Cyprus Audit Service Comments On the Report of the Investigative Committee

Аудиторская служба Кипра прокомментировала отчёт Следственного комитета
4 May 2021 Liza Medvetskaya

On Tuesday 4 May, the Cyprus Audit Office spoke out on the interim report of the Investigative Committee, which was released last week.

We have studied the interim report of the Investigative Committee, published by the Prosecutor General of Cyprus without attachments and with a significant part of hidden information. We believe that there are important issues, on which it would be useful to express our opinion, - noted the Audit Service.

The General Audit Office reconstructed the chronology of events that had disastrous consequences for the Citizenship by Investment program and questioned the competence of local officials.

The Audit Service tried to audit the Cyprus Investment Program (KEP) several times: on after the Al Jazeera scandal, 28 August 2020 and a year earlier, in July 2019, but faced obstacles from the government. The staff of the Audit Service decided that due to the negative image of Cyprus, it was necessary to conduct an audit by an institutionally independent body such as the Audit Office, therefore the country's genetic auditor publicly announced the start of their own audit.

On August 31, 2020, employees of the Audit Service went to the Ministry of the Interior and received copies of files on 5 naturalization cases. However, the next day, September 1, 2020, when they tried to take files on 15 more cases for consideration, they were refused by the Cyprus Foreign Ministry, which the day before found out the opinion of the country's attorney general on this matter.

Further, on September 2, 2020, the current President of Cyprus announced at a meeting of the Council of Ministers that he intends to make a proposal to the Attorney General on the appointment of an Investigative Committee. It is noteworthy that this proposal was approved by the Council of Ministers immediately. On September 7, the Prosecutor General issued a decree on the appointment of the Investigative Committee. The Audit Service learned that all materials on the cases of Golden passports would be transferred to the new body, which was appointed for investigation, so the bureau would not receive any more information.

On September 24, 2020, the Accounts Chamber published a special report on naturalization of 5 applicants, of which the Audit Service was previously able to obtain a dossier, as well as some additional statistics on naturalization, which were provided without names.

The main findings of the report were as follows:

  • The former Minister of the Interior has ordered the urgent consideration of 23 investor applications.
  • The naturalization of family members of thousands of naturalized foreigners was carried out illegally. There were cases where the real investor was the husband, but his wife submitted the application, perhaps so that the investor, who was a person with a high level of risk, did not have to explain the source of his income.
  • There was a naturalization of persons with a criminal record, without a permanent place of residence, who could not confirm the origin of money coming from abroad, and their investments posed a high risk of money laundering. Also, among those who were issued passports, they found politically significant persons who are wanted by Interpol.
  • The criteria of the program were repeatedly violated, as a result of which the state suffered financial losses.
  • Some investors were charged a low VAT rate (5%), which should be applied when buying a first home, at a time when in fact the transaction was of an investment.

On the same day, the Ministry of the Interior issued a statement describing the report as fragmentary and arguing that “the auditor general once again exceeds the powers conferred on him under the Constitution and laws, and makes reports and comments that go beyond his scope. competence and responsibilities ”. The ministry approached the Research Committee led by Nikolatos and the ad hoc committee led by Kalogirou.

The former Minister of the Interior (now the Minister of Finance) stated on 23 October 2020 that instructions to accelerate naturalizations were issued if the request was deemed justified, for example, due to the size of the investment or other humanitarian reasons.

The Court of Accounts, using data collected from the Tax Department of the Social Security Service, the Registrar of Companies, the Cadastre and Geodetic Office and the Register of the Population and Immigration Archives, issued on October 27, 2020 a new report on 64 investors of company "A" and 27 investors who were directors of the company that operates the casino resort, as well as their family members.

