TERRORISM FINANCE COORDINATION OFFICER: CYPRUS

C O N F I D E N T I A L NICOSIA 001917 SIPDIS SIPDIS DEPT FOR EB/ESC/TFS: SHINDS, S/CT: PHILL, INL/C/CP: SPETERSON, AND IO/PSC: JSANDAGE E.O. 12958: DECL: 11/07/2016 TAGS: KTFN EFIN ETTC KVPR PREL PTER CY SUBJECT: TERRORISM FINANCE COORDINATION OFFICER: CYPRUS REF: A) SECSTATE 181096 B) NICOSIA 1889 Classified By: A/DCM Tom Miller; Reasons 1.4 b and d. ¶1. (C) All responses are keyed to the questions in paragraph 9 of ref A. a) TFCO: Jane Zimmerman Deputy Chief of Mission tel: 357 22 39 3595 Embassy after hours switchboard: 357 22 39 3300 ZimmermanJB@State.gov b) Deputy TFCO: Michael S. Dixon Economic and Commercial Officer tel: 357 22 39 3359 Embassy after hours switchboard: 357 22 39 3399 DixonMS@State.gov c) Post found the June 2, 2006 regional meeting on Terrorism Finance at USEU Brussels informative and valuable and would encourage making this an annual event. Visits from Treasury officials have also proven helpful in pushing our money laundering/terrorist finance agenda forward. Post would welcome more visits and more targeted regional generic op-eds for placement in local press, especially if they include examples of where terrorist finance efforts led to tangible results in other similar jurisdictions. Post would also welcome USG-financed terrorism finance workshops for GoC officials, either in Cyprus or abroad. While Cypriot cooperation has been strong, we occasionally find ourselves up against the attitude that terrorist financing is unlikely to occur here and all the work that is required generates little bang for the buck. d) Government-controlled area: The GoC claims that its anti-money laundering law and its ratification of the 1999 Convention on the Suppression of the Financing of Terrorism give it the authority it needs to confiscate terrorist funds, although this has yet to be tested in practice. The recent Moneyval evaluators, however, were not convinced that this was an adequate mechanism. The evaluators found that "Cyprus has an administrative procedure for freezing (terrorism funds) under the UN resolutions and regulations of the EU." However, a "comprehensive and effective system for freezing without delay by all financial institutions of assets of designated persons, including publicly known procedures for de-listing, is not yet fully in place." (Note: Cyprus has also yet to criminalize the collection of funds for terrorist groups or individuals as required under FATF SR 2.) The GoC has signed and ratified the UN Convention on Terrorism Financing and has implemented UNSCRs 1267, 1373, 1390, and 1455. The GoC has adopted money laundering legislation and established an FIU. Cyprus is also a member of Egmont and a FATF style regional body (Moneyval). Cyprus has not issued any freeze orders on terrorist-linked assets (it reports that is has yet to find any). The GoC regularly shares terrorism finance information with the USG in a timely manner, and its FIU enjoys excellent cooperation with FinCEN, the FBI, DEA, and the Embassy. The area administered by Turkish Cypriots: The area administered by Turkish Cypriots (the self-proclaimed "Turkish Republic of Northern Cyprus" or "TRNC"),which controls the northern third of Cyprus, is not recognized by the U.S. or any other country except Turkey, and is outside the control of the GoC. This area does not have a clear legislative authority to freeze terrorist funds. It is not a UN member, so it has not signed or ratified the UN Convention on Terrorism Financing. It has also not fully implemented the relevant UNSCRs. While it has a relatively weak anti-money laundering law, it has not established an FIU. It is also not a member of Egmont or any FATF-style regional body, nor has it issued a freeze order on terrorist funds. The Turkish Cypriot "Central Bank" does ask the 24 Turkish Cypriot domestic and 16 off-shore banks to search for assets linked to designated terrorists (when we ask),but the penalties for non-compliance are minor, and no bank has reported any positive findings. The Turkish Cypriots would welcome greater cooperation with U.S. intelligence and law enforcement, which is constrained due to non-recognition issues. (Note: Since the U.S. only recognizes the Government of Cyprus as the sole government on the island, the area of Cyprus administered by Turkish Cypriots should not be listed as an entity separate from Cyprus on any charts, especially if the chart is likely to be made public. End note.) SCHLICHER