Cyprus bank seized by the US

Caput Lupinum · Jul 25, 2014

IN A short statement yesterday, the Central Bank of Cyprus announced the two-day suspension of operations by the Federal Bank of the Middle East (FBME), which had been placed under administration last week after being deemed a "primary money laundering concern" by the US Treasury.

But a late-night statement from the bank suggested that it was the victim of a hostile takeover and that the authorities seemed to have forgotten that it took part in a quarter million euro bond issue last year as part of the island's bailout.

"As a result (of the suspension), the FBME bank's Cyprus branch will not execute any customer payment or other instructions during this time," the CBC statement said.

The CBC also announced that Dinos Christofides had been appointed special administrator to the branch on July 21.

Last Friday, the central bank said it had taken control of FBME's operations in Cyprus, following a report from the Financial Crimes Enforcement Network of the US Treasury describing the bank as a "primary money laundering concern".

FBME, headquartered in Tanzania, had denied the allegations, saying the US Treasury had compiled the report without its input.

The US Treasury accused FBME, which though chartered in Tanzania operates primarily in Cyprus, of facilitating financial activity for transnational organised crime and Hezbollah.

In an announcement issued late last night, FBME Bank said that "given that the Central Bank of Cyprus action has occurred at a time when the bank maintains exceptionally high solvency ratios, it is natural for FBME to question whether the CBC current action is motivated by concern for its depositors, or by the financial requirements of the CBC itself and the institutions it supervises."

"In the bank's view, the CBC measure is a hostile takeover. FBME does not know who this action is intended to help but it is clear that it will not be to the benefit of FBME Bank, its depositors, its employees, or the Republics of Tanzania or Cyprus."

FBME Bank said that it is taking steps to engage with the US authorities regarding the report issued on July 15 by the US Department of the Treasury. "These measures will be managed through specialist legal advisors and independent forensic accountants," it said in the announcement.

"This measure is taken at a time when FBME's financial position is sound and fully in line with all relevant capital adequacy and solvency requirements of the European Central Bank. However, because of the announcement of the US Treasury, FBME has experienced difficulties in accessing financial markets via its correspondent banks. On the day of the CBC announcement FBME's short term liquidity ratio was 104%, sufficient to cover all depositors if required," it said, adding that FBME's legal counsel in Washington had already begun dialogue with the US Department of the Treasury and that "this conversation between legal counsel and the US Treasury is continuing and has included the engagement of a forensic accountancy examination, arranged at the request of FBME."

"This forensic accountancy investigation comes soon after a recently concluded a 10-man Anti-Money Laundering (AML) examination by the Central Bank of Cyprus, which was conducted with the assistance of PricewaterhouseCoopers from 17 June to 4 July. FBME has not been informed of any adverse findings emerging from this examination."

FBME added that it engaged KPMG Germany to conduct a full AML audit in April 2013 and the concluding report "made best-practice recommendations which have been subsequently implemented by FBME."

Feeling betrayed by the Cypriot authorities and concluding on a scathing note, FBME said that its "solvency and commitment to the Republic of Cyprus are a matter of public record, both before and after the crisis of 2013 during which FBME maintained its support of the Country through a 240m investment in short term treasury notes. This helped the Republic to meet its financial obligations while negotiating the MOU. Essentially, says FBME, it funded the Republic until it could be bailed-out."
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http://cyprus-mail.com/2014/07/24/c...for-2-days-banks-says-its-a-hostile-takeover/

SpacePete · Jul 25, 2014

Cyprus bank seized by the US
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I don't see anything about the US seizing the bank. Just a 2 day suspension of the Federal Bank of the Middle East (FBME) Cyprus Branch after allegations of money laundering.

Caput Lupinum · Jul 25, 2014

So it's just coincidental that the Cyprus central bank took action against FBME when the US treasury accused the bank of money laundering?

SpacePete · Jul 25, 2014

Caput Lupinum said:

So it's just coincidental that the Cyprus central bank took action against FBME when the US treasury accused the bank of money laundering?
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No idea, just trying to work out what is happening. Its bad bad news when things like this happen.

Here's some more news I found which might clear things up a little:

Cyprus plans to seek a buyer for the local operation of Federal Bank of the Middle East, a Lebanese-controlled lender, which has been placed under administration by the island's central bank following allegations of money-laundering.
FBME, which has a $2bn balance sheet, was accused by the US Treasury's financial crimes enforcement network (FinCEN) of facilitating a "substantial volume" of money-laundering through its network for many years.
...
The US has taken a more active interest in Cyprus in the past year following the confirmation of a sizeable offshore gas deposit in Cypriot waters adjoining another bigger gas find in Israeli waters. The discovery is seen by the US as a possible catalyst to help reunify the Greek and Turkish communities on the divided island, even though recently resumed inter-communal talks have made little progress.

But Cypriot authorities had been accused in the past of facilitating money-laundering by Russian and Ukrainian companies through subsidiaries based on the island to take advantage of low corporate tax rates and agreements on avoiding double taxation.

The Cyprus government has agreed to a proposal by the central bank to sell FBME's Cypriot assets in order to protect depositors and "demonstrate our commitment to safeguarding financial stability," a Cypriot official said on Tuesday.

FBME carried out the bulk of its activities through two branches in Nicosia and the port of Limassol. The bank did not offer retail facilities in Cyprus but its loan portfolio included more than 200m of lending to official Cypriot clients, mainly local government, according to people familiar with its operations. It was originally established in Cyprus in 1982 as a subsidiary of the Federal Bank of Lebanon SAL but is now registered in Tanzania.

http://www.ft.com/cms/s/0/bf5044a0-1240-11e4-a581-00144feabdc0.html
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And...

Customers panic as FBME Cyprus under central bank resolution
23 July, 2014
Customers and corporate depositors started to panic after the Central Bank of Cyprus issued an announcement late Monday saying it had issued a decree by which it has placed the Cyprus branch of FBME Bank Ltd. under a state of resolution.

http://www.financialmirror.com/news-details.php?nid=32888
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SpacePete · Jul 25, 2014

Key sentence from the Financial Times article:

The US has taken a more active interest in Cyprus in the past year following the confirmation of a sizeable offshore gas deposit in Cypriot waters adjoining another bigger gas find in Israeli waters.
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Hmmmmm.

gabrielpeters · Feb 17, 2015

It looks like FBME goes down the drain. 8 months without any movement. More restrictions come up and the customer service line take days to respond to your request.

Although the media doesn't have much information to share, many people worldwide are desperately looking for more information at FBME Bank News. FBME customers need to be informed, but when there is no news to share, it is difficult to constantly share the same things.

So what do we know about the current status of FBME Bank?
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FBME bank news

TingTing · Feb 17, 2015

"Had you come in last week, without warning, I wouldn't have been able to give you so much cash," he said in a low voice to the client withdrawing 20,000 euros. "We didn't have the money."

www.bloomberg.com/news/articles/2015-02-03/greeks-spooked-by-debt-clashes-put-cash-under-bathroom-tiles

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