23 December 2017
Recently there have appeared in the press various wholly false and outrageous allegations against FBME Bank, which is owned by FBME Ltd. For example, we have recently been accused of banking Manafort and Gates, who have never had accounts at FBME and who are widely known to have accounts with Bank of Cyprus. The Bank believes these falsehoods have been deliberately generated by people with a commercial axe to grind against FBME. The timing of this egregious smear campaign started in earnest immediately following the final hearing of a Bilateral Investment Treaty arbitration in June 2017 between the Saab Brothers and the Republic of Cyprus at the International Chamber of Commerce in Paris, which we are currently awaiting the outcome of.
FBME has not engaged in money-laundering and was never accused of such until the FinCEN allegations. The Bank has acted in compliance with all the EU and Cyprus Anti-Money Laundering directives; a fact corroborated by multiple third party auditors. FBME implemented and operated the most sophisticated Anti-Money Laundering software, which was also being used by other major banks. The Bank carried out all the necessary Know Your Client checks, which were then audited by third party auditors, including supervisory examination by the Central Bank of Cyprus.
FBME’s account opening process and monitoring of clients after opening their accounts was in line with international best practice standards as well as all relevant EU AML laws. FBME conducted initial due diligence at account opening, and ongoing due diligence for all of its clients, as required by Anti-Money Laundering directives. This process included identifying the source of wealth, obtaining business plans, conducting World-Check searches on relevant parties, screening relevant parties against sanctions lists, identifying the ultimate beneficial owner (UBO) of corporate customers, and conducting internet searches of relevant parties for any negative media.
Suggestions that FBME had a culture in which secrecy was paramount and staff were encouraged to evade money laundering protocols to protect nefarious clients is absolutely false. FBME performed periodic due diligence on all customer accounts. Any high-risk customers (including Politically Exposed Persons (PEPs)) were reviewed annually and normal-risk customers were also reviewed according to the Regulatory mandates. All high-risk customers required approval by the Money Laundering Compliance Officer (MLCO) or Alternate MLCO prior to account opening. Furthermore, the MLCO had to approve any changes to risk classifications. FBME monitored all incoming and outgoing transactions via HotScan and MANTAS, which are recognised AML solutions for transaction screening, customer scanning and fraud detection. Suspicious transactions were reviewed in accordance with industry standard processes. Any insinuation of lacklustre compliance at FBME is false and wholly denied.
The outrageous claims that FBME acted for terrorists, or knowingly acted for any sanctioned individuals, are false and deliberately damaging. Unfortunately, the Bank’s appeals in the US Courts were not heard on the merits. FinCEN have never released the classified evidence they were supposedly relying on.
Suspicious Activity Reports (SARs) were filed by FBME’s US correspondent banks and highlight any transactions that may appear suspicious to them. These reports are generated by all correspondent banks and are not unusual in themselves. FBME’s SARs record for the period 2013-2014 has been publicized because it coincided with the time at which the Cypriot Government had issued capital controls on all Cyprus banks. This restrictive financial environment meant that clients would often transact in smaller sums, below the specified thresholds, simply due to the ‘restrictive measures’ decrees. This should not be misinterpreted. Those transactions were mandated by the transfer limits imposed on all banks by the Central Bank of Cyprus. It has also been claimed that FBME had $1.2 billion of SARs transactions reported on it by FBME’s correspondent banks between 2006 and 2014. While this number appears large, FBME carried out a total of over 900,000 transactions, with a value of over $230 billion during this period. Therefore the $1.2 billion transactions which were reported as possibly appearing suspicious represent less than 1% of FBME’s total dollar transaction amount. FBME attempted to better understand FinCEN’s rationale in relying on the $1.2 billion amount to justify its implementation of its Final Rule. However, FBME was not allowed to view, benchmark or test the alleged SARs transactions which FinCEN allegedly faulted the bank for. A 1% suspicion is not the hallmark of a bank of “primary money laundering concern”.
FBME Card Services was a wholly owned subsidiary of the Bank, which operated and was fully licensed by the Central Bank of Cyprus. Any card project was only commenced after FBME Card Services had received specific approvals from either VISA or MasterCard and following full disclosure to the Central Bank of Cyprus.
FBME Card Services had one negative experience with specific issues relating to processing online transactions between 2009 and 2010. Whilst the isolated problem was not exceptional in the industry, the Board took immediate action by replacing the senior management team, including making the then CEO redundant, and undertaking a remedial programme recommended by Global Vision Group, a certified VISA contractor. Following the successful and self-imposed remediation, VISA reinstated FBME Card Services’ licence. Audits by RiskSkill and SightSpan also confirmed that the Company was fully compliant with all the relevant regulatory rules and directives. Furthermore, the head of Anti-Money Laundering at the Central Bank of Cyprus carried out an intensive audit of FBME Card Services and awarded it a full Payment Institution license in 2014.
Both the Bank and Card Services regularly reported suspicious clients to the local Financial Investigations Unit, MOKAS. One specific report was on a client whom it suspected of carrying out miscoding. This is when a merchant states that they provide one online service, when in reality they provide another. The Bank and Card Services reported these merchants to MOKAS on two separate occasions in July and then again in October 2012. Unfortunately, MOKAS closed the file on both occasions. This left both the Bank and Card Services with no choice but to sue the merchants for breach of contract and thereby only pay the merchants’ commission to the court. This action by the Bank and Card Services is illustrative of the lengths FBME would go to in reporting suspicious activity, and demonstrates that neither the Bank nor Card Services would tolerate any illegal activity by any of its clients and/or merchants.
The CBC has targeted FBME for more than a decade, and misled FinCEN to its own ends. Shortly after the FinCEN notice was delivered to FBME, the CBC fined Hellenic Bank EUR 1.1m for failing to comply with AML, ATFL and KYC requirements. Hellenic Bank then closed over 8,000 accounts to improve compliance – more accounts than FBME had clients.
FinCEN’s conclusions about FBME seem based on secret information provided by the CBC, a regulator that appears to openly discriminate against FBME. The CBC effectively used FBME as a scapegoat to draw attention from poor compliance at Cypriot banks, and FinCEN’s rulings were used as a pretext for illegally revoking FBME’s license and initiating its liquidation for the benefit of the Cypriot government, which has now taken control of a USD 2bn bank.