A few days ago, Maxine Waters, Chairwoman of the House Financial Services Committee, issued a very important statement for Cyprus. The statement came after a bipartisan Congressional delegation – which Waters was leading – concluded its visit to Cyprus.

The delegation met with Cyprus’ Minister of Finance, the Governor of the Central Bank of Cyprus, the Chairwoman of CySEC – the capital markets regulator of the country; the Director of MOKAS – the Cypriot Financial Intelligence Unit; the political director of the Ministry of Foreign Affairs, and representatives of local banks and accounting firms. “I am pleased to see that the close cooperation and coordination between the Republic of Cyprus and the United States is beginning to pay off,” Waters said in the statement. While commenting that she would like to see additional progress towards detecting and stopping illicit financial activity, she added that the delegation is confident that Cyprus is up to the challenge.

Never before in history, has Cyprus received such positive comments by a formal U.S. body such as the Congress’ Financial Services Committee. State officials in Cyprus were more than happy with Waters’ announcement, stressing that it was some sort of recognition of the country’s efforts to strengthen its anti-money laundering framework and to improve its overall reputation, that has been adversely affected in the past from mishandling money that came from disputed sources. Waters initial comment portrays the U.S.’ main concern regarding Cyprus’ financial system: “…Until recently, for example, Russian oligarchs were reported to have laundered the spoils of their political corruption through banks in the Republic of Cyprus”.

It is true and everyone accepts it that for many years, the country was used for transferring money out of Russia. It is not strange that for a fairly lengthy period, Cyprus was the biggest source of FDIs to Russia and vice versa. But things are changing. Just a few days after Waters’ announcement, the country’s Minister of Finance Harris Georgiades tweeted that the Public Debt Management Office had proceeded with early repayment of a loan granted by the Russian Federation back in 2011 when Cyprus’ fiscal position was at a very critical point. The Office repaid the rest of the facility that amounted to $1.6b (€1.5b). Funding for the early repayment was sourced through the issuance of bonds in May and fiscal surpluses. But it’s not just the repayment of the loan that reduced the country’s dependence on Russia, after the financial crisis’ escalation in 2013 that resulted in a haircut on deposits exceeding $111k (€100k).

Since then, Russian deposits in the financial system are continuously decreasing. According to figures from the Central Bank of Cyprus, deposits of residents from countries outside the Eurozone were $7,4b (€6,7b), at the end of July 2019, compared to $23,9b (€21,5b), at the end of 2012. Furthermore, a very strict Directive regarding the handling of shell companies accounts was recently adopted. As a consequence, many Russian companies fled the country as it became very difficult to proceed with transactions. Nevertheless, Cyprus still has strong economic ties with Russia. Russian tourists are the second biggest source of incoming tourism and the ones that spend the most. Also, during the past couple of years, many wealthy Russians acquired Cypriot citizenship through the country’s Citizenship by Investment Program. Cypriot citizenship was also given to Russians that were affected by the haircut on deposits.

Asking Cypriot officials and professional bodies whether Cyprus has made a turn to the West leaving Russia in the cold, you get a very diplomatic answer: Every company and business is welcome to Cyprus as long as it’s legitimate and transparent.

Antonis Antoniou for Forbes

Leave a Reply