According to the report, the naturalization of 27 persons associated with the casino:

  • It was in violation of the Law on the Population Archives and the corresponding decrees of the Council of Ministers.
  • The resort's casino licensing agreement's official governing bodies (the National Gambling and Casino Supervisory Authority and the Coordinating Committee) were not informed of the issue that should have been about promoting this investment.
  • The license agreement was signed in June 2017. Based on this, the management company has undertaken to meet certain deadlines for the completion of the investment. The granting of citizenship took place two years after the conclusion of the license agreement and therefore cannot be seen as any incentive for the company to make investments (which should have been included in the bidding documents anyway).
  • The applications were approved, although some did not even meet the standard criteria, which, for example, implied an immigration permit for a period of six months.
  • The intervention of the then Minister of the Interior (and now the Minister of Finance) should be considered as a priority in relation to other issues.

The naturalization of 64 persons associated with company "A" also took place with gross violations. In particular:

  • All of them were naturalized on the recommendation of the same Minister of the Interior, who also proposed to the Council of Ministers to grant citizenship to company executives.
  • It turned out that out of 64 people, 37 do not even work for company "A", but were naturalized as persons associated with it. Of those who worked, only a few had the necessary wages.
  • Some naturalized persons indicated false addresses as permanent residence in Cyprus. Upon inspection, it turned out that there are empty lots, parking lots or buildings under construction.
  • No sales documents have been released, although many years have passed. Many of them were canceled altogether, which indicates possible fictitious actions.
  • Almost all real estate transactions took place between specific companies that are related to each other. This reinforces the suspicion that fake transactions were involved in many sales cases.

On the same day that the Audit Bureau published its report, the Attorney General, who had called not to do so the day before, expressed the opinion that the content of the report exceeded the constitutional powers of the Auditor General.

The next day, a government spokesman said the following:

  • Once again, the genetic auditor is distracted, violates the provisions of the Constitution, despises and undermines other institutions. His generally inappropriate behavior will affect the prestige, authority, and independence of the institution he is called to serve.
  • The published "report" exceeds the constitutional powers of the auditor, who constantly interferes with the activities of the independent commission of inquiry and tries to anticipate its conclusions, ignoring the ethical norms and integrity of its members.
  • For reasons of obvious expediency, the "report" contradicts any principle of the law, is based on assumptions and unconfirmed evidence, is full of inaccuracies, distortions and contradictory statements, as well as arbitrary conclusions.

During the discussion of the aforementioned special report in the Parliamentary Audit Committee on December 10, 2020, the Minister of the Interior stated that the findings of the Auditor General are highly political and not technocratic on matters related to the responsibilities of the Audit Service.

He stressed that evidence must be provided with respect to the naturalization of 64 persons associated with Company A, otherwise the findings of the Auditor General are irrelevant.

On December 16, 2020, the Minister of Finance announced that his ministry had carried out a thorough examination of the findings of the special report of the Audit Service. And already on November 27, 2020, he noted that he considers the conclusions of the report to be completely misleading and inaccurate, that they are full of lies and conclusions that are completely untrue.

He also accused the Audit Service of exposing investors, who see that their companies are embroiled in a scandal and are a field of political discord.

On February 26, 2021, the Audit Service released a special report for the Ministry of Tourism, which mentioned the naturalization of eight people associated with the Ayia Napa port. Of these, three people fell under the period considered by the Investigative Committee. At the same time, a legal office, which is managed by the daughters of Nicos Anastasiades, took part in their naturalization. One of the directors of the developer company turned out to be the son-in-law of the current president.

On April 12, 2021, a government spokesman, commenting on the report, accused the auditor general of evading his duties. On April 15, 2021, the Minister of the Interior announced that the government followed the same procedure with respect to the naturalization of investors in Ayia Napa Marina as it did for the casino and Company A.

In a report dated October 24, 2020, the Audit Bureau noted that the planned inspections of the Accounts Chamber are of a different nature than the object of investigation by the Investigative Committee.

The members of the Audit Bureau emphasized the usefulness of the Investigative Committee in their statement dated October 26, 2020, in which they also expressed the opinion that the work of the Accounts Chamber and the Investigative Committee are not mutually exclusive, but instead can complement each other, in parallel and simultaneously. The same announcement was made in many public appearances by the press representative of the Audit Bureau.

