FBME owners triple claims, now demand €1.5bn from Cyprus

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By Stelios Orphanides

The owners of FBME Bank Ltd, which resorted to international arbitration after its Cyprus branch was placed in resolution, have tripled their claims against Cyprus, sources familiar with the matter said.

“They now demand €1.5bn in damages,” a source said on condition of anonymity.

While a second source confirmed the information, none provided background about how the owners of the bank justified their new demand.

The owners of the bank initially resorted to the Paris-based arbitration court of the International Chamber of Commerce demanding €500m in damages, citing the provisions of a bilateral agreement between Cyprus and Lebanon protecting investor rights.

In the meantime, the Central Bank of Cyprus is reviewing the situation before deciding its next steps following last week’s Nicosia district court ruling that rejected the appointment of a liquidator at the Tanzania-based bank.

The Cyprus Business Mail understands that the Central Bank will have to decide whether it will appeal against the ruling or file another request to appoint a liquidator for the Cyprus branch of FBME only, which was in charge for more than 90 per cent of its business. In addition, the Central Bank will also have to decide whether it will modify the mandate of the special administrator it had appointed at the branch.

The Cypriot bank supervisor, which in December 2015 revoked the branch licence of FBME’s Cyprus unit and fined it €1.2m for violating anti-money laundering and terrorist financing legislation, received assurances for cooperation from the Bank of Tanzania, the African country’s supervisor.

Bank of Tanzania which decided on May 5 to appoint a liquidator at FBME Bank, did not immediately respond to a request for comment.

The decision came days after a US court rejected an appeal against the imposition of “measure 5” of the US Patriot Act against FBME, which effectively bars it from carrying out transactions dollar, upholding the position of US Treasury’s Financial Crime Enforcement, which considers the bank as a financial institution of primarily money laundering concern with ties to Lebanon’s Hezbollah, the Iran-backed militia considered a terrorist organisation in the US and the EU.

Following this development, Attorney-general Costas Clerides said the police continues to investigate in FBME matters.

“Criminal prosecution is pursued in specific offences for which there is good evidence,” he said in a text message to the Cyprus Business Mail.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • Barry White

    How do you spell ‘coke-up’?

    Another fine mess that you got us into, Chrystella.

    • exodia23

      she won’t pay a thing.. it’s the taxpayers who will pay her mess…if people even realise how much is 1.5 BILLION euros and what this money could have been used…personally it freaks me out.

      • Nemisis

        Unknown to many, and not long after this attack on the FBME began, the CBC got their cronies in parliament to pass a law basically protecting CBC employees from legal action due to their actions while employed.. If extrapolated to the rest of the working population this would mean that, while in working hours, a lorry driver could drive through a schoolyard, kill a few children and not be prosecuted…
        And now the AG sends text messages to the Cyprus Mail, that sounds very professional! Not.

        • exodia23

          omg. if such thing happened why noone goes under anonymity and tell this to proper news ?!?! why are you just commenting on a thread that noone else will read apart from a few people?

          • Nemisis

            Check it out for yourself…What “proper news” in Cyprus?

          • exodia23

            i meant TV stations for publicity.

      • Pc

        You seem to believe that FBME will win. That is unlikely, given the actions by the US authorities.

        • exodia23

          they might not win but there is high chance the arbitrary in France might not be influenced by the decision from US courts who could have been paid underneath the table or whatever to cover usa’s trickery and political fraud. Let’s face it noone trusts the US anymore. most people have figured out that they have a different agenda from what they preach.

          • Pc

            If you really buy into corruption and conspiracy theories, then the French courts will surely rule in favour of Cyprus because of Total’s interest in the Cypriot gas. A favourable review of its bid in the latest auctioning round is sure to happen in return for a favourable ruling.

          • exodia23

            Very good point! I didn’t think of this..it could as well become a reality then!

        • Anisixos Politis

          What about the actions by the Cyprus Court

          • Pc

            Under appeal. Notice also what the verdict said: the CBC cannot appoint an administrator to guide the bank to liquidation. None of the other actions taken by the CBC have been questioned by the court.

            With FBME’s parent now under lquidation in Tanzania, I don’t think the appeal will be lost.

