Cyprus to strip citizenship of 26 investors

Bloomberg
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Cyprus to strip citizenship of 26 investors

CYPRUS is beginning the process of revoking citizenship from 26 individuals, including fugitive financier Jho Low, who obtained citizenship through the country’s investment-for-passport program.

The withdrawal process is focused on investors who obtained a total of 26 passports, including for family members, Interior Minister Constantinos Petrides told reporters in Nicosia.

Jho Low is among those who will be stripped of Cypriot citizenship, a senior government official said.

Cyprus Archbishop Helped Jho Low Get Passport, Politis Says

Low has been painted by prosecutors as the mastermind behind the 1MDB scandal, which saw more than $4.5 billion allegedly misappropriated from the Malaysian investment fund. He recently struck a deal with the U.S. Justice Department to return almost $1 billion of assets to resolve forfeiture cases linked to him. He has consistently denied any wrongdoing.

The decision to revoke Cypriot citizenship will cover nine Russians, eight Cambodians, five Chinese, two Kenyans, one Iranian and one Malaysian, the government official said.

Cyprus will also review all individuals who’ve obtained some 4,000 passports under the program, while the government plans to ensure strict observance and implementation of the investment program framework, the minister said.

The program has benefited Cyprus and the country needs to safeguard its image, Petrides said.

Reporting by Georgios Georgiou and Paul Tugwell

Bank foreclosure: outline of the legal framework

Christiana Achilleos
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Bank foreclosure: outline of the legal framework

RECENTLY, heated discussions have been going on between bankers, Cyprus property owners and borrowers about the new foreclosure procedure being followed by Banks in Cyprus and notices that have been sent by Banks in Cyprus to borrowers for this purpose.

This discussion, which is partly based on rumours and misinterpretation of the Law, has caused stress and anxiety to a number of borrowers.

It is true that, in 2014, new legislation came into force in Cyprus, which amended the Transfer and Mortgage of Properties Law number 9/1965, expediting the foreclosure procedure in Cyprus.

According to the amending law number 142(I)/2014 and the subsequent amending laws number 87(I)/2018, 118(I)/2019 and 138(I)/2019, Banks in Cyprus can sell mortgaged properties via auctions and e-auctions after 120 days of arrears.

The Bank cannot proceed with the foreclosure of all properties for the purchase of which a housing loan has been granted by the Bank to the borrowers, but which is not secured by a registered mortgage.

The foreclosure procedure can be used only for a “mortgaged property”; namely, a property on which there is a registered mortgage in favour of the Bank.

It is well known that many properties in Cyprus do not have a separate Title Deed. The finance on such properties is usually a housing loan, not a mortgage. Such loans are secured by the assignment of the sale agreement to the Bank and often not by a registered mortgage.

Sometimes housing loans are also secured by a mortgage on a share of the land, upon which the property is constructed, with such mortgage having been registered with the developer’s consent. The provisions of the Law do not apply in cases where the Bank has a registered mortgage on a share of the developer’s land. Although the Bank can send out Notices in compliance with the Law, the Bank cannot proceed with the foreclosure of the borrower’s property as the mortgage is not registered on the property itself.

Borrowers who are in dispute with the Bank regarding their housing loan should be warned that as soon as they accept the transfer of the Title Deeds for their property in their names, the Bank will register the mortgage on the Title Deeds. The borrowers’ housing loan becomes a mortgage. The Bank will be then entitled to proceed with foreclosure of the mortgaged property.

Our assistance is offered to examine the Title Deed situation for borrowers, so as to ascertain if the property can be subject to foreclosure.

If there is a registered mortgage on the property, which is the subject of the housing loan, the Bank can proceed with its foreclosure, following the below procedure:

  1. After 120 days of arrears, the Bank can send out Notice “I” to the borrowers, asking the borrowers to pay the outstanding debt and informing them that the Bank will proceed to foreclosure.
  2. If the borrowers do not comply with the payment of the outstanding amount within the deadline stated in Notice “I”, the Bank can progress the foreclosure procedure, after serving on the borrowers Notice “J” accompanied by a statement of account, indicating the outstanding balance of the loan, interest and cost, and asking the borrowers to pay the outstanding amount within thirty (30) days.
  3. If the borrowers do not comply with the payment of the outstanding amount within the deadline stated in Notice “J”, the Bank can proceed with the service of the Notice “K” on the borrowers, informing them that the Bank will sell the mortgaged property via auction.
  4. The Bank will then proceed with the forced sale of the mortgaged property and use the proceeds of the forced sale against the loan balance.

