Nations in Manafort case known to laundering experts

Ken Sweet
Associated Press

New York — The three countries named in the indictment of former Trump Campaign Chairman Paul Manafort span three continents but all have something in common: They’re island nations with a legacy of relatively lax oversight of offshore entities and a known history of being a conduit for suspicious money.

Special counsel Robert Mueller has accused Manafort and business partner Rick Gates of using shell corporations in Cyprus, the Seychelles, and Saint Vincent and the Grenadines as a way to hide assets and keep from paying taxes.

“They don’t ask questions about what their banks know about their customers, which is a basic requirement to stop money laundering,” said Ted Truman, a fellow at the Peterson Institution for International Economics and an expert on money laundering.

The Mediterranean island country of Cyprus plays an outsized role in Manafort’s indictment. The country is listed as the domicile for a dozen of Manafort’s shell corporations and the alleged source of millions of dollars in wire transfers in and out of the country.

Since the 1990s Cyprus has been a focus of money laundering crime-fighters, but is probably best known for its alleged ties to money flowing in and out of Russia. The country had been accused in the past of providing lax oversight to potential money laundering, as well as providing ways for Russian and Ukrainian officials to hide assets abroad.

“Russia has become the primary source for investors in Cyprus, usually through banks or companies set up as trusts. Most of the money that goes into Cyprus is then invested back in Russia,” said James S. Henry, an economist and ex-journalist with the Tax Justice Network, which studies offshore tax havens.

Cyprus and Russia have a favorable tax treaty, which has resulted in Cyprus having a cottage industry of bankers and lawyers on the island who primarily exist to set up shell corporations and trusts to help money move in and out of Russia, Henry and other experts said.

Its role has drawn scrutiny from other European Union members, particularly after Cyprus joined the bloc in 2004. When Cyprus suffered its own financial crisis in 2012 and 2013 and requested a bailout, German intelligence reportedly estimated that Russians had $26 billion in deposits in Cypriot banks. EU authorities, worried any bailout package would ultimately help Russian multimillionaires, insisted Cyprus implement tough anti-money laundering laws and regulations as part of any rescue deal. Cyprus banking officials have in recent years started taking action and asking uncomfortable questions to suspicious clients, desperate to rebuild confidence in the banking system.

“Since its entry into the European Union in 2004 and especially after the 2013 banking collapse, Cyprus has done much to clean up its act,” said Sofronis Clerides, professor and chair of the economics department at the University of Cyprus. “Unfortunately, it takes a long time for the stigma to wash off.”

Federal prosecutors became interested in Manafort’s activities in Cyprus years ago as part of a broad investigation to recover stolen Ukrainian assets after the ouster of pro-Russian President Viktor Yanukovych there in early 2014. No U.S. criminal charges were filed in that case.

It’s worth noting that setting up foreign companies and bank accounts is not illegal; however, using them to evade taxes or hide proceeds from ill-gotten gains is. Manafort and his business partner pleaded not guilty in district court Monday.

The other two countries in the Manafort indictment play decidedly smaller roles in Manafort’s alleged operations and international money laundering overall.

At least a thousand miles from any major continent in the middle of the Indian Ocean, the Seychelles is primarily a place for French and African investors to discreetly park money. The country was named as a domicile for offshore tax havens in last year’s Panama Papers investigation.

While not historically an offshore tax haven like the Bahamas or the British Virgin Islands, the Caribbean island nation Saint Vincent and the Grenadines recently has been considered an at-risk place for money laundering. In the indictment, Manafort allegedly had at least two offshore corporations based in the Grenadines.