The unceasing planned final closure and liquidation of FBME Bank Ltd. can be seen as a circus of mistakes from all stakeholders involved. The main decision of US court and Judge Cooper – Case no. 15-cv-0127 (CRC) – is that FBME Ltd. lost the case FBME Bank Ltd. vs Jacob Lew on all counts, but an order to ‘stay’ was issued due to FinCEN’s failure to respond to FBME’s comments regarding a data analysis.
The execution and implementation of formal procedures is remarkable to say the least. FinCEN failed to follow the Administrative Procedures Act. The Central Bank of Cyprus planned already in 2014 to sell FBME Card Services, an impossible action without a verdict in court and as planned in respect of European anti-trust laws. But also FBME Ltd.’s misleading information regarding the activation of the deposit guarantee scheme in Cyprus, spread out through their PR channel is noteworthy.
It is inevitable that FinCEN’s actions have significant impact on the survival of the institute at stake. It is in todays’ fast pacing international economy questionable that an institute like FinCEN can have legislative, executive and federative power. However, this questionable reputation has no influence whatsoever in the case FBME Bank Ltd. vs Jacob Lew. It was Judge Cooper who in 2015 already concluded that US court will not second guess FinCEN on its finding that FBME poses a primary money laundering concern, or its resulting imposition of the fifth special measure.
Cooper explains in the court records: “The Court therefore finds that FBME has not established a likelihood of success on the merits of its claim that FinCEN’s ultimate finding is arbitrary and capricious under the Administrative Procedure Act (APA).”
Nevertheless, the Court further concluded that such a finding does not relieve the agency of its obligation to adhere to the APA’s procedural requirements in at least two respects: (1) it did not provide FBME with the notice and thereafter all the public information available to FinCEN; and (2) it did not explain why other less drastic remedies were not chosen. This administrative verdict was moreover explained by FBME Ltd. as a victory, while the original measure was not challenged and the verdict basically strengthens the position of FinCEN and the central bank of Cyprus.
The basis of the law is to create safety in the broadest sense of the word for all of those involved. Legal certainty is needed to protect civilians from the government and vice-versa. To keep order in society, laws accompanied by procedures and regulations must be followed in the most strict form. The closure of FBME Bank shows many events where separation of powers, also known as the Trias Politica, was forgotten or even ignored. The question is if failure to comply with these regulations should result in a warning, fine or do-over of specific parts of the trial or even a future change in the scope of legal options one institute can have.
The planned sale of FBME Card Services: One of the first steps the Central Bank of Cyprus took, after it placed FBME Bank Ltd., Cyprus branch, under resolution, was to announce a plan to sell a part of the bank. FBME Card Services was the most valuable asset of the bank for other entities. It is assumed that the Cyprus government wanted to keep the entity, including all (or most) of its employees in Cyprus. An alternative scenario is that no reasonable candidate was found to takeover the entity. Obviously the shareholders of the bank did everything to prevent the central bank from selling the entity.
Where did it go wrong? First of all, even though a central bank has compelling powers, it also has to follow European laws. The planned sale of FBME Card Services to JCC, a consortium of financial institutions in Cyprus to facilitate card terminals and online payment services, was doomed to fail from the beginning due to European anti-trust and competition law. Furthermore, without a court order, it is impossible to start the liquidation of a bank and the shareholders have the right to go into appeal against the decision of either the central bank or a judge in court.
International Chamber of Commerce (ICC): The ICC in Paris was appointed by FBME Ltd. and the Central Bank of Cyprus in an effort to mediate in their conflict. The ICC has three main activities: rule setting, dispute resolution, and policy advocacy. ICC Arbitration is a private procedure that leads to a binding and enforceable decision. Decisions, even in interim verdicts, are not available to the public.
The arbitration tribunal of the ICC issues a verdict based on international law and jurisprudence. It has to follow the domestic laws of the parties involved and can, in the conflict of FBME Ltd. vs CBC, never appoint the Central Bank to return the license of a branch, even when the verdict is against this Central Bank.