The borrower or any other interested party can file an Application-Appeal before the Court, where the mortgaged property is located, asking the Court to set aside Notice “K” only for any of the following reasons:

a. The notice does not comply with the provisions of the law.
b. The notice has not been served properly.
c. The notice has been sent before the expiration of the thirty (30) days provided by Notice “I”.
d. An interim order has been issued by virtue of article 32 of the Courts’ Law of 1960 in favour of the borrowers (in a legal action filed by the borrowers against the Bank or in a counterclaim filed by the borrowers against the Bank).
e. An order has been issued for the security of the borrower by virtue of the Insolvency of Natural Persons Law.
f. The borrower has been accepted in the new government debt relief scheme for debts secured on principal private residences, known as Estia, provided that they comply with the eligibility criteria of the said scheme.

The most common reasons used to have a Notice “K” set aside are the existence of an interim order (reason d.) and Estia (reason f.).

As regards reason d. above, the borrowers can file an application before the Court, asking the Court to issue an interim order prohibiting the Bank from proceeding with the foreclosure process (a prohibition order), until the final adjudication of their claim or counterclaim issued against the Bank.

There are a number of conditions to be satisfied according to Cyprus law and caselaw as well as the principles of equity, in order to achieve the issuance of prohibition orders in Cyprus.

The borrowers will need to prove that they have a strong case against the Bank, that they have good prospects to succeed in their claims against the Bank and that, unless the prohibition orders are issued, it would be impossible for justice to be served at a later stage.

The borrowers will need to prove that, based on the balance of convenience, it is just and fair for such a prohibition order to be issued, otherwise the borrowers will suffer irreparable damages.

Borrowers have been successful in achieving the issuance of such prohibition orders for their mortgaged homes, but their success has not been extended to holiday homes or plots of land.

As regards reason f. above, the borrowers can apply to be accepted in the new government debt relief scheme for debts secured on principal private residences, known as Estia, provided that they comply with the following criteria:

  1. The loan agreement is secured with a 1st mortgage on the primary residence of the borrower, with a market value which does not exceed the sum of €350,000.
  2. At least 20% of the outstanding balance of the borrower’s loan was in arrears for more than 90 days prior to 30 September 2017 and up to the date of submission of the Estia application.
  3. The total household income of the borrower for the years 2017 and 2018 should not exceed the following thresholds:

– €60,000 for family with at least four dependent children
– €55,000 for family with three dependent children
– €50,000 for family with two dependent children
– €45,000 for family with one dependent child
– €35,000 for family without dependent children
– €20,000 for single parent households

  1. The household net assets of the borrower, excluding the primary residence, should not exceed the 80% of the market value of the primary residence (to be decided based on the market prices for the years 2016, 2017 and 2018 in accordance with the valuations of the Estia) and the threshold should not exceed the sum of €250,000.
  2. Any cash or deposits that exceed €10.000 or 20% of the net household assets of the borrower, whichever is greater in value, which do not secure any credit facilities of the borrower, will be set-off against the non-performing loan prior to the restructuring process.
  3. The borrower must be a citizen of the European Union with permanent and continuous residence in the E.U. since 2013. Continuous residence is not interrupted if the borrower was abroad:

(a) up to one (1) month per year,
(b) for health reasons,
(c) temporarily for studies.

Such an application for submission to Estia, based on the above criteria, may be submitted within the period of 3 September 2019 – 15 November 2019. Although there are current discussions to extend this deadline because a small number of debtors applied, the deadline has not been extended yet.

The final approval of the Estia applications will be provided by the Ministry of Labour, Welfare and Social Insurance that has been appointed by the Council of Ministers, on 1/11/2018, as administrator of the Scheme.

