Cracking Cyprus Confidential: EU state gave investors tax haven, secrecy – and a golden passport | Express Investigations News
Even as governments worldwide scramble to plug regulatory holes, money flows of the global elite, from Russian oligarchs to Syrian warlords, UK football clubs to Indian investors, continue to pour into tax havens – the latest revelations come from the Mediterranean island of Cyprus that’s earned the reputation of a shady financial hub washing dirty money.
Six financial service providers based in this island and a Latvian agency with an office in Cyprus have yielded a trove of over 3.6 million records that form the subject of the latest in the series of investigations by The Indian Express, in collaboration with the International Consortium of Investigative Journalists (ICIJ), into offshore tax havens.
Over eight months, The Indian Express analysed more than 20,000 documents — the India connection in the project — from the data trove comprising 3.6 million records. Dating from the mid-1990s to mid-2022, these include confidential background checks, organisational charts, financial statements, bank account applications, and email messages.
Along with The Indian Express, there are more than 60 media partners including Munich-based investigative newsroom Paper Trail Media, The Guardian, Washington Post and Asahi Shimbum, working on this ICIJ investigation.
The investigation lifted the wraps on a complex maze of investments made by prominent Indian businessmen in Cyprus who cashed in on its range of benefits: from preferential — and loosely controlled — tax rates to tax exemptions on income and gains of offshore trusts; zero estate duty, no trust registration requirements and the promise of beneficial owner secrecy.
That’s not all, many of the investors (see adjacent story) also procured Cypriot passports under the country’s now-withdrawn golden passport investment scheme which ran from 2007 to 2020 – passports that, in return for an investment of 2 million Euros (the figure for 2016), gave them freedom of movement and another protective and, of course, secretive shield for their investments in that country.
Responding to ICIJ, the office of the Cyprus Presidency said Cyprus can be placed in the top quartile internationally on the implementation of the international standards as depicted in the FATF consolidated list of assessment ratings. Russian deposits in the banking sector stand at only about 4 per cent at the end of 2021 and thus the relevant direct risks have been contained. “I would like to stress that our government is unequivocally committed to fighting corruption and illicit finance and take all necessary actions to ensure full implementation of EU Sanctions,” Konstantinos Letymbiotis, a spokesperson for the Cyprus government, said in a statement.
Emphasising that the Cyprus government is unequivocally committed to fighting corruption and illicit finance and taking all necessary actions to ensure full implementation of EU Sanctions. “More specifically, as a result of the restrictive measures around 1.1 billion Euros have been reported as frozen by CY investment firms and funds related to financial instruments. A large proportion of these funds are under the custody of EU financial institutions, the vast majority with Euroclear,” the spokesperson said.
For the Cyprus Confidential project, over 270 investigative reporters looked into records from six financial service providers: ConnectedSky, Cypcodirect, DJC Accountants, Kallias & Associates, MeritKapital and MeritServus. The Latvian company, Dataset SIA, maintains a website, i-Cyprus, through which it sells information about Cyprus companies, including Cyprus corporate registry documents.
The MeritServus and MeritKapital records were obtained by Distributed Denial of Secrets. Leaked records from Cypcodirect, ConnectedSky, i-Cyprus and Kallias & Associates, were obtained by Paper Trail Media. In the case of Kallias & Associates, the documents were obtained from Distributed Denial of Secrets, which shared them with Paper Trail Media and ICIJ. DJC Accountants’ records were obtained by the Organized Crime and Corruption Reporting Project (OCCRP). The partner organisations shared all leaked records in the project with ICIJ, which structured, stored and translated them from several languages before sharing them with the reporting partners, including The Indian Express.
Taken together, the project’s 3.6 million documents – despite representing a small fraction of Cyprus’s offshore industry records – reveal how Cyprus, despite being a EU member state, has become a massive financial hub for Russian oligarchs. The documents also provide a glimpse into the oligarchs’ lavish lifestyle – their super yachts, their priceless art collections of Matisse, Monet and Lucien Freud, and their private concerts featuring Amy Winehouse, Red Hot Chili Peppers and other famous rock stars.
The ICIJ-led investigation reveals how the EU-member state plays an even bigger role than was commonly known in moving dirty money for Russian President Vladimir Putin’s autocratic regime and other brutal dictators and anti-democratic actors.
Among them: Syria’s rulers, whose state-owned oil company attempted to evade the United States ban on doing business with it by using an intermediary on the island to disguise requests to purchase products from a Houston oil equipment supplier; and Kremlin operatives who channeled payments through Cyprus to a prominent German journalist known for producing fawning coverage of Russia’s autocratic leader.
The Russian money flow was a bonanza for Cyprus’s powerful industry of bankers, offshore service providers, accounting firms like PwC and other Big Four firms, and an army of 4,000 lawyers — all deeply intertwined with a Cypriot political class that erected some of Europe’s most stringent corporate secrecy and turned the Central Bank of Cyprus into a protector of the system rather than its regulator.
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Here, in India, Cyprus Confidential is expected to prompt regulatory and investigative agencies to lift one more veil as they have done with each of the earlier global investigations in which they have detected sizeable tax avoidance and evasion.
Indeed, while announcing its probe into the Pandora Papers leak in October 2021, the Central Board of Direct Taxes (CBDT) disclosed that Rs 20,352 crore of “undisclosed credits” had, till then, been detected by tax sleuths following the Panama Papers and Paradise Papers (2017) leaks.
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