In this interview, International Investment's Pedro Gonçalves talks with Marios Skandalis, director group Compliance at Bank of Cyprus, as he details the banks' six year journey from a public bail-in requiring depositors to take a 50% haircut to regaining the customers' trust and gives his views on the upcoming register of Ultimate Beneficial Owners in Cyprus and what will happen to British expats on the island after Brexit.
In 2013 the Bank of Cyprus required a public bail-in and ever since it has taken a more aggressive approach towards money laundering. What has been done in the last years in terms of compliance?
Marios Skandalis: The Bank of Cyprus is the undisputed trailblazer of Cyprus' banking sector, and this approach to reforming, reshaping and remediating our compliance framework has only cemented our market-leading position. We have not followed the traditional approach taken by some institutions elsewhere of simply enhancing existing policy frameworks and promoting this as an entirely new product. On the contrary, we have made sure to enhance the real effectiveness of our compliance programme and have combined it with an enhanced policy framework.
All relevant stakeholders in Cyprus including the banks, have pre-emptively taken the relevant measures to ensure no negative impact from a no-deal Brexit and as such our British expats clients do not have to worry to this respect"
We have built a robust and fully independent compliance function and ensured that we have effective monitoring measures in place by utilizing state-of-the-art financial crime monitoring systems. We have also built relevant awareness about compliance into all levels of the institution by designing AML courses with an obligatory assessment to be taken by all participants. All members of staff are required to take these training/assessment courses including the members of the Board of Directors. With the deployment of specialized teams of AML auditors, we provide ongoing assurances to all internal stakeholders as to the robustness and effectiveness of our remediated compliance function through regular and ongoing anti-money-laundering visits to all branches. Above all, we have infused transparency and integrity into all forms of our operation, as well as into our communications with all stakeholders and regulators.
There was a reputational backlash when the Bank of Cyprus had to seize deposits from savers during the crisis. How has it worked to regain the customers trust?
MS: Obviously this deposits' haircut was not the Bank's decision, but an extraordinary harsh measure imposed for the first time in the European Union by Troika (i.e. the European Commission, the European Central Bank and the International Monetary Fund). Indeed, just six years ago, the Bank of Cyprus looked to be on the brink of collapse and although this development managed to avoid our Bank's collapse, the crisis left our Bank's reputation in tatters.
This experience made us in Bank of Cyprus realise that our credibility and customer trust could only be regained by changing our mind set. And there was no other way of doing this than to become more transparent and more committed on ethical values in conducting our business. This meant that as well as adhering to local laws and regulations, we have engaged in this spectacular transformation by adopting best international standards and practices. We consciously elected to transform our culture rather than just our compliance framework - this is what marks us out from our competitors not only in Cyprus, but also in South-East Europe. We have adopted policy provisions from robust international frameworks, such as the USA Patriot Act, and have put in place restrictions only found in highly governed institutions.
What's more, the Bank of Cyprus is the only institution in the country that has performed a gap analysis and has adopted all provisions of ISO 19600 (compliance) and ISO 37001 (anti- bribery). Today, we are the only institution in the region that is concurrently governed by three different corporate governance frameworks (the UK Corporate Governance Code, the Corporate Governance Code of the Cyprus Stock Exchange, and the Central Bank of Cyprus' Governance Management Arrangements Directive) in four different European jurisdictions (Cyprus, Ireland, the UK and the EU).
Through this immense remediation and the enhancement of our compliance & governance function, we significantly de-risked from specific high-risk jurisdictions to the extent of more than 60% since year 2014. At the same time, we have been able to strengthen our leadership position in the local market, recording an increase of 70% in deposits value, as well as in all other European Union countries, leading to an overall increase of 45%.
In other words, we have successfully regained our valued customers' trust and maintained our leadership, not through empty words and promises, but through our hard work and uncontested results which confirm Bank of Cyprus sustainable success and resilience.
How do you see the implementation of the upcoming register of Ultimate Beneficial Owners in Cyprus?
MS: The live operation of the Ultimate Beneficial Owners' registries in Cyprus planned to take place in the first quarter of year 2020, is just a small step to a higher degree of transparency and a development that confirms the new culture of Cyprus as a highly compliant and transparent jurisdiction. In this area, the expected the quality of Cyprus' UBOs registry will certainly supersede that of any other country in the European Union. This is because the regulatory framework in Cyprus compels banks not just to recognize and record UBOs for all of their clients, but actually hold obligatory face-to-face meetings with them.
Care should be demonstrated, however, as to the accessibility to these registries so that we do not have any adverse results where, instead of promoting transparency, it could be seen as a jurisdiction promoting cannibalization of personal data. For this reason, accessibility to these registries should solely be granted to regulatory authorities as well as any other person (physical or legal) that bears a legitimate interest in accessing them.
With so many Britons choosing to live in Cyprus, without a doubt there are Brit expats among the Bank of Cyprus customers. What would you say to them, as fears grow amidst a possible no-deal Brexit?
MS: Ties with the United Kingdom have and will always be very close both in terms of culture as well as professionally. Even the base of the legal system in Cyprus is the British common law.
Cyprus is probably one of the very few jurisdictions that will bear the least, if any, adverse impact even from a possible no-deal Brexit. The reason is because of the similarities in the culture described above which enabled a high degree of cooperation as reflected in the Cyprus economy (i.e. UK tourists visiting Cyprus, Cypriot students electing UK universities for their studies, UK qualifications dominating key professions in Cyprus like accountancy etc.). Because of this, all relevant stakeholders in Cyprus including the banks, have pre-emptively taken the relevant measures to ensure no negative impact from a no-deal Brexit and as such our British expats clients do not have to worry to this respect.