Since 2014, FBME Bank Ltd., previously known as the ‘Federal Bank of the Middle East Ltd’, has been involved in some serious legal battles. The Federal Bank of the Middle East Ltd. was threatened with supervisory action by the Cayman Islands Monetary Authority for large un-provided doubtful exposures in the bank’s loan portfolio in 2002. FBME Bank Ltd. was established in Tanzania in 2003 and operated under a licence granted by the Bank of Tanzania. The Central Bank of Cyprus provided FBME Bank Ltd. with a license to operate in the form of a branch in September 2003.
In July 2014, the Cyprus branch was placed under resolution by the Central Bank of Cyprus, soon followed by the resolution of the main office in Tanzania by the Bank of Tanzania. A rudderless time commenced.
This article on the legal battles of FBME Bank aims to provide clarity on the legal steps initiated by FBME Bank Ltd. There still seems to be a lot of indistinctness relating the consequences of the different cases. Frequently, we are confronted with bank customers who think that the Arbitrage Tribunal of the ICC in Paris can influence the re-opening of the bank. On the contrary, the Arbitrage Tribunal can only present clarity on the legitimacy of the actions taken by the Central Bank that resulted in the resolution and later the branch license of the bank that was revoked.
At this moment in time, there are in general three different cases, all with different objectives and possible outcomes:
- US Court: FBME vs Lew
- ICC in Paris: Arbitrage tribunal
- Cyprus Court: CBC vs FBME
Although US court has no control in Europe and Tanzania, the order of Judge Cooper, who is responsible for the case FBME vs Lew (inter alia. FinCEN) in the US District Court for the District of Columbia, has a profound impact. A verdict can exclude FBME Bank Ltd. from doing business in the United States, leaving the bank in an almost impossible position in the current global financial environment.
The ICC has an arbitrage tribunal. This tribunal is an international dispute resolution court where members can ask an independent party to order based on pre-defined questions. The main question that the ICC tribunal needs to address is the legitimacy of the actions taken by the Central Bank of Cyprus. If the ICC rules in favour of FBME Bank Ltd., a financial claim is assigned. When the opposite happens and the ICC approves the actions taken by the Central Bank of Cyprus, the Republic can decide on further measures against the owners and even management of the bank. The ICC cannot and will not issue an order to re-open the bank.
In Cyprus, Administrative Court allowed FBME lawyers to inspect specific documentation at the premises of the Central Bank. Additionally, FBME filed an administrative recourse against the Central Bank in the Supreme Court to challenge the resolution decree. The biggest concern is currently that the bank lost its license to operate as a branch on the 21st of December 2015. Therefore, there is no possibility to re-open the bank. The owners can receive substantial damages rewarded, but only in the unlikely event that they win the case.
- The legal frameworks
The US legal system has five pillars. The actions of FinCEN challenged by FBME in US court can refer to three of them: statutory law, administrative regulations and the US common law. The case in US court (No. 15-cv-01270) is seen as the most important. After all, it was US based FinCEN that initiated a Notice of Finding in July 2014 and eventually invoked the Final Rule in September 2016, against FBME Bank Ltd.
In Cyprus, there are different proceedings. The overall question is the legitimacy of the resolution decree that resulted in the ‘closure’ of the bank and eventually the license of the branch of the bank being withdrawn. In December 2015, the Central Bank of Cyprus filed an application in court for the winding up of FBME based on article 33(B) of the Business credit Institution Law (66)(1)/1997. The court ordered that FBME Bank is allowed to take part in the proceedings, which is common practice in any legal dispute.
- The legal battles of FBME Bank: Statements, orders and verdicts
The US and Cyprus cases seem to be a fight over procedures. Although FinCEN had, according to the main judge in the US case FBME Bank Ltd. vs Jacob Lew ‘strong enough support for its factual assertion in this regard that any comment from FBME would not make a difference‘.
After the Notice of Finding, that was issues in July 2014, FinCEN promulgated a final rule under section 311 of the USA Patriot Act in July 2015. FBME Bank appealed in US court against the rule and moved to preliminary enjoin the final rule.
FBME Bank alleges that the rule is invalid because (1) FinCEN failed to provide it adequate notice of the basis of its findings as required by the Administrative Procedure Act (APA), (2) FinCEN acted arbitrarily and capriciously under the APA by, among other things, not considering all relevant facts or the imposition of less punitive measures, and (3) FinCEN violated the Bank’s constitutional due process rights.
The above seems marginal when compared with the statements made by FinCEN in the Notice of Finding and Final Rule. It should not come as a surprise that the judge denied the claims made by FBME Bank in motion for summary judgement on the 20th of September 2016. The sole point of reference the judge gave FBME Bank was that FinCEN failed to respond to FBME’s significant comments regarding the analysis of SAR data. An ‘order to stay’ was issued in that same decision by Judge Cooper.
The order to stay is explained by many as a victory. The meaning of the order to stay is however, that execution of the final rule stays pending until FinCEN follows up on the questions raised by the court. The first of December 2016, Jamal El-Hindi, deputy director of FinCEN published the requested response in the Federal register.
Although the judge was clear in his orders and denied all substantive points raised by the lawyers for FBME, plaintiffs decided to resurrect arguments from prior summary judgement motion in their reply in support of cross motion for summary judgement.
In any court of law the ‘non bis in idem’ principle, in layman terms this is comparable with ‘double jeopardy’, prevails. When the court already rejects arguments, or when the case is followed by a conviction or valid acquittal, arguments are invalid. As FinCEN clearly states in their reply in support of defendants renewed motion for summary judgement: Only issue in this case remains properly before the court: whether FinCEN has adequately responded to ‘significant comments made by FBME regarding the adverse conclusions it drew from the Suspicious Activity Report (SAR) data’. It is now up to the capable judges in the US and Cyprus to come with their final conclusion.
IMPORTANT NOTIFICATION FOR CUSTOMERS OF FBME BANK:
It is noteworthy to remind customers of the bank that there is a Deposit Guarantee Scheme in place that protects customer deposits for accounts held in Cyprus up to 100,000 Euro. Many of the banks customers absolutely need this guarantee fund to get their total balance recovered. Therefore, don’t wait before it is too late…
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 1.300 customers of FBME Bank, both with accounts in Cyprus as well as in 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, can and will not pay. Simultaneously, we reserve the right not to accept you as a customer. We wish to know our clients and must be assured on 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.
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