During the previous years, there have been three interim verdicts presented by the ICC that were made public by FBME Ltd. The first verdict refers to the planned sale of the bank or specific business units by CBC. As mentioned in the paragraph ‘the planned sale of FBME Card Services’, an expected verdict.
The second verdict of the ICC is about the collected fine given to FBME Bank Cyprus in 2013. The Central Bank imposed this fine in the amount of 240 Million Euros for a combination of an alleged violation of capital controls and a high risk profile. Since FBME Ltd. did not have the chance to go into appeal against the fine, the Central Bank had no right to collect this fine.
Recently, the administrator of FBME Bank made 130 employees of the bank redundant. Furthermore shareholders were denied access to FBME Bank offices. The last is under different labor laws difficult to execute. Therefore the administrator should have gotten to court to formally request to disallow the banks shareholders from entering the premises. The ICC agreed with FBME Ltd. and shareholders cannot be refused to enter the banks offices.
The final verdict of the ICC is binding and results in an administrative consequence. FBME Ltd. claims, based on the standard remuneration, 500 Million Euro from the Central Bank of Cyprus. It is uncertain what the Central Bank claims. However, a ruling against FBME Ltd. is a stepping stone for further investigations that can even lead to prosecution. The stakes are high. Very high when studying the resume of FBME Ltd. vs. Lew below.
FBME Ltd. vs. Lew: The much debated case between FinCEN and FBME Ltd. is fought in the US District Court for the District of Columbia. It is the main federal court for cases that involve the US Treasury department. Jacob Lew is named as defendant in his capacity as Secretary of the Treasury department. District Judge Christopher R. Cooper is responsible to present the courts verdict.
FinCEN promulgated a Final Rule under Section 311 of the USA Patriot Act, imposing a special measure against FBME Bank Ltd. The Final Rule was designed to prevent FBME from continuing to do business in the United States or in US Dollars. In 2015 Judge Cooper already rejected all claims from FBME Ltd. However, FinCEN failed to respond to FBME’s significant comments regarding the analysis of SAR’s data by Lew, et al.
The only lead for FBME Ltd. was the Administrative Procedure Act, also referred to as APA. An interim order in September 2016, stated that FBME Ltd.’s Motion for Order to Supplement the Administrative record is denied. Additionally, also the Motion to cross-examine or depose ‘Richard May’ was denied. The Final Rule shall remain stayed until the agency furnishes adequate responses to FBME’s significant comments.
It seems that it is just a matter of time before Lew, et al present its findings. Specifically because Judge Cooper finds it exceedingly unlikely that FBME could mount a credible challenge at this point. Having reviewed the entire record, including the classified and unclassified portions, the Court is persuaded that FinCEN has strong enough support for its factual assertion in this regard that any comment from FBME would not make a difference. Finally, FinCEN had a more-than-sufficient basis, apart from this new allegation of fact, to conclude that it could not “reasonably rely on a proposed resolution that depends on FBME’s candid provision of complete, credible and accurate information”.
Courtfiling to liquidate the bank in Cyprus: The central bank of Cyprus announced on the 22nd of December 2015 that the licence granted to FBME Bank Ltd, Tanzania, on 8 September 2003 to operate a branch in Cyprus, has been revoked as of 21 December 2015.
A few days after the license was revoked, the Central Bank presented its case in Cyprus court and asked the Judge to approve the liquidation of the Cyprus branch of the bank and the business unit in Tanzania that held offshore companies and high net worth individuals that were managed from Cyprus. It’s a matter of course that this filing was postponed until further notice. The plaintiff, FBME Bank Ltd. should have gotten reasonable time to defend itself against the accusations the Central Bank filed in court.
Redundancies of FBME Bank Cyprus employees: Although the license of the branch in Cyprus was revoked in December 2015, dismissal of employees need to follow specific labor laws. Failure to comply with these labor laws can result in severe penalties to the employer.
