Article by Tim Rich, photo by TaxRebate.org.uk
EU nations from Germany to Cyprus are facing increasing pressure from the United States amid further evidence money laundering is still rife across the continent.
In the wake of the visit of Marshall Billingslea, the assistant secretary to the US Treasury with responsibility for combatting terrorist financing, the Central Bank of Cyrus claimed 55,000 accounts, mostly linked to shell companies, had been closed on the island.
When meeting bank officials in May, Billingslea had said: ‘It is vital illicit actors know that Cyprus is not open for business.’ One of the island’s residents who most concerns Billingslea is the Russian oligarch, Viktor Vekselberg, who owns nine per cent of the country’s largest bank, The Bank of Cyprus.
Since April, Vekselberg has had up to $2bn worth of assets frozen as a result of US sanctions. He has been accused of ‘malign activity’ that includes interference in the 2016 Presidential elections.
A European commission report released this month into the granting of passports in return for substantial investments – the so-called ‘golden visas’ – concluded that these activities, which have been most prevalent in Cyprus and Malta, lay the EU wide open to money laundering.
However, it is difficult to see the EU’s two smallest nations giving up the golden visas. Since 2008 Cyprus has issued more than 3,300 passports for investment, which have brought in a reported €4.5bn to the island’s economy.
Panicos Demetriades, the former head of the Central Bank of Cyprus, said there were ‘too many politically well-connected law firms’ that benefit from golden visas who have remained untouched.
Since the assassination of journalist, Daphne Caruana Galizia, who was investigating fraud at Pilatus Bank, in October 2017, Malta has increased its anti-money-laundering budget by 600 per cent. However, it is still under threat of heavy fines from the European Banking Authority.
If Malta and Cyprus argue they are targeted because of their small size, US authorities have moved against Germany’s largest bank, Deutsche Bank.
Following the scandal at Danske Bank’s Estonian branch that saw $230bn of laundered money flow through it, the US Federal Reserve has asked the German firm what it knew of the allegations. Deutsche Bank, which was acting as a correspondent for Danske, was responsible for clearing dollars from the Estonian branch. That service has now been withdrawn.
Deutsche Bank has denied it is being investigated but has admitted that ‘requests for information’ have been made to its Frankfurt offices.
In addition, Deutsche Bank’s chief executive, Christian Sewing, has received a letter from a leading American politician asking what safeguards its US arm has taken to prevent money laundering.
Representative Patrick McHenry, the leading Republican on the House Financial Services Committee, has asked for documents outlining how it is preventing illicit transactions.
Deutsche Bank, which was fined $41m in 2017 for failing to ensure its US businesses had sufficient safeguards, has until February 7 to respond.
The German government has also been formally warned by the European Commission over its failure to apply EU regulations on money laundering. The government has been sent a formal letter of notice which is the first step of a process that may end in substantial fines. The second stage of the process is for the Commission to give a Reasoned Opinion, which has been sent to Belgium, Finland, France and Portugal.