Cyprus Mail
Cyprus

US Treasury rules FBME ‘still a money laundering concern’

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a final ruling imposing prohibition on the opening or maintaining of correspondent accounts for, or on behalf of, FBME Bank Ltd, the Central Bank of Cyprus (CBC) announced on Sunday.

The CBC took over the operations of FBME in 2014 after the latter was named a “financial institution of primary money-laundering concern” FinCEN.

The final FinCEN ruling says that information available to FinCEN “provides reason to conclude that FBME’s anti money laundering (AML) compliance efforts remain inadequate to address the risks posed by FBME, and that FBME continues to facilitate illicit financial activity”.

“Because of the ongoing money laundering and terrorist financing concerns that FinCEN has regarding FBME, FinCEN finds that FBME continues to be a financial institution of primary money laundering concern,” it says.

On July 29, 2015, FinCEN published in the Federal Register a Final Rule imposing a prohibition on U.S. financial institutions from opening or maintaining a correspondent account for, or on behalf of, FBME Bank Ltd. (FBME) under the fifth special measure of Section 311 of the USA PATRIOT Act, with an effective date of August 28, 2015.

On August 27, 2015, the United States District Court for the District of Columbia granted FBME’s motion for a preliminary injunction and enjoined the Final Rule from taking effect. On November 6, 2015, the court granted FinCEN’s motion for voluntary remand to allow for further rulemaking proceedings.

On November 27, 2015, FinCEN published in the Federal Register a Notice to re-open the Final Rule for 60 days to solicit additional comment in connection with the rulemaking, particularly with respect to the unclassified, non-protected documents that supported the rulemaking, and whether any alternatives to the prohibition on the opening or maintaining of correspondent accounts for FBME would effectively mitigate the money laundering and terrorist financing risk associated with FBME. FinCEN

According to the latest statement from FinCEN, after re-opening the comment period, it considered all of the special measures available to it under Section 311, as well as conditions rather than a prohibition under the fifth special measure, and concluded that a prohibition under the fifth special measure was the appropriate choice.

“Accordingly, FinCEN is issuing a final rule imposing a prohibition on U.S. financial institutions from opening or maintaining a correspondent account for, or on behalf of, FBME in place of the rule published on July 29, 2015,” it said.

“FinCEN’s imposition of a prohibition under the fifth special measure will guard against the international money laundering and terrorist financing risks that FBME poses to the U.S. financial system. This rule will take effect 120 days from the date of publication in the Federal Register,” it added.

FinCEN documents say FBME Bank Ltd. (FBME) was established in 1982 in Cyprus as the Federal Bank of the Middle East Ltd., a subsidiary of the private Lebanese bank, the Federal Bank of Lebanon. Both FBME and the Federal Bank of Lebanon are owned by Ayoub-Farid M. Saab and Fadi M. Saab.

In 1986, FBME changed its country of incorporation to the Cayman Islands, and its banking presence in Cyprus was re-registered as a branch of the Cayman Islands entity. In 2003, FBME left the Cayman Islands and incorporated and established its headquarters in Tanzania. At the same time, FBME’s Cypriot operations became a branch of FBME Tanzania Ltd. In 2005, FBME changed its name from the Federal Bank of the Middle East Ltd. to FBME Bank Ltd.

Full text of ruling

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