Cyprus Confidential shows dangers of EU forgetting lessons of past leaks, says Tax Justice Network

The International Consortium of Investigative Journalists (ICIJ), in partnership with nearly 70 media outlets around the world, published today its Cyprus Confidential investigation. The investigation exposes how financial firms and service providers based in Cyprus have helped shield Russian wealth.¹

Cyprus ranked 15th on the Tax Justice Network’s Financial Secrecy in 2022 – a ranking of jurisdictions most complicit in helping individuals hide their finances from the rule of law – coming in just behind British Overseas Territory Cayman Islands.²

Markus Meinzer, director of policy at the Tax Justice Network, said:

“We commend the brave work of the ICIJ, and the journalists and media outlets that have brought these important revelations into the public eye. Financial secrecy is about hiding finances from the rule of law and that makes it a threat to everybody everywhere, be it by facilitating tax abuse, sanctions-busting or human rights violations.

“Many EU governments have already forgotten the lessons learnt from previous scandals like the Panama Papers, and the Cyprus Confidential investigations make clear why this is so dangerous. Time after time, we see that the single most powerful tool against financial wrongdoing, whether it’s by oligarchs or multinational corporations, is public transparency. Public transparency is necessary for exposing wrongdoers but also making sure governments act.

“Worryingly, we’re seeing the EU backslide into the dark days of dirty money and go from a global champion of financial transparency to a fierce global blocker of it today. Despite the EU’s rhetoric on sanctioning Russian oligarchs, the European Court of Justice’s ruling in 2022 to bar public transparency on beneficial owners made it easier for Russian oligarchs to evade EU sanctions than it was at the start of Russia’s invasion of Ukraine.³

“The ECJ’s ruling has created a legal vacuum in the EU that’s seen some countries immediately, even gleefully, revoke public access to their beneficial owners register while others kept it in place.⁴ Cyprus was among the first to revoke access. Public access to these registers is vital for fighting financial secrecy. It’s telling that almost all countries that physically border Russia or have historical ties to it have kept public access to beneficial owner registers in place, creating a transparency frontline. But financial secrecy is a global problem that needs international coordination, and, as Cyprus Confidential shows, tolerance of it in one place puts all places at risk.

“At the global stage, EU countries are actively trying to block the majority of countries at the UN from voting this month to bring decision-making on global tax rules into the public eye at the UN.⁵ This is the most important vote on tax in our lifetime and the world’s best shot at reining in the financial secrecy that makes possible the financial wrongdoings exposed today by Cyprus Confidential.

“We urge all EU countries to commit to public transparency, both at home by ensuring public access to beneficial owner register and at the UN by not blocking global demand for a UN tax convention.”

According to the Financial Secrecy Index’s evaluation of Cyprus last year,⁶ Cyprus falls short in comparison to other European countries, particularly concerning ownership registration and legal entity transparency. Noteworthy risks include the implications of banking secrecy rules, such as the presence of prison terms deterring whistleblowers. Additionally, Cyprus’s tax administration faces significant hurdles in accessing banking information.

The Financial Secrecy Index’s 2022 assessment also revealed Cyprus’s legal framework for beneficial ownership registration to be flawed. Most worrying, Cyprus was found to be allowing legal entities or arrangements to be register as beneficial owners in place of actual beneficial owners made of flesh and blood.

Cyprus’s swift revoking of public access to its beneficial owner register after the ECJ’s ruling was consistent with the country’s poor implementation of public access to the register to begin with. The Financial Secrecy Index 2022’s assessment found that crucial information held by the country on legal entities’ beneficial owner and accounts was inaccessible to the public, underscoring an enduring issue in the jurisdiction’s transparency practices. A similar lack of transparency was also identified as regards the country’s real estate register.

-ENDS-

Additional resources:

• For more information on the ECJ ruling and an update on the status of EU countries’ beneficial ownership registers as of July 2023, see this article.
• We have published this briefing today on the variety of use cases beneficial ownership transparency has, going beyond just tackling money laundering and sanctions-busting.

Notes to editor

1. View the ICIJ’s Cyprus Confidential investigation here.
2. See the full Financial Secrecy Index 2022 ranking here.
3. For more information, see our press release ‘One year on, Russian oligarchs can more easily evade EU sanctions thanks to EU court ruling’.
4. More information on the ECJ ruling and an update on the status of EU countries’ beneficial ownership registers as of July 2023 is available here.
5. More information about EU’s attempt to block a planned vote at the UN this month on a UN tax convention is available here. An FT article on the matter is also available here. To see where all countries stand on a UN tax convention, see our recently launched Policy Tracker.
6. A detailed breakdown of Cyprus’s evaluation on the Financial Secrecy Index 2022 is available here.