U.S. Department of State Country Reports on Terrorism 2005 - Cyprus

Cyprus generally supported international efforts to block and freeze terrorist assets, implemented Financial Action Task Force (FATF) recommendations, and conformed to EU directives on counterterrorism. The Cypriot Government drafted legislation to restructure, modernize, and strengthen Cyprus' Central Intelligence Service (KYP) for the first time since the Republic was founded.

Cyprus' legal framework for investigating and prosecuting terrorist-related activity remained weak. There was some debate about possible amendments to the Cypriot constitution, but no political consensus has yet developed.

Although Cypriot law enforcement and intelligence services were generally cooperative on counterterrorism, legal and constitutional restrictions made it difficult for Cyprus to investigate and prosecute terrorism-related activities effectively. A recent change to evidentiary law allows the introduction of hearsay evidence in court proceedings, but information obtained through wiretaps and direct surveillance is prohibited. Further changes to strengthen the laws of evidence would make a real difference, but this likely would require amending the constitution. Meanwhile, Cyprus is working on a number of laws that could strengthen counterterrorism capabilities. These include new legislation aimed at modernizing and restructuring the Cypriot Central Intelligence Service (KYP) and a new law on arms brokering intended to bring Cypriot practices in line with an EU common position.

In July, the Government of Cyprus and the United States signed a ship boarding agreement under the auspices of the Proliferation Security Initiative. The Cypriot Parliament ratified the agreement in November. This was the United States' first such agreement with an EU member state. With the world's ninth largest commercial fleet, Cyprus is a strong ally in U.S. efforts to regulate international maritime traffic to reduce the risk of both WMD proliferation and terrorism. Cypriot Government officials made significant improvements to Cyprus' offshore industry regulation as a result of efforts to bring Cypriot law and practice into accordance with EU requirements. Cyprus was also an advocate for the completion of the Comprehensive Convention on International Terrorism (CCIT) and followed the EU position on the text.

The United States and Cyprus cooperated closely on issues related to terrorist finance and money laundering. The U.S. Financial Crimes Enforcement Network (FinCEN) and the Cypriot Financial Intelligence Unit (MOKAS) signed a Memorandum of Understanding designed to formalize and enhance their historically excellent relations.

Although Cyprus established an effective legal framework with regard to export controls – with Cyprus Customs as the lead enforcement entity – it did not establish a cohesive export control system. Police and customs officers need additional training in areas of basic inspection, equipment utilization, and familiarization.

"Turkish Republic of Northern Cyprus"

The United States does not recognize the "Turkish Republic of Northern Cyprus," nor does any other country except Turkey. That entity cannot sign treaties, international conventions and protocols, or other international agreements. Moreover, the area administered by Turkish Cypriots lacked the legal and institutional framework necessary to combat money laundering and terrorist financing effectively. Within these limitations, authorities in the Turkish Cypriot-controlled north cooperated with the United States in pursuing specific counterterrorism-related objectives.

The "Green Line" between northern and southern Cyprus is relatively porous. Turkish Cypriot authorities recently adopted new "legislation" strengthening controls against illegal immigration and tightening "citizenship" requirements. The large Turkish troop presence in the north acted as a deterrent to open Kongra-Gel/PKK activity.

In the north, Turkish Cypriot authorities lacked the legal and institutional framework to meet minimum international standards on combating money laundering and terrorist finance. Nevertheless, the Turkish Cypriot community took some steps to prevent terrorist financing within its banking institutions. The Turkish Cypriot "Central Bank," for example, regularly asked financial institutions to search for any assets linked to individuals or entities designated as terrorists by the United States and/or the UN 1267 Committee. Turkish Cypriot authorities also committed to prepare and implement new legislation to prevent money laundering and improve oversight of casinos, offshore banks, and currency exchange points.