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Final Curtain for Cyprus Money-Launderer
The Tanzania-based FBME Bank, which has been described as one of the most notorious money-laundering operations in the world, has lost its final fight for access to the US electronic money transfer system, effectively putting its Cyprus unit out of business after an October 24 ruling by the US District Court in Washington, DC.
The ruling validates the US Treasury Department's conclusion that FBME Ltd., a Cayman Islands corporation, “was of primary money laundering concern.” The bank, according to the prosecutors, allegedly “facilitated money laundering, terrorist financing, transnational organized crime, fraud schemes, sanctions evasion, weapons proliferation, corruption by politically exposed persons, and other financial crimes.”
That is hardly the end of the story, however. At the moment, Tanzania and Cyprus are in a contest for jurisdiction over dissolution of the bank, many of whose depositors are believed to be among some of the world’s major criminal organizations, including the Russian Mafia, pornographers, phishing scams, corrupt heads of state and a long list of other wrongdoers. One source told Asia Sentinel that millions of dollars may never be claimed once the bank is finally dissolved because to do so would expose the names of the depositors, which would then alert law enforcement authorities to their actions. It could take months or even years to decide who gets jurisdiction, one source said.
Reports for the Cyprus Central Bank and other organizations by Kroll Associates, the international corporate investigation and country risk company, the Ernst & Young and PwC accounting firms and others painted a dark picture of vast corruption inside the bank.
The Lebanese brothers Ayoub-Farid and Fadi Saab are the beneficial owners of the bank. Michael Norbert Saab is the head of the bank’s credit card services division. It was first labeled a money-laundering operation three years ago by the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The Bank of Tanzania, the country’s central bank, took over control of FBME Bank in the wake of the US ruling and appointed a manager to handle the bank’s affairs to oversee its liquidation even as the Saabs continued to fight to stay the US decision.
The end for the bank came on a stunning oversight. On Oct. 3, the bank’s lawyers, Quinn Emanuel Urquhart and Sullivan, wrote the US District Court that the Washington-based arm of the law firm had been instructed by the central bank of Tanzania to withdraw FBME Bank from the appeal, a move by Tanzania that was believed to be at the behest of the US government. The ultimate owners, a Cayman Islands entity, however, refused to give up and continued the court fight.
But apparently the bank’s 20-odd lawyers didn’t notice that the bank had neglected to re-register in the Cayman Islands. The Cayman Registry of Companies struck off the bank’s holding company on Oct. 31, 2016 “due to a lapse in its corporate administrator.” According to Cayman law, a company struck off is effectively dissolved and cannot sue or be sued.
“The upshot is that FBME was a legal nullity when it purported to file its notice of appeal in April 2017,” ruled the court, headed by Chief Judge Henderson Garland. “[A] corporation which has been dissolved is as if it did not exist, and the result of the dissolution can not be distinguished from the death of a natural person in its effect. It remains a legal nullity now. It is not and has never been a proper party to this appeal. And because the Bank has withdrawn, there is no viable appellant and no dispute fit for resolution on the merits.”
In April, after a three-year court battle, US District Court Judge Christopher Cooper granted a motion by FinCEN to bar FBME Bank from US operation, affirming a March 2016 final ruling barring FBME from use of the US SWIFT system (Society for Worldwide Interbank Financial Telecommunication) through which most of the world’s financial transactions travel, or from using US dollars. It also prohibited domestic financial institutions from opening or maintaining correspondent bank accounts on behalf of FBME.
FBME appealed, fighting the ruling tenaciously until the sudden withdrawal described in the Quinn Emanuel letter on Oct. 3.
The Saabs, who have publicly denied wrongdoing, have sought arbitration in the International Chamber of Commerce Arbitration Court in Paris, seeking €1.5 billion in damages from the Republic of Cyprus.
The bank has been the subject of a series of stories by Asia Sentinel that described the alleged laundering of millions of US dollars out of the Indonesia-based Bank Mutiara, formerly known as Bank Century, which was looted by its owner, Robert Tantular, during the global financial crisis of 2009. Bank Mutiara was taken over by the Tokyo-based J Trust financial conglomerate. J Trust and the Saabs have threatened multiple lawsuits against Asia Sentinel over the stories. Asia Sentinel stands by its reporting.
(This article has been updated)