Once the borrower is accepted in Estia, the Bank will not be able to proceed with the foreclosure of its primal residence which is subject to the mortgage.

Our office can offer assistance to any borrower wishing to make such an application.

Our law firm specializes in banking litigation and urges any borrowers, who wish to take any action in connection with the above or to fully understand how the foreclosure law and Estia applies to them, to contact us.

Christiana Achilleos
Senior Litigation Lawyer
L.G. Zambartas LLC

Minister downplays citizenship scheme’s value

Jean Christou
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Minister downplays citizenship scheme’s value

FINANCE minister Harris Georgiades said on Tuesday that the importance of the citizenship by investment programme should not be overestimated.

Speaking at The Economist conference in Nicosia, the minister said both those who supported the programme and those who disagreed “try to create a picture that we depend on it”. He added: “This is not true.”

The programme, which was introduced in 2014 when economy was in deep recession, is said to have generated €6 billion by the end of 2018 and that some 4,000 Cyprus passports had been issued to third country nationals that invested in the country.

“The impact is positive but relatively small,” insisted Georgiades. “I must admit in the initial years we made some isolated mistakes. We have to acknowledge it. We made some corrective moves from the beginning of this year including more credible audits.”

The citizenship by investment programme had come under attack in recent weeks, after it was reported that eight Cambodians, with close links to their country’s authoritarian regime had been granted passports.

At the weekend it was revealed that Malaysian businessman, Jho Taek Low, wanted by the authorities of his country and elsewhere, had been granted a passport in 2015. On Monday President Anastasiades said that Low’s passport should be revoked.

Earlier this year, the government, responding to criticism about lax procedures, introduced much tougher criteria for the citizenship scheme and has also decided to use the services of three companies to carry out due diligence checks on all applicants.

Georgiades said that members of the private sector, which deal with the citizenship scheme, were complaining the new strict framework had killed the programme.

“I do not agree with this. We have to understand the good name of our country is more important than selling another villa,” Georgiades said.

Small rise in property sales

Nigel Howarth
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Small rise in property sales

Small rise in Cyprus property salesOCTOBER saw a small rise of less than 1% in property sales with the total number of contracts deposited reaching 813 compared with the 811 contracts deposited in October 2018 according to the latest official figures published by the Department of Lands and Surveys.

Although property sales in Larnaca and Nicosia rose by 38% and 26% respectively, they fell by of 21% in Limassol, 12% in Famagusta and 6% Paphos.

Total Property Sale Contracts – 2018/2019 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2018 146 96 126 117 153 146 176 91 118 145 161 131
2019 161 194 131 169 213 145 174 103 137 183
Famagusta 2018 48 52 40 52 79 61 61 50 45 57 47 48
2019 53 48 45 96 87 43 49 30 40 50
Larnaca 2018 112 99 116 83 113 133 112 94 121 116 143 103
2019 114 125 118 140 173 102 157 93 102 160
Limassol 2018 225 256 314 246 282 338 314 262 251 289 344 290
2019 251 256 287 428 546 219 286 196 240 228
Paphos 2018 164 163 172 157 201 180 233 156 152 204 230 230
2019 187 211 185 224 404 205 230 166 173 192
Totals 2018 695 666 768 655 828 858 896 653 687 811 925 800
2019 766 834 766 1057 1423 714 896 588 662 813

Property sales – year to date

During the first ten months of 2019, the number of sales has risen by 14% to reach 8,549 compared to 7,517 in the corresponding period last year.

Although sales have declined by 1% in Famagusta, they have risen in the remaining four districts.

In percentage terms, Nicosia leads the way with sales rising 23% to reach 1,610 compared with 1,314 in the first ten months of 2018. Paphos, which is favoured by overseas buyers, has seen sales rise by 22%, followed by Larnaca and Limassol, where sales have risen by 17% and 6% respectively.

In terms of the total number of property sales, Limassol is in first place with 2,937 followed by Paphos with 2,177, Nicosia with 1,610, Larnaca with 1,284 and finally Famagusta with 541.

