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

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




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