1998 International Narcotics Control Strategy Report

Bureau for International Narcotics and Law Enforcement Affairs
United States Department of State
February 26, 1999

CYPRUS

I. Summary

Cypriots do not produce or consume significant amounts of narcotics, but hashish use by young Cypriots and tourists continues to grow. Drug traffickers are drawn to Cyprus because of its relatively sophisticated business and communications infrastructure. A signatory to the 1988 UN Drug Convention, Cyprus strictly enforces tough anti-drug laws, and police and customs authorities maintain excellent relations with United States and other foreign government officials.

Cyprus has ratified the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime. Legislation to implement the Convention was passed in April 1996. An essential element of that law was the formation of a money laundering investigations unit, comprised of representatives of the Attorney General's Office, the Director of Customs, and the Chief of Police.

Cyprus' Unit for Combating Money Laundering (UCML) was very active in 1998 in receiving and investigating suspicious transactions. Since its inception in 1997, the UCML has evaluated over 125 cases (more than half referred by other governments) and has closed more than 82; it has also issued a number of freezing and restraining orders. Cypriot authorities have frozen assets valued at more than U.S. $13 million during the past two years. It evaluates evidence generated by both the unit member organizations and from elsewhere to determine if investigation is necessary. It has conducted training seminars for over 500 Cypriot police officers, as well as for bankers, accountants, and other financial officers. The Cypriot police force now includes a module on money laundering in its basic training for new officers. In 1998, the Cyprus government amended its money laundering law by expanding the list of predicate offenses and allowing the Unit to legally cooperate with other nations' financial intelligence units for the purpose of investigation of money laundering offenses and the exchange of information.

Cyprus monitors the importation and exportation of chemicals for local markets. However, Cyprus' geographic location and the free-port status of its two main sea ports complicate the task of monitoring contraband, because Cyprus is an attractive transit country for trade in chemicals and most other goods between Europe and the Middle East.

II. Status of Country

Cypriots do not themselves produce or consume significant quantities of drugs. The island's strategic location in the Eastern Mediterranean and its current status as a gateway to and from Lebanon and elsewhere make it a convenient stopover for traffickers. The re-opening of Beirut's port means, however, that licit trade-related transshipment levels from Cyprus to Lebanon are much lower than they were during their peak in the 1980s. Highly developed business and tourism facilities, a modern telecommunications system, and the fifth largest merchant shipping fleet in the world also serve to attract traffickers to Cyprus, where they can arrange to conceal heroin and cannabis resin in the substantial container traffic transshipped through Cyprus, and take advantage of air connections to transship currency and bullion to and from Europe. Drug related crime in Cyprus is low by international standards. Although drug related crime has generally increased during the last decade, this trend has appeared to level off in 1998, when just 251 Greek Cypriots were arrested for narcotics related crime.

Cyprus' success as an international offshore center has made it vulnerable to international money laundering activities. Reports in the local and foreign press suggest that the Russian Mafia, among others, is using Cyprus for money laundering.

Cypriot Law now carries a maximum prison term of one year for drug users under 25 years of age with no police record. Sentences for drug traffickers range from four years to life, depending on the substances involved and the offender's criminal record. Cypriot Law allows the confiscation of drug- related assets and allows the freezing of profits or a special investigation of the suspect's financial records, although no drug-related assets have ever been seized under this law.

International enforcement cooperation is affected by the de facto division of the island in 1974, when the Turkish military intervened following a coup d'etat directed from Greece. Since 1974, the southern part of the island has been under the control of the Government of the Republic of Cyprus; the northern part has been controlled by a Turkish Cypriot administration (the self-proclaimed "Turkish Republic of Northern Cyprus" is recognized only by Turkey). The Republic of Cyprus authorities have no working relations with Turkish Cypriot authorities. Turkish Cypriot authorities have shown a willingness to pursue narcotics traffickers and provide assistance when asked by foreign law enforcement authorities. Northern Cyprus is a convenient stopover for narcotics traffickers moving between Turkey and other countries, and there were occasions in 1997 when kilograms of heroin seized in London were identified as transiting northern Cyprus from Turkey.