Fugitive businessman holds Cyprus passport

Editorial
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Fugitive businessman holds Cyprus passport

REPORTS have emerged that fugitive businessman Low Taek Jho or Jho Low is now moving around under a Cypriot passport.

According to Cyprus based Greek-language newspaper Politis, the businessman linked to the 1Malaysia Development Berhad (1MDB) scandal had also been a Cyprus citizen for the past four years.

The report, reproduced by the Sarawak Report blog, said Low had obtained the passport through a well-known citizenship and passport broker in 2015.

The firm had previously commissioned a passport from the Caribbean island-nation of St Kitts & Nevis.

According to Politis, Low had arrived in Cyprus on Sept 18, 2015 and obtained his passport through the council of ministers two days later under an investment scheme after investing in some property in the Famagusta district said to be worth €5 million (RM23.2 million).

He was not wanted at the time in connection with the 1MDB scandal. Interpol did not issue a red notice until a year later.

The claim that the fugitive businessman holds a passport and citizenship from the Mediterranean nation comes days after a local portal reported that Low had been offered asylum in the United Arab Emirates and had been shuttling between the Middle East and Europe since June.

However, Inspector-General of Police Tan Sri Abdul Hamid Bador said it was “illogical and impossible” for the fugitive businessman who is wanted for the “crime of the century” in the 1MDB scandal, to enter the UAE so easily.

The top cop said this as the middle-east nation has a very tight security system at its airport and the police over there work very closely with their counterparts in Malaysia.

It was reported that the US Justice Department had reached a deal with Low to recover almost a billion dollars in assets that was misappropriated from 1MDB.

The deal did not include an admission of guilt or wrongdoing and isn’t tied to the criminal action against him.

Low faces charges in the United States as well as Malaysia over his alleged central role in the scandal.

Malaysian and US investigators say that at least US$4.5 billion was misappropriated from 1MDB by Low and other high-level officials of the fund and their associates. Wall Street bank Goldman Sachs Group Inc, which acted as an underwriter to the fund, has also been embroiled in the scandal.

© 2019 New Straits Times, New Straits Times Press (M) Bhd.

Archbishop intervened in naturalisation of Malaysian financier by Melissa Hekkers

The report, which was published earlier today in in-cyprus.com, notes:

It appears that the naturalisation of Malaysian financier, Jho Low, wanted internationally for fraud was materialised with the intervention of the Archbishop. According to a report in the Politis Newspaper in September 2015, the Archbishop had sent two letters to then-Interior Minister Socrates Haskikos, requesting the naturalisation of the Malaysian national, citing discussions about investing in church land.

According to the report, Jho Taek Low came to Cyprus, attained the Cypriot passport and citizenship and disappeared after investing 5 million euros in a villa in Ayia Napa.

It’s worth noting that the Malaysian national was wanted for financial scandal at the time he was granted citizenship, but this did not prevent the Council of Ministers from unanimously approving his naturalisation.

President wants passport of Malaysian businessman revoked by Elias Hazou

The report, which was published in the Cyprus Mail, notes:

Authorities should revoke the passport issued in September 2015 to a Malaysian businessman, now wanted by authorities in his country and elsewhere, President Nicos Anastasiades said on Monday.

“Absolutely yes,” Anastasiades told a reporter asking about the case of Malaysian fugitive Jho Taek Low that broke over the weekend.

But first, he added, the necessary probe must be carried out, so that due process is followed to justify any revocations.

 

ESTIA debt relief scheme failing big time

Editorial
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ESTIA debt relief scheme failing big time

Cyprus ESTIA debt relief scheme failing big timeCyprus’ ESTIA scheme to subsidise borrowers with toxic mortgages is failing to generate the expected interest with less than 3% of loan defaulters applying for government help.

ESTIA was launched in September in an attempt to reduce the island’s bad debt mountain.

Analysts attribute the failure of the government plan to a large number of strategic defaulters who chose not to take part in the scheme as they feel there is no substantial risk of losing their primary home.

The rescue scheme drawn up by the Ministry of Finance enables struggling borrowers to repay their loans by subsidising a third of the repayment of a restructured loan.

