Money laundering check to slow down Cyprus cash

Ben Southwood
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CYPRIOT anks will face independent money-laundering investigations before getting hold of any Eurozone bailout funds, the Eurogroup of finance ministers said yesterday.

“We agreed that an independent assessment conducted by a private sector firm is required,” aid Jeroen Dijsselbloem, at his first meeting heading up the Eurogroup, after taking over from Jean-Claude Juncker.

Cypriot leaders agreed to the demands, which will delay the €17bn (£14.5bn) package they say they need until at least March, the next time the 17 euro area finance ministers meet.

“We’ll try to reach a decision in March,” ijsselbloem promised. But just a few weeks ago in January the Dutch career politician said: “I on’t think that we will come to a decision on Cyprus in a short time – I lso don’t think that’s necessary.”

The Eurogroup president also delayed a firm judgement on the question of a bail-in, where depositors and investors in Cyprus’s banks would foot some of the costs of keeping the institutions alive.

This could go some way to assuaging fears that bailout funds would go to Russian oligarchs, but Cypriot finance minister Vassos Shiarly said the likelihood of the funds going to these depositors had been “grossly exaggerated”.

“The bail-in is unlikely to happen and we will not accept it under any circumstances,” hiarly added. This came in response to reports that alleged up to €10bn of the total package might come from bank stakeholders rather than external lenders.

Olli Rehn, European Commissioner for economic and monetary affairs also firmly repudiated the reports, saying: “There are no proposals of the European Commission along the lines described in the article.”

Still, worries about money-laundering and giving a boost to Russian money launderers are not the only stumbling blocks holding back bailout negotiations.

The Eurogroup is worried that without structural reform the small Mediterranean state will not be able to afford to repay the loans – almost as big as the country’s yearly output.

But Cyprus’s Communist party rulers have fought against demands they sell off state assets to put their finances in a more sustainable position for the longer term.