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39 Int'l Tax J. 51 (2013)
Getting beyond the Dirty Laundry (and Laundering): Understanding the Role of Cyprus in Contemporary Offshore Law and Finance

handle is hein.journals/intaxjo39 and id is 319 raw text is: November-December 2013 Getting Beyond the Dirty Laundry (and Laundering): Understanding the Role of Cyprus in Contemporary Offshore Law and Finance By James McConvill James McConvill is a Senior Lecturer/ Postgraduate Studies Coordinator at the College of Law &Justice of Victoria University. 1. Introduction Notwithstanding domestic political and economic issues culminating in the troika of the IMF, Euro- pean Union (EU) and European Commission (EC) endeavoring to impose a deposit tax on savings in Cypriot banks in March 2013 (in an effort to raiseE5.8 billion to enable Cyprus to gain access to E1 0 billion in emergency funding),, Cyprus has been a popular offshore financial center over the past 20 years and has been growing steadily each year. The proposed deposit tax was ultimately rejected by the Cyprus Parliament, and an alternative deal which protected insured deposits under E100,000 was agreed upon in late March 2013,2 however the initial proposal to impose the tax as a condition of any European bailout of Cyprus raised worldwide attention towards Cyprus as a financial center and what exactly goes on there. There was some unfortunate confusion in the fi- nancial press that Cyprus is filled with shady banks housing dirty Russian money, however, there is much more to Cyprus as a financial center than its banking system. In fact, the banking system in Cyprus is really separate and distinct from the day-to-day functioning of Cyprus as a leading offshore financial center and the utilization of Cyprus companies for legitimate, so- phisticated and large-scale commercial transactions. A major reason for the growth of Cyprus as an off- shore financial center is that Cyprus vehicles (mainly offshore companies) are used by Russian and interna- tional investors investing in, or withdrawing money from, Russia. This long-standing Russian interest in 02013 J. McConvill INTERNATIONAL TAX JOURNAL / 51

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