The Federal Bank of the Middle East (FBME) experienced a difficult last two years. In July 2014 the central banks of Cyprus and Tanzania have assumed control of the bank and placed the bank under resolution. This has led to the suspension of all commercial activities and the closing of several business units.
This drastic move was the response to the findings of an in-depth investigation by the Financial Crimes Enforcement Network (FinCEN), which is an agency of the US Treasury.
According to a statement on 17 July 2014 by Jennifer Shasky Calvery, the director of FinCEN, FBME has a weak anti-money laundering policy which serves as a strong attraction to shady business men and untraceable money streams. According to Shasky the business model of FBME has proven to be very successful.
The conclusion of the FinCEN report was: “FBME is used by its customers to facilitate money laundering, terrorist financing, transnational organized crime, fraud, sanctions evasions and other illicit activity internationally and through the US financial system”.
Because of the FinCEN report international banks terminated their cooperation with FBME. Therefore it was no longer possible to transfer money from FBME to any bank accounts with other banks.
As a result of this move by the central banks of Cyprus and Tanzania, its income drastically decreased and withdrawals drastically increased. On the other hand, operational costs remained the same. You don’t have to be a rocket scientist to understand liquidity problems result when there’s more money going out than coming in.
During the last two years there have been a few developments. In the third quarter of the year 2014, the administrators of the Cyprus branch allowed customers with Euro accounts to withdraw funds from their account via checks. As usual in these situations, a bank cannot be closed or liquidated without proper investigation and a verdict from a judge in court. Therefore there was no other option.
Until december 2015, checks were requested by the banks customers and deposited on their accounts in Cyprus. Although it is a rumor, it sounds realistic though, but in December 2015 the 100 million Euro the central bank of Cyprus received from FBME Cyprus in 2014 to honour the request for bankchecks by FBME customers, was withdrawn by all checks. It resulted in the license of the bank being revoked on the 21st of December in 2015.
The next stage in the recovery process of funds from FBME Bank accounts in Cyprus is the activation of the Deposit Protection Scheme. Since the 18th of April 2016, customers of the Cyprus branch of FBME Bank are invited to issue their claim at the offices of the central bank of Cyprus. You can read all about the procedures to issue this claim at this website in the article FBME Bank Cyprus. Here you can also read how you can hire professionals to help you qualify for the insured funds and minimize the risk of rejection.
In the future the bank has to be liquidated. In order to allow a judge to issue this verdict, Cyprus court needs to have sufficient evidence that there is no future for the bank anymore and that the banks customers want their money back. The central bank of Cyprus, as one of the parties in the courtcase, has to present a realistic view on the current stage of the closure of the bank. It is therefore of the utmost importance that customers of the Cyprus branch of FBME file their claim as quickly as possible.