    • Pc

      Why? Because she closed down a corrupt bank? Stories around FBME have been rife for at least a decade. Don’t put your money in an African bank, owned by Lebanese under Cypriot supervision. It’s not rocket science.

      • Barry White

        Agree with your assessment of the background of the bank in question.

        However, the Central Bank of Cyprus fully vouched and confirmed annually that the bank was fully compliant with all regulations and its operations.

        The grab for the bank’s assets was simply a continuation from the last grab for depositors’ cash by the CBC, aka the haircut.

        No concern from the CBC that FBME bank’s financial status was many times more sound than any of the ‘Cypriot’ banks.

        Again I share your avoidance of any bank with Lebanese interests. The Central Bank of Cyprus unfortunately does not share our view. It recently blessed and licenced another bank to operate in Cyprus with similar ownership.

        • Pc

          Disagree. There was no grab. There was a ban by the US authorities that effectively stopped FBME from conducting any further business. No matter how healthy a bank is, but when it can no longer do business, it ceases to be a business. CBC had no choice but to revoke the banking permit so that the shareholders could not draw the bank empty and leave the Cypriot taxpayer with the bill.

          Note that, belatedly, the Tanzanian authorities have come to the same conclusion and have put the parent company into administration based on the actions taken by the US authorities.

          The supposed owners (we don’t really know who they are as there are many trusts and holding companies that keep the true owners in anonimity) have been carrying a succesfull campaign against the CBC in the media. The reality is that of all the lawsuits and arbitrations that have taken place so far, none of put FBME in the right. Even the verdict in the Cypriot court is only a temporary setback as it basically asked CBC to argue better why it wants to appoint an administrator. The court’s verdict will almost certainly be overturned in the appeal.

          • Barry White

            The ample cash reserves and assets of the Bank are under the control of the Central Bank.

            It would be very surprising if depositors see the full return of their money. The fact that they are deprived the use of their money for years is viewed by the bank as a mere inconvenience.

            Cyprus’ theft of depositors’ money is unprecedented in modern times and unique in the EU.

          • Pc

            The cash reserves are under the control, but not owned or confiscated by the CBC. The owners are the creditors. And that includes the shareholders and depositors.

            As per FBME’s own statement, the assets of the bank are more than enough to cover the liabilities towards all their despositors. Based on that statement, depositors are covered, although it may take some time to see the full amount of their deposits back as some of the assets will need to be sold off or converted back to cash in some other way.

            There is only theft if someone takes something that does not belong to them. There is no such case here. Note that at the moment it is FBME that is obstructing the return of deposits to the depositors.

          • Barry White

            Fees, expenses and loss on assets including possible sweetheart deals beloved by some, Pc. There is no reason why a significant proportion of depositors’ funds cannot be paid out immediately instead of being frittered away in employee, Administrator and Consultant fees. The longer it is dragged out the more pay days for the boys and girls.

            The balance sheet was the envy of the other NPL riven banks. Some might fear that FBME was looking attractive as a competitor for deposits and loans.

          • Pc

            Depositor funds have already been paid back up to €100,000. Above that amount depends on the unwinding of the company for which the administrator needs to be appointed.
            I don’t think the US authorities had stiffling banking competition in Cyprus in mind when they declared FBME a center of money laundring and terrorist finance activity.

          • Nemisis

            You are talking out of your arse…(1) There is no reason that this or any other bank cannot carry on doing business without using the US Dollar. (2) The FBME was 104% liquid when the CBC stepped in…Enough to pay all depositors in full, so no need for the €100k deposit protection scheme to be triggered, unless the rest of their deposits were earmarked for something else by the CBC??? (3) The FBME has had almost countless audits by some of the top forensic auditors in the world and yet still no evidence of money laundering.(4) There is absolutely no anonymity about who owns the FBME, their names have been published in the Cyprus Mail many times (5) It looks more and more as though the CBC spoonfed FinCen unreliable information regarding the FBME in order to give themselves a flimsy excuse to take it and sell it, why else would it WITHIN DAYS of the initial FinCen findings publish their intentions to sell the FBME to the Bank Of Cyprus, a bank that at the time was invested in by none other than Wilbur Ross, who by coincidence is now is none other the current United States Secretary of Commerce, had the sale taken place immediately as planned, and the FBME liquidity been absorbed by the BoC, Ross could have made a huge profit, and profit, like jam, can be spread…Factor in the FBME Card Services demise, which was caused by this action, and this whole affair stinks.

