poses a money laundering risk. As of November 2019, it consists of seven offshore banks regulated by the “central bank” and 475 international financial services companies,” it added.
The report also noted that Turkish Cypriots only permit banks licensed by OECD-member countries to operate an offshore branch locally.
There is one free port and zone in Famagusta, regulated by the “Free-Ports and Free Zones Law” in the breakaway north.
Operations and activities permitted include industry, manufacturing, and production; storage and export of goods; assembly and repair of goods; building, repair, and assembly of ships; and banking and insurance services.
There have been reports of smuggling of people, illegal drugs, tobacco, alcohol, and foodstuffs across the UN buffer zone.
Additionally, intellectual property rights violations are common; a legislative framework is lacking, and pirated materials, such as sunglasses, clothing, shoes, and DVDs/CDs are freely available for sale.
In conclusion, the report noted that while progress has been made in recent years with the passage of “laws” better regulating the onshore and offshore banking sectors and casinos, these “statutes” are not sufficiently enforced.
By Theano Theiopoulou