By Staff Reporter
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.”