          • exodia23

            interesting I didnt know the Wilbur Ross thingy. more confirmation to my theory of this being a political USA attack against russian and chinese investors.

      • Anisixos Politis

        “Strories around”. In Cyprus we say “kouventes tou kafene”. All these years that CBC have gone through all the acounts in FBME Bank, have they found a single acount with money laundering?

        • Pc

          It took an insider to expose the scandal at Wells Fargo where managers and employees created millions of accounts to create higher charges to customers.

          Major banks in the world have been colluding to rig the LIBOR rate and the interbank exchange rates. The BoE didn’t pick it up until an insider reported it.

          The state of affairs around Lehmann Brothers wasn’t discovered after the bank went under. Neither the New York Federal Reserve nor the BoE detected anything prior.

          The world is rife of banking scandals where the authorities didn’t detect anything until after it had all gone awry.

          And for what it is worth, the CBC may not have found anything (because it can only check FBME Cyprus), but CinFEN apparently did (they would see all Dollar transactions of all FBME branches and would have a completer picture).

          • exodia23

            if they have complete pictures and the name of the accounts why don’t they release it for the whole world to see? how can a bank hid such accounts from 2 INDEPENDENT searches from PwC and Delloitte firms which have found nothing? either there truly was nothing OR the FBME people were SUPER geniuses hiding everything from everyone and only FinCEN scoupped them out but they aren’t releasing any data on the matter when asked by other authorities including their own USA justice system….

          • Pc

            As I already explained, the Americans probably have access to more information because they can see the other branches of FBME. Deloitte and PWC were probably restricted to FBME Cyprus and they most likely had less access than the CBC had. And neither has access to transactions like FinCEN.

      • Disenchanted

        How about stories around other banks and the coops? I recall that there were quite a few in Germany about the big banks, and continue do so in Bloomberg and other respectable international media outlets, surely a lot more serious than the gossip you are spreading around.

        • Pc

          So far no other Cyrpiot bank has been forced out of business by a cinFEN ruling. If such a time comes I would expect the CBC to do the same as she has done with FBME.

          • Disenchanted

            I’m not talking about fincen rulings, which I find are highly suspicious,how can you close a bank on the basis of suspicion? Sounds like sending suspected terrorists to Guantanamo torture centre without trial on the basis of suspicion, and then they torture them to confess. It’s the same country that invaded Iraq because their intelligence suggested that Salam had weapons of mass destruction…I have no faith in their intelligence.
            The CBC has fined several other banks for making new laundering violations, why din fin can not do anything about them? Is it because they dont have Middle East in their name?

          • Pc

            The bank was not closed on the basis of supicions. It was closed because the US actions effectively put it out of business. The CBC had and has no choice but to unwind the bank. Whatever the motives of the US are, is irrelevant. Because of US actions, FBME was going to fail.

            The Tanzanian government has finally reached the same conclusion. With the FinCEN ruling upheld, the Tanzanian government has put FBME in administration too, because it believes it can no longer function. Nowhere does Tanzania refer to actions taken in Cyprus. It only refers to the US.

          • Disenchanted

            Suddenly Tanzania is relevant?

          • Pc

            It is the home country of FBME and the main regulator of the bank (with the exception of the Cypriot branche). So yes, it is very relevant.

          • exodia23

            it is precisely the problem that it was the actions of USA that brought this bank to fail. so they created the problem and they provided the solution based on suspicion and no solid evidence- as if you are telling me ‘ well.. w suspect you and because of this we are locking you out of the us dollar system’ very unilateral decision. and because everyone ‘trusts’ the dollar noone can overrule it. i think it’s time for the world to change and just dump the us dollar and lead us to collapse, as such actions only demonstrate that USA can do what they want and as they want.

