BEIRUT: The Cypriot Central Bank took over the management of operations of the Lebanese-owned FBME Bank in Cyprus Friday, a day after the United States Treasury Department announced that it was blacklisting the bank.
"The Central Bank of Cyprus (CBC) announces that, under the powers conferred to it by the relevant legislation, [it] has taken over, as of today, the management of the operations of the branch of FBME Bank Ltd in Cyprus," the Central Bank said on its website.
FBME Chairman Ayoub-Farid Saab told The Daily Star that the bank had requested the Cypriot action, in order to clear itself of the "unfounded allegations."
"We are running a clean operation on the island," he said.
On Thursday, the U.S. Treasury accused FBME, which though chartered in Tanzania operates primarily in Cyprus, of facilitating financial activity for transnational organized crime and Hezbollah, labeling it a “primary money laundering concern.”
“FBME promotes itself on the basis of its weak Anti-Money Laundering (AML) controls in order to attract illicit finance business from the darkest corners of the criminal underworld.” Financial Crimes Enforcement Network, a department of the U.S. Treasury, Director Jennifer Shasky Calvery said in a statement Thursday. “Today’s action, effectively shutting FBME off from the U.S. financial system, is a necessary step to disrupt the bank’s efforts."
FBME, which originally established in Cyprus in 1982-1986 as a subsidiary of the Federal Bank of Lebanon SAL, is now chartered in Tanzania, according to its website.
According to the Federal Bank of Lebanon’s website, the two firms are "part of the Saab’s financial group." The Federal Bank of Lebanon, owned by Ayoub-Farid Saab and his brother Fadi Saab, is not named in the Treasury Department report.
Ayoub-Farib Saab insisted that the Federal Bank of Lebanon was not involved in the FBME issue.
"We have two separate board of directors, there are no problems with the Federal Bank of Lebanon and we are cooperating with the Central Bank," he said, adding that he had met with Lebanese Central Bank officials Friday and would be issuing a statement over the weekend.
The Treasury report, dated July 15, listed a number of suspicious transactions and legal violations from FBME over the last decade, including allegations that a bank customer “received a deposit of hundreds of thousands of dollars from a financier for Lebanese Hezbollah.”
“FBME was involved in at least 4,500 suspicious wire transfers through U.S. correspondent accounts that totaled at least $875 million between November 2006 and March 2013,” the report said.
The finding of the bank as a “primary money laundering concern” opens the process to institute special measures against the bank and all of its subsidiaries. The Treasury Department has proposed applying the “Fifth Special Measure” under the U.S. Patriot Act, which blocks U.S. financial institutions from carrying out any transactions with the sanctioned bank. There is a 60-day comment period from the publishing of the Treasury Department report before any final action can be taken.
The United States has sought to increase pressure on Hezbollah, which it considers a terrorist network, by cutting it off from any access to international financing. Several Lebanese money changers have been targeted over informal fund transfer activities, while the Lebanese Canadian Bank was wound down after being designated a primary money laundering concern by the U.S.