7 February, 2017
On 29 January 2017, local Cypriot newspaper Kathimerini, published an article in Greek, of which an exact translation can be found below.
“The mess up with FBME continues
Questions about the handling of the case by CBC. How the Resolution Authority responds to Kathimerini.
The handling of FBME by the CBC surfaces again. While the decision of the ICC is expected, media in the US indicate that the case will not be untangled easily. In particular, following the interim order from the Administrative court in Cyprus, dated 26 November 2017, with which the court ordered CBC to present documents to the FBME lawyers, referring to its communication with FinCEN, it has now become clear that CBC had indeed been in contact with FinCEN, before CBC said it was. Due to this court order, it has become known that in February 2015, CBC sent the report of an audit it conducted at FBME with PriceWaterhouseCoopers. Furthermore, according to information received at our newspaper, from correspondence presented by CBC, it is verified that a FinCEN officer was asking CBC whether it could present the report in question at the case going on in the US, while at the same time FINCEN claimed before the American courts that it did not have this report. The picture is completed with other information whereby PriceWaterhouseCoopers is said to have not compiled this report, but only taken part in the audit that was carried out. The whole matter began in Christmas of 2016 “when CBC asked the Cyprus courts for permission to basically shut down FBME, a permission that was never granted. It is still pending to date, while CBC believed that they would have been granted this permission within a week, and right now they are in a difficult position” a source said to Kathimerini. It is also added that following the administrative court’s interim decision in Cyprus (dated 29 November 2016) CBC should have given FBME lawyers access to all the correspondence it had with FinCEN” so that it could be shown that there were reasons FBME was accused, reasons that also constituted the accusation by FINCEN. Basically, CBC allowed it and not allowed it. When the correspondence was requested the answer was that it did not exist or that whatever was given to the lawyers was not complete. And when CBCs legal advisor found himself in a difficult spot before the Cyprus court, he said that CBC is not allowed to give more information for reasons of public interest”. It must be noted that FINCEN gave the same argument before the American courts in Washington.
The Audit and the Report
FBME’s basic argument is that there is not specific charge against it. According to sources that are aware of the report, it is claimed that nothing has been found against FBME and that this audit took place a few weeks before the bank was accused for the first time by FinCEN for money laundering. The question that arises is how FinCEN accused FBME before the report was compiled and was it made known that the said audit had been conducted and had found nothing against the bank. “When the report was requested the answer was that the audit was still in process. They froze 300 accounts which they released many months later, without closing even a single one”, it is noted by the same source. And then, since no account was shut down, they returned money to some depositors, while for the last two and a half years FBME remains under accusation of money laundering, the source says.
The Three Fronts
What is now anticipated to move the case forward is the arbitration in Paris where the owners of FBME are demanding over €1bn in damages. If FBME proves that it was illegally shut down, then it has the right to ask for damages. Alternatively, if CBC proves that it had sufficient evidence, then there will be no discussion for damages. This will be decided in Paris in the next few months. At the same time, there are court proceedings both in Cyprus and the US. Certain circles maintain that the Cyprus court is waiting to see what the US courts will decide, to use it as an excuse. “Alternatively, matters for the Cypriot judges will be more difficult as they will have to decide without having reference to other court decisions. Cypriot judges have no assistance from CBC who doesn’t submit any documentation to allow the judge to reach a decision”, it is noted.
Our newspaper contacted CBC, as the resolution authority, seeking answers to the aforementioned. Primarily, we asked whether all that was said above is indeed true, secondly, when the CBC sent the PwC report to FinCEN; if this report is signed by PwC, and what are the reasons of public interest that do not allow it to be publicized. Here is CBCs answer as it was given to us. “The article on the American website notes claims that were submitted by FBME Bank Ltd to the US court in Columbia, within the framework of the application that was submitted for the cancellation of FinCENs final rule which described FBME as an institution of primary concern for money laundering and prohibited American banks to do business with it. As far as we know, FinCEN was given a deadline to answer FBMEs claims sometime in the middle of February 2017 and, therefore it has not made any public announcements on this matter. Respecting the rights of both parties in this court proceeding, CBC does not wish to say anything at this time.”
The Kathimerini article is attached here.