The controversy centers on public claims made in mid-2025 by Paphos Mayor Phedonas Phedonos, who argued that Cyprus had shifted from a peripheral node in illicit finance to an active laundering center for Latin American drug cartels. 

He said Mexican and Colombian cartel proceeds were entering the island through Cyprus-based foreign exchange trading companies. 

According to the mayor, these funds were moved via layered corporate structures designed to obscure origin and ownership. 

The mayor did not cite court cases or name companies, but he characterized the activity as systematic, warning that Cyprus had become “part of an international money-laundering network.”

Phedonos’s intervention carried weight because it came amid heightened sensitivity over Cyprus’s financial credibility. 

He claimed that FX firms were exploiting complex arrangements involving shell entities across Latin America to recycle illicit cash into Europe. 

While he did not detail mechanisms, online commentary amplified terms such as “mirror trading” and alleged an “open cheque to the President,” language that circulated widely on messaging platforms. 

The mayor urged authorities to examine fund inflows from high-risk jurisdictions and argued that the issue extended beyond compliance failures to governance and oversight.

Cyprus’s primary financial watchdog, the Cyprus Securities and Exchange Commission (CySEC), responded within weeks. 

The commission said it was collecting information from domestic and international partners to assess whether further action was warranted. 

CySEC emphasized that licensed FX firms operate under European Union rules, including MiFID II and EU anti-money-laundering directives.

As of late 2025, the regulator confirmed no enforcement actions, prosecutions, or fines linked to the mayor’s claims. 

No cases had reached court, and no formal breaches were announced. 

The allegations resonated because Latin American cartels have a documented history of laundering funds through sophisticated financial channels.

Colombian groups, in particular, used the Black Market Peso Exchange in the 1990s and 2000s, while Mexican cartels diversified methods in the 2010s.