          • Pc

            So, if we both agree that the US is where the root cause lies, then how can one possibly blame the CBC? They were put into a corner and their hand was forced.

          • exodia23

            Are they not independent entity? Or are they the submissive bitch of Uncle Sam? Don’t they have brains to think and utilise information and figure out whether they should go for the lead or not? If they really had brains they would have heard the ‘concerns’ of FinCen and do some investigation of their own rather than being gullible and go for it with no evidence what’s so ever. Anyone with an awareness of what is happening around the world, especially with USA who bomb whole countries with no evidence e.g. see Iraq and then come back and say there were no evidence for them to do so; yes I would question the FinCen decision and demand evidence. Sorry but CBC is governed by idiotic people and they should be fired and jailed for their decisions.

          • Pc

            CBC is independent. But when a foreign authority effectively pushes FBME out of business, the CBC is forced to act and take control. It is their job. It has nothing to do with whether FINCen is correct or not. By forbidding the bank to trade in USD and to put the same sanction on any financial institution that does business with FBME, they killed off the bank’s business. It became a dead bank walking.

          • exodia23

            So from my point of view FinCen has a very dangerous and powerful effect and noone can control it. If they decided FBME was or wasn’t money laundering based on political agendas or other secret agendas then noone can stop them. This is what you get when you give the USD more importance than it should.

          • Pc

            But that is the general issue with US anti-terrorism laws and the Department of Homeland Security. They only need to quote terrorism and suddenly checks and balances that people in the west take for granted, are disolved. Basically, the US, and the UK to some extend as well, switched their policy from “inncocent until proven” to “we don’t care if some innocents get trampled on in the war on terrorism”.

            That doesn’t mean FBME is not guilty. But it does mean that Cinfen has very limited accountability.

          • exodia23

            I would disagree FinCen has very limited accountability . They are treated as a lawful person/entity and what they have done is defamation which is subject to liability fees and damages.

          • Pc

            Good luck sueing them.

          • exodia23

            from my point of view FBME had lots of russian and chinese mega-clients which other cypriot banks didn’t have at all. FINcen time of notification was around when the Ukraine crisis happened along with Syria.By doing this they have essentially removed lots of russian and chinese investors from the island but there seems to be lots of interested from western investors now which i find odd. I call bullshit for FinCen allegations when confronted no evidence was provided or accounts mentioned which if they are that confident they could easily reveal them. They hid themselves with the ‘national security’ story as always with whatever political agenda happens in USA. Just a word of mouth with no evidence is enough to cause such chaos. This FinCen was a political indirect attack against Russia and China.

      • Alex Leighton

        Unfortunately your comments portray your bigotry and basic attitude. Had it not been for Lebanese and other foreigners where would Cyprus be today? Reading through your comments it is clear that you are a simple person with even simpler ideas. You fail to pose fundamental questions such as why hadn’t the CBC picked up any systemic money laundering in the 30 years it supervised FBME? Why did the CBC bar FBME from trying to investigate the FinCEN allegations, forcing FBME to obtain a court order to gain access to its premises. There are so many more questions which are publically available which could be asked, unfortunately asking you to consider them would be superfluous. The issue dealing with dogmatic people like you is that one has to stoop down to your level only to be beaten by experience.

        • Pc

          When or where did I say anything against the Lebanese?

          The most fundamental question is: what should the CBC do with a bank that has effectively been forced to cease trading by a foreign authority? And the retorical answer is: take charge and guide this organisation to an organised demise and not let it escalate into chaos.

  • almostbroke

    And we used to think the gullible Cypriots were suckers for just a Greek scam !

  • Bruce

    Mqre generally the Central Bank of Cyprus has become just a secretariat for the ECB with the Governor and staff pre occupied with sending data and travelling frequently to Frankfurt at tax payer’s expense.CBC does little for the Cypriot tax-payer, doing no real economic analysis and providing no decent policy recommendations. And with Cyprus becoming again uncompetitive because of the appreciating Euro it would be best for Cyprus to to leave the euro area..

    • Vladimir

      Cyprus has always been begging others to help it out never giving anything in exchange, which makes this island a unique state of the EU – totally and always sponsored.
      If it leaves EU it will not survive even within one moth.