By Stelios Orphanides
A US court rejected a motion by Tanzanian FBME Bank against a 2015 measure taken by the Financial Crime Enforcement Network (FinCEN) barring the lender from engaging in transactions in the US financial system..
A lifting of the ban, which bars US banks from opening and maintaining corresponding accounts with FBME, effectively preventing the lender from carrying out transactions in US dollars, would be justified if FBME had made a “strong showing” to likely succeed on the merits, or alternatively if FinCEN’s measures against it could cause irreparable damage to the bank, the ban would injure other parties, or there was public interest in lifting it, judge Christopher Cooper of the District Court of Columbia said in his April 14 ruling.
“In light of the Court’s merits analysis, FinCEN’s interest in having the rule take effect, and the public’s interest in protecting the US financial system from illicit activity such as money laundering, only the second factor could possibly weigh in favour of FBME at this stage,” the ruling said. “And the Bank has not demonstrated how implementation of the rule would cause it irreparable harm under present circumstances. Accordingly, lifting the stay pending appeal is proper.”
FBME had its Cyprus branch placed under administration and subsequently resolution, after FinCEN described it in July 2014 as a financial institution of primary money laundering concern with links to Lebanon’s Hezbollah militia –considered by both the US and European Union as a terrorist group.
FBME challenged FinCEN’s final ruling, issued a year later, and judge Cooper asked the agency to disclose evidence against the lender.
“FinCEN has now adequately responded to FBME’s significant comments in promulgating the Second Final Rule,” the ruling said.
A year ago, the Central Bank of Cyprus triggered the deposits guarantee scheme allowing holders of accounts with FBME on the island to claim up to €100,000 in deposits. Customer deposits are estimated at around €1.4bn. Its owners dispute any wrongdoing and resorted to international arbitration claiming up to €500m in damages from the Republic of Cyprus.
Floris Alexander, a legal advisor who helps FBME depositors file claims at the Central Bank of Cyprus, said that while the owners of the bank have the right to appeal the latest US court ruling, by doing so, they cause more damage to its customers who practically cannot claim their uninsured deposits. “It is stunning to see that the shareholders of the bank pursue this case over the customers interests because customers will have to wait longer for a final verdict and as a result of the long legal battles, it takes longer to resolve customer claims,” Alexander said in a telephone interview on Thursday.
“If the shareholders of the bank really believe that they are in the right and the Central Bank of Cyprus is in the wrong, they can claim the compensation (at the arbitration court of the International Chamber of Commerce) in Paris but they should not pursue a legal battle on the expense of the customers,” he added.