Аудиторская служба Кипра прокомментировала отчёт Следственного комитета

On October 4, 2020, the Auditor General expressed his respect for the work of the Investigative Committee and confirmed his readiness to cooperate and assist in the investigation in every possible way.

On December 1, 2020, the auditor general gave evidence to the Investigative Committee.

The critical and controversial questions posed by all members of the Commission to the Auditor General make the Commission's conclusion all the more important, as it is clear that before most members came to it, they had a very different opinion.

This is supported by reference to pages 72-74 of the report, from which it follows that initially the majority of the Committee members took the position that the naturalization of some investors was not a violation.

This position, if finally adopted, would lead to a completely different conclusion regarding the legality of thousands of naturalizations, as well as to the obligation of the Council of Ministers to respect and uphold general principles of administrative law, such as the principle of legality, the principle of impartiality, the proper exercise of discretionary powers (which also defines what constitutes an abuse of power), the obligation to indicate the reasons for administrative actions, etc.

The above statement, in the opinion of the Audit Service, refutes the assertion that the parallel investigation or publication of reports may negatively affect the work of the Investigative Committee. If there was any influence, it was certainly positive if it was required to establish real facts and draw correct and reliable conclusions.

Аудиторская служба Кипра прокомментировала отчёт Следственного комитета

Finally, the following conclusions on the work of the Audit Service can be drawn from the detailed, well-structured and documented interim opinion of the Investigative Committee:

  • Full confirmation of the Audit Service's findings regarding dozens of illegal naturalizations of alleged executives of Company A, the company that operates the casino resort, and the company associated with Ayia Napa Harbor, has been received. This is the best response to a government that has attempted to covertly discredit the Audit Service reports and ascribe to the Auditor General inappropriate behavior, deviations from the constitutional framework, political motives, and considerations of expediency.
  • It is now clear that granting citizenship in this way can in no way be seen as an incentive for investment, especially when it comes to persons who have never worked in Cyprus. Obviously, the highest level of public interest cannot be used to cover up illegal activities.
  • There is full confirmation of the findings of the Audit Service regarding the illegal naturalization of family members of thousands of foreigners, as well as the conclusion that in many cases it was used as a Trojan horse for the naturalization of dignitaries and mafiosi.
  • It has been proven that the former Minister of the Interior (now the Minister of Finance) gave instructions to expedite illegal naturalization in some cases. So, on page 167 of the report, there is a footnote about the minister who gave the go-ahead to expedite the submission of the application after the intervention of the Metropolitan, which ultimately concerned a person associated with a casino in the occupied territories and cigarette smuggling. Also on pages 290 and 374 there is a link to an investor case that was initially rejected but then approved. By the way, the investor said that he faced health problems, because of which he could not fly to Cyprus to provide his biometric data. He was allowed to do this at the Cyprus Embassy in his country of residence. In the end, the applicant was naturalized despite violating the program criteria.
  • The Investigative Committee made conclusions similar to the Audit Service on 5 files, which the latter had previously studied.
The Investigative Committee, with thousands of files on foreign investors in their hands and a large number of support personnel who performed their verification, carried out a very important and significant work that our Service, acting on the basis of a sample of the frame, could not easily carry out to such an extent. On the other hand, the Investigative Committee did not deepen as the Accounts Chamber, in some aspects of the cases it considers (for example, in emerging tax issues), and this is logical, since the audits of the Accounts Chamber are conducted in a different way. This confirms our repeatedly expressed position that the work of the Accounts Chamber and the Investigative Committee did not exclude each other, but could complement each other and be carried out without any problems. Adhering to these principles, objectively and professionally, the Audit Bureau, always within the framework of the Constitution and relevant laws, continues their work. An audit of naturalizations approved after the adoption of the new Regulation on August 18, 2020 is being conducted now, which do not fall within the competence of the Investigative Committee, the Audit Bureau noted.

Read more:

Chronicles of the Cyprus Passport Saga:

Photos:, philenews
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