U.S. DEPARTMENT OF STATE
INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT, MARCH 1996: CYPRUS

United States Department of State

Bureau for International Narcotics and Law Enforcement Affairs

CYPRUS

I. Summary

II. Status of Country

Cyprus has also attracted over 20,000 international offshore companies, more than 2,000 of which are Russian. Cyprus' success as an international offshore center makes it vulnerable to international money laundering activities. Reports in the local and foreign press continue to suggest that Russian organized crime is using Cyprus extensively for money laundering. The Central Bank denies these reports and believes its general monitoring of monetary activities prevents any widespread money laundering activity, some of which would be drug-related. However, it is likely that money launderers use the legitimate facilities of Cyprus to further money laundering activities in other countries.

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 profits regardless of possession and allows the freezing of profits or a special investigation of the suspect's financial records. No assets have ever been seized under this law.

International enforcement cooperation is limited by the de facto division of the island into a government-controlled area in the south and an essentially Turkish speaking area in the north that is effectively beyond the control of the GOC. Authorities in the GOCcontrolled areas have no direct working relations with enforcement authorities in the "Turkish Republic of Northern Cyprus" or with Turkey. Turkish Cypriots have their own law enforcement organization, responsible for the investigation of all narcotics related matters.

III. Country Action Against Drugs in 1995

The Cypriot police force organized a working group of financial investigators and central bank officials to identify suspicious banking transactions and accounts. The Central Bank requested that all Cypriot banks appoint a member of their managerial staff as the "money laundering compliance officer" to report suspicious transactions to the police. The Central Bank also recommended that bank employees participate in special, on-going training programs to combat money laundering. The Central Bank, in cooperation with the association of commercial banks, is also preparing a "code of conduct" to prevent the criminal use of the banking system for the purpose of money laundering. Cypriot authorities have also tightened enforcement in a number of other areas including strict enforcement for possession or sale of any amount of controlled substances.

Extradition. Two rounds of negotiations have been held on a new extradition treaty between the United States and Cyprus, to replace one in effect since 1931. The USG is hopeful that conclusion of the new treaty, as well as consultations on implementation and other mutual legal assistance matters, will take place in 1996.

Cultivation/Distribution. The only controlled substance cultivated in Cyprus is cannabis which is grown in small quantities for local consumption. Eradication of such cultivation is vigorously pursued by the Cypriot authorities. Cyprus has a small but growing population of soft drug users. Distribution increases during the summer months in the tourist areas. Efforts to combat such distribution, like the illegal cultivation, are pursued aggressively by the Cypriot authorities.

Sale, Transport, and Financing. Cyprus attempts to interdict drugs transiting Cyprus when information is made available to the authorities. No significant sale has been identified as occurring in Cyprus.

Money Laundering. Offshore banking facilities make Cyprus vulnerable to money laundering activities. Identification of these activities remains difficult.

Asset Seizure. Cyprus has had an asset forfeiture statute since 1992, but it has never been used.

Law Enforcement and Transit. Cyprus maintains excellent cooperative relations with its neighbors, Europe, and the US and is quick to assist when requested.

Precursor Chemical Control. There is no production of precursor chemicals in Cyprus, nor is there any indication of illicit diversion. Precursor chemicals manufactured in Europe are believed to transit Cyprus. Cyprus Customs no longer receives manifests of transit goods, as the seaports of Larnaca and Limassol have been declared "free ports." Cyprus Customs is considered an income-generating rather than a lawenforcement agency. Goods entering Cypriot free ports can be reexported legally using different customs documents, as long as there is no change in the description of the goods transported.

Demand Reduction. Cyprus actively promotes demand reduction programs through its school system and social organizations.

Law Enforcement Efforts. Cyprus aggressively pursues drug seizures, arrests, and prosecutions for drug violations. Cyprus focuses on major traffickers when the opportunity arises, and readily supports the international community in its efforts. Cypriot police are generally effective although techniques and capacity remain restricted by a shortage of financial resources.

Corruption. Corruption in Cyprus is fairly limited. There have been accusations of senior-level police involvement in underworld corruption, including some related to drugs. The current acting police chief is investigating these charges and an internal investigation is underway.

Agreements and Treaties. Cyprus government authorities honor an existing US/United Kingdom treaty governing extradition that predates Cyprus' independence in 1960. Cyprus is a party to the 1988 UN Convention and the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime.

Drug Flow/Transit. No significant increase has been observed over the last year. Cyprus police believe their efforts to combat drug trafficking have largely converted Cyprus from a drug transit point to a "broker point" for dealers. This change is likely also the result of Lebanese containerized freight now moving directly to third countries without transiting Cyprus. However, there were occasions in 1995 when heroin seized in London was identified as transiting northern Cyprus from Turkey. 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.

Domestic Programs. Drug abuse remains relatively rare in Cyprus. Hashish is the most common drug used, 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 GOC to promote actively demand reduction programs through the school system and social organizations. Drug treatment programs are also available.

IV. US Policy Initiatives and Programs

Road Ahead. The USG anticipates continued excellent cooperation from both Cypriot police and customs officials in drug enforcement efforts. The USG will continue to track closely Cyprus' efforts to prevent the use of the offshore sector as a money laundering center.