FBME Bank has denied money laundering accusations and said it will cooperate with the Central Bank of Cyprus (CBC), which took over its administration on Friday after the US government named the lender as a financial institution of primary money laundering concern.
FBME said it was “shocked” by the content of the US Department of the Treasury notice “that sets out unexplained allegations of weak AML controls,” which, the bank said, it had not been given any opportunity to comment on or refute.
The bank denied the allegations, saying it had commissioned the German division of an international accountancy firm to carry out a detailed assessment into its operations and practices over the past two years.
BME, it said, was found in compliance with applicable rules on AML regulations of both Cyprus and the European Union.
“FBME Bank welcomes the involvement of its regulator, is cooperating fully with it and reiterates its absolute continued commitment to full compliance with applicable laws and regulations,” the bank said in an announcement posted on its website.
The CBC took over FBME’s Cypriot operations on Friday after the US government named the lender as a financial institution of primary money laundering concern.
FBME, formerly known as the Federal Bank of the Middle East, is based in Tanzania, but, according to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN), it transacts 90 per cent of its global banking business through branches in Cyprus.
“The Central Bank of Cyprus (CBC) announces that, based on the powers afforded to it by the relevant legislation, starting today (Friday), it has taken over the administration of the FBME Bank branch’s operations in Cyprus,” the CBC said in a three-line statement.
It was not immediately clear how long the Cypriot branch of the bank would be under central bank management. The legal statute invoked by authorities says “as long as the central bank deems it necessary.”
FinCEN said its action reflected its continuing commitment to take strong action against financial institutions willing to facilitate the laundering of funds for weapons proliferators, terrorists, and transnational organized criminals, an official statement said.
“FBME promotes itself on the basis of its weak Anti-Money Laundering (AML) controls in order to attract illicit finance business from the darkest corners of the criminal underworld.” FinCEN Director Jennifer Shasky Calvery said.
Calvery said FBME’s business plan “has been far too successful” but naming it as a foreign financial institution of primary money laundering concern will effectively shut the lender off from US financial system.
It “is a necessary step to disrupt the bank’s efforts and send the message that the United States will not stand by while financial institutions help those who intend to harm or threaten Americans,” Calvery said.
FBME’s business model is based on its weak AML controls, FinCEN said.
The lender changed its country of incorporation numerous times, partly due to its inability to adhere to regulatory requirements.
“It has established itself with a nominal headquarters in Tanzania. However, FBME transacts over 90 per cent of its global banking business through branches in Cyprus,” FinCEN said. “Finally, FBME has taken active steps to evade oversight by the Cypriot regulatory authorities in the recent past.”
FBME openly advertises the bank to its potential customer base as willing to facilitate the evasion of AML regulations.
The US authorities said FBME solicits and is widely recognized by its high-risk customers for ease of use.
“These facts, taken in concert with FBME’s extensive efforts over the years to evade regulatory oversight, illustrate FBME’s willingness to service the global criminal element.”
More details from FinCEN here