The latest investigation by the International Consortium of Investigative Journalists (ICIJ) has honed in on the activities of a handful of financial services providers based in Cyprus. Almost 70 media organisations – including The Irish Times – spent eight months pouring over the 3.6 million documents involved.
Cyprus Confidential paints a depressingly familiar picture. It illustrates once again how the wealthy and powerful use a global network of offshore jurisdictions and intermediaries to avoid tax and scrutiny.
In this way Cyprus Confidential is similar to a number of other ICIJ investigations, notably the Panama Papers, which looked at offshore financial services providers in the eponymous Central American country.
But three things are different this time. The first is that Cyprus is a member state of the European Union. It is subject to the same rules as other members. It is in the euro zone and its financial services industry is ultimately regulated by the European Central Bank. It is not Panama.
The second is that one of the firms that features extensively in the documents is the Cypriot arm of PwC, a global accountancy firm. The other national firms in the PwC network may be separate legal entities, but they cannot escape all responsibility for the actions of their Cypriot member. A spokesman for the international firm claims the Cyprus office has pivoted to a “new economic model”. About time.
The third is that some of the Cypriot firms in question seem to have come perilously close to helping Russian oligarchs evade sanctions imposed after the Russian invasion of Ukraine in February 2022. The leaked documents detail transactions taking place on the eve of sanctions. This is clearly deeply concerning.
The government of Cyprus says that it is taking all necessary measures to ensure full implementation of EU sanctions. Whether that extends to clamping down on the firms exposed by the ICIJ remains to be seem.
Officials in the Department of Finance on Merrion Street must have breathed a sigh of relief on Tuesday evening when the first reports from Cyprus Confidential broke. In contrast to previous ICIJ investigations into tax havens, Ireland barely gets a mention. Previous leaks showed that Ireland is one of the spots that offshore money transits through as it seeks to avoid scrutiny.
They will also appreciate the problem that now confronts their Cypriot counterparts. How do you reign in an outsize and sometimes wayward financial services industry without doing unnecessary damage to your economy? But the problem of offshore finance is a global one that must be addressed. The Tax Justice Network estimates that up to $32 trillion is held offshore and that an estimated $427 billion in tax is lost every year.