"There are elements about a Yugoslav and Russian influx, but to be honest there is a much bigger problem in Guernsey, Jersey, the Isle of Man, London and New York and next door neighbor Israel," said Eftekhar.
He said offshore banks like Barclay's and HSBC have installed their own internal money-laundering measures.
Despite denials, Cyprus was strongly associated with deposed Yugoslav leader Slobodan Milosevic's money-laundering during his rule.
On Dec. 1, 2000, the Yugoslav National Bank said US Treasury officials had traced US$1 billion of Milosevic's treasure chest to secret accounts in Cyprus.
And Cyprus sent 25 boxes of files of possible evidence against the disgraced Yugoslav leader to the UN war crimes tribunal at The Hague.
Yugoslav authorities allege Cyprus was a key money-laundering center for Milosevic during his rule, when an estimated US$4 billion vanished.
It was also regarded as a safe haven and laundering center for the Russian mob after the break up of the Soviet Union.
US authorities estimated that US$1 billion a month was being laundered through Cyprus in 1997 and 1998 in the post-Soviet era.
But earlier this year, the US Treasury declared Cyprus a "model" for the region because of the raft of anti-money laundering legislation now in place.
"We have introduced tougher legislation in our continued effort to clamp down on money-laundering," said government spokesman Michalis Papapetrou.
As part of the ongoing campaign Attorney General Alecos Markides has proposed the authorities should not wait for EU directives but go it alone and implement pioneering legislation to safeguard the island's "clean reputation."
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