Sarris confident of allaying money-laundering fears

FINANCE Minister Michalis Sarris yesterday left for Brussels where he is due to present Cyprus’ proposal on a money-laundering audit of Cyprus’ banking system during tomorrow’s Eurogroup meeting.
Sarris told the Cyprus News Agency they would propose that the Council of Europe’s Moneyval should carry out money-laundering checks, with the supervision of Cyprus’ Central Bank and - if necessary - of private experts who are “beyond any doubt”.
During last month’s Eurogroup meeting - the meeting of finance ministers in the eurozone - Eurogroup head Jeroen Dijsselbloem referred to an “agreement” to appoint a private firm to assess how Cyprus’ banks comply with anti-money laundering regulation, but no official Eurogroup statement was actually issued and it is understood that no consensus was reached on the matter.
Sarris said that at Cyprus’ end, a meeting was held this Thursday to agree on an evaluation model. In addition to Sarris, present at the meeting were the recently departed former finance minster Vassos Shiarly, the central bank governor Panicos Demetriades, and the attorney general Petros Clerides.
“I believe we have reached a formula that will also satisfy those who may want a somewhat different evaluation,” Sarris told the Cyprus News Agency.
“In this way we can prove once and for all that all these (money laundering) accusations are baseless,” Sarris said, adding however that moving forwards would be “very difficult without resolving the matter”.
Sarris is due to have meetings today with his German counterpart, Wolfgang Schaeuble and other eurozone and European Commission top brass, including head of the Eurogroup Working Group of senior officials, Thomas Wieser.
Schaeuble said yesterday the Eurogroup would not rush into any decisions tomorrow in relation to Cyprus.
"Cypriot banks are completely oversized in relation to the country's gross domestic product. This situation cannot continue. That's where the problem needs to start being tackled," he said according to an advance copy of an article due to be published in German newspaper Tagesspiegel today.
Cyprus needs 8-10 billion euros to recapitalise its banks and 7 billion to repay loans and finance government operations. Such a rescue would increase the island's debts to around 145 per cent of GDP, a level considered unsustainable.
European policymakers have been split over how to handle a bailout of Cyprus, with Germany and some other countries pushing for bank depositors to bear part of the cost and many other member states worried such a move will cause a bank run.
Sarris said on Friday that any talk of a haircut on deposits was ‘foolish’ and that depositors would not be made to carry part of the cost.
Schaeuble said that the Eurogroup was in close dialogue with Russia that is interested in a solution given that investors hold deposits in Cyprus’ banks and that Russia itself is a creditor to the island, he told the newspaper.
In an interview with Austrian broadcaster ORF, Wieser reiterated that Cyprus' steps to crack down on suspected money laundering will be a precondition for any outside aid but warned against blanket accusations that the country was awash with dubious funds from Russia.
He said it was unfair to suggest all Russian money there was suspect or to assume that other foreigners' funds in Cyprus were beyond reproach.
Wieser said yesterday that a bailout agreement with Cyprus, on hold for the past eight months, needed to be reached by the end of March.
"It's getting a bit tight," Wieser said
"The financing of Cyprus is still secured for the coming weeks and months but we have to come to a negotiating result in the course of March."