III. Country Actions Against Drugs in 1998

Policy Initiatives. The Unit for Combating Money Laundering began operations in January 1997. The Unit includes three representatives each from the Department of Customs, the Police, and the Attorney General's Office. The Unit's coordinator works directly for the Attorney General.

Law Enforcement. The Unit for Combating Money Laundering recorded its first conviction under the anti-money laundering law in July 1998. There are two cases currently pending. The Unit has also issued 78 information disclosure orders.

Under the authority of its 1992 Asset Forfeiture statute, and its money laundering law, it has frozen $13 million in 1997 and 1998.

Cypriot police are generally effective in their law enforcement efforts; their techniques and capacity remain restricted by a shortage of financial resources.

Corruption. There is no evidence of senior or other officials facilitating the production, processing, or shipment of drugs.

Agreements and Treaties. A new extradition treaty between the United States and Cyprus was recently ratified by the U.S. In October 1997, Cyprus signed a Memorandum of Understanding with the Belgian Fraud Investigative Unit for the exchange of information on money laundering issues. Cyprus is a signatory to the Vienna Convention and the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime. On 30 June 1998, Cyprus became a member of the Egmont Group. This membership will increase Cyprus' effectiveness in combating money laundering by strengthening its cooperation with other financial intelligence units. There is no Mutual Legal Assistance Treaty in force between Cyprus and the United States; however, negotiations are underway and are expected to be completed as early as 1999.

Cultivation/Production. The only known production is the limited, but increasing, cultivation of cannabis for individual use and, on a smaller scale, for resale. There is no production of precursor chemicals in Cyprus, nor is there any indication of illicit diversion. Precursor chemicals manufactured in Europe do transit Cyprus to third countries. Cyprus customs no longer receives manifests of transit goods, as the seaports of Larnaca and Limassol have been declared "free ports." Goods entering Cypriot free ports can be legally re-exported using different customs documents, as long as there is no change in the description of the goods transported.

Transit/Drug Flow. Cyprus has a small, but growing population of casual drug users. Distribution increases during the summer months in the tourist areas. The Cypriot authorities aggressively pursue this distribution, as they do illegal cultivation. Cyprus attempts to interdict drugs transiting Cyprus when information is made available. Cyprus Police believe their efforts in combating drug trafficking have moved Cyprus from a drug transit point to a "broker point" for dealers. This change is likely also the result of improved conditions in Lebanon. Lebanese containerized freight now moves directly to third countries without transiting Cyprus. However, there were seizures in Cyprus of heroin coming from Iran. In addition, Cyprus has become a transit point for cocaine transported by commercial air from Brazil via Cyprus to the Middle East and the former Soviet Union.

Demand Reduction. Cyprus actively promotes demand reduction programs through the school system and through social organizations. Drug abuse remains relatively rare in Cyprus. Hashish is the most commonly encountered drug, followed by heroin and cocaine, all of which are available in most major cities. Users consist primarily of young people and tourists. Recent increases in drug use have prompted the government actively to promote demand reduction programs through the school system and social organizations, occasionally with DEA-Nicosia participation. Drug treatment is available.

IV. U.S. Policy Initiatives and Programs

The U.S. supported the Cyprus government's efforts to deter money laundering activities in Cyprus through a number of activities:

High-level contacts: the Ambassador and other members of the U.S. Embassy staff in Nicosia raised the issue repeatedly during the year with key Cyprus government officials;

A Federal Reserve Board Supervisory Financial Analyst in the Division of bank Supervision and Regulation visited Cyprus on a fact finding mission and consulted with the Cyprus Central Bank Governor and other top bank officials.

DEA conducted money laundering and asset seizure training for 35 Cyprus Police Force and Cyprus Customs Officers.

The Federal Bureau of Investigation conducted an anti-money laundering seminar.

Bilateral Cooperation. Although there are no formal bilateral narcotics cooperation agreements in place at this time, there are numerous on-going consultations and cooperation between Cyprus and the U.S. in the field of narcotics control and anti-money laundering efforts.

Road Ahead. Organized crime's impact on Cyprus, especially through Cyprus' offshore business and financial sector, will remain an important concern. The United States anticipates continued excellent cooperation from the government of Cyprus on this issue.