The employees of FBME Bank Cyprus started a strike after the deposit guarantee scheme was triggered by the Central Bank. Obstruction of the activation of the deposit guarantee scheme is a last resort for the bank going into liquidation. Therefore the Central Bank of Cyprus, in its position of administrator of the bank had to settle with these employees who have not been given the statutory notice period before termination of employment, the proportion of annual leave, 13th salary ratio and the other accrued benefits.
FinCEN´s failure to comply with the APA: The Administrative Procedure Act is the United States federal statute that governs the way in which administrative agencies of the federal government of the United States may propose and establish regulations. In order to protect citizens, the APA also grants the judiciary oversight over all agency actions.
The Administrative Procedure Act empowers a reviewing court to hold unlawful and set aside an agency’s actions, findings or conclusions under specific circumstances. Judge Cooper rejected nearly all of the points raised by FBME Ltd. but a summary judgment is granted to Lew, et al. except to the extent FinCEN failed to respond to FBME’s significant comments regarding Lew’s analysis of SAR’s data, as outlined in the accompanying Memorandum Opinion.
FinCEN justifies its distrust of FBME in part on the alleged fact that FBME employees acted to conceal information even after FinCEN issued its Notice of Finding. Nevertheless, when an agency fails to disclose supporting documents or information, a plaintiff must show that the error was prejudicial by indicating with reasonable specificity how it might have responded if given the opportunity. Furthermore, a plaintiff must show that on remand it can mount a credible challenge and was thus prejudiced by the absence of an opportunity to do so before the agency. FBME has done neither here.
Judge Cooper recites: ‘The closest FBME has come to indicating how it would have responded to this evidence is to explain that it would have conducted an internal investigation in an attempt to decipher what incident or incidents FinCEN may have been referencing and then try to rebut FinCEN’s interpretation. It has not, as far as the court is aware, undertaken any such investigation or suggested what its response might be.
The court also finds it exceedingly unlikely that FBME could amount a credible challenge on this point.
Having reviewed the entire record, including the classified and unclassified portions, the Court is persuaded that FinCEN has strong enough support for its factual assertion in this regard that any comment from FBME would not make a difference. Finally, FinCEN had a more-than-sufficient basis, apart from this new allegation of fact, to conclude that it could not reasonably rely on a proposed resolution that depends on FBME’s candid provision of complete, credible and accurate information.’
It seems that the possibilities for FBME Ltd. get exhausted. Although FBME Ltd. tries to keep its back straight, the house of cards slowly starts to collapse. The threat of a systemic banking crisis in Europe where Deutsche Bank and Commerzbank, that keep the majority of FBME funds on their corresponding accounts, are involved, makes many of the stakeholders involved nervous.
The license of the branch cannot be returned and the Central Bank will continue with the process to liquidate the bank. Both accounts from the Cyprus branch and the Tanzania accounts that were managed from Cyprus are according to the court records part of the liquidation of the bank in Cyprus.
Since FBME Ltd. lost its license to operate in Cyprus, FBME Direct and Card Services are shut down, the bank has no access to IBAN and SWIFT payment channels anymore. It is therefore technically impossible to transfer funds to other banks or accounts. Re-opening the bank, even in Tanzania is therefore ruled out.
FBME bank Cyprus fund recovery
Are you a customer of the bank and do you want the funds from your blocked bank account to be returned, contact us today. Legal Floris LLC currently represents over 850 customers of FBME Bank, both with accounts in Cyprus as well as Tanzania.
We don’t work for everyone. FBME Bank was shut down for a reason. If there is a suspicion of money laundering, the DGS and liquidator, at a later stage in the process, cannot and will not pay out and simultaneously we reserve the right not to accept you as a customer. We need to know our clients and must be assured about the source of your funds. If you’re a legitimate customer there is nothing to fear. Therefore, contact us today and let’s start the process for recovery right away.