ESTIA covers borrowers that had non-performing loans up until September 30, 2017. The plan only applies to vulnerable borrowers whose market value of their home does not exceed €350,000.

However, according to analysts, favourable legislation in place to protect a borrower’s primary home and the continued political pressure to loosen the already weak criteria make integration into the ESTIA scheme unnecessary, rendering the project a failure.

According to data quoted by online news site Stockwatch, so far, only around 350 borrowers, out of the estimated 12,000 who meet the criteria, have applied.

These 350 applications which have been approved correspond to loans of around €110 million from a total toxic reservoir of €3.4 billion estimated to be eligible for the scheme.

Around 90% of the 350 applications come from borrowers with loans at the Bank of Cyprus and the former Co-op Bank.

University of Cyprus finance professor Sofronis Clerides told Stockwatch that limited interest in the scheme is a clear indication that it is not as attractive to borrowers as the government initially thought.

“This does not mean that the plan has to change. On the contrary, it is already very generous towards defaulting borrowers. What needs to be done is to make the alternative, which is not paying, less attractive.”

Clerides said that while the ESTIA scheme is the carrot, the stick is nowhere in sight. As he explained, the stick would be the fear of divestment of the homes of those who do choose not to join the scheme and continue to be inconsistent with their obligations.

“Otherwise few will choose to pay part of their debt when they can pay nothing,” said Clerides.

Also finding interest in the generous scheme disappointing, CIIM finance professor George Theocharides feels that the complexity of the scheme and the inadequate information provided to borrowers by the state and banks may have played their part.

However, Theocharides did note that there might be a high number of strategic defaulters who do not wish to reveal other assets.

He said more time should be given for people to understand what the scheme is about; procedures need to be simplified while introducing measures to reduce the moral hazard this scheme may pose to society.

Stavros Zenios, a professor of economics at the University of Cyprus, notes that the results are unsatisfactory, pointing out in a tweet, that the scheme is “failing BIG time.”

Strategic defaulters

He said that only 3% of the NPL problem is expected to be resolved through the ESTIA scheme at this rate.

“This would mean that either the remaining 97% are strategic defaulters who are not being discouraged by existing legislation, or that the ESTIA scheme does not offer real help to those in need.”

Zenios advised the government and the finance minister to take into consideration criticism made by economists regarding weaknesses of the scheme.

“Unfortunately, my colleagues’ fears have been verified and I am very afraid that even now the finance minister will not lend an ear, as he is more concerned about proving that all is well as he prepares to depart from the ministry at the end of the year.”

While agreeing that ESTIA will not function as the carrot if there is no stick, analyst Fiona Mullen argues the scheme is also failing due to complex procedures.

The director of Sapienta Economics thinks the incredibly low take-up has other causes too.

“Of course, the lack of punishment has played its role, but procedures are too complex for a large group of borrowers. Applying for ESTIA requires potential beneficiaries to fill in a 37-page form. One must ask how skilled at filling out forms are the most vulnerable borrowers?” she commented.

She said the forms must also be accompanied by a large number of supporting documents, acquiring these documents takes time and money, especially with e-government being non-existent.

“Are the most vulnerable, expected to have the time, knowledge, skills and money to acquire all of these documents?”

Matters become more complicated when the property mortgaged is jointly owned, and there are potential guarantors involved.

Mullen said there is yet another aspect to be considered which touches upon gender equality.

After doing research she has concluded that there might be an issue with women’s access to information.

“Usually the paperwork is left to the men, even if the loan is in their name. This could mean that women do not have the means and the necessary information to apply.”

The ESTIA scheme is estimated to cost the state some €815 million over 25 years, allocating a budget of €32 million each year. The total value of restructured loans eligible for the scheme amount to €3.4 billion.

Applicants must also meet income criteria to be eligible to join the scheme:

Total family income should not exceed €60,000 for each calendar year for a family of at least four children, €55,000 for a family of three dependent children and €50,000 for a family with two, and €45,000 for a family with one dependent child and €35,000 for a family with no dependent children and €20,000 for a household of one.

The same criteria apply to single-parent families.

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