Rogue Bank May Have Lost Fight to Stay Open
Ayoub-Farid, Fadi and Michael Norbert Saab, the beneficial owners of the Tanzania-based FBME Bank, whose Cyprus unit has been described as one of the most notorious money-laundering operations in the world, apparently have lost their fight to keep the bank open in the face of a US Justice Department move to shut it down for good.
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. The court on Oct. 5 denied an emergency joint motion by Quinn Emanuel to delay ending the proceedings, effectively putting an end to the appeal filed by the Saabs against owners of FBME Bank Ltd against a ruling banning the bank from the US financial system.
The Cyprus unit of 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. The Saabs have threatened multiple lawsuits against Asia Sentinel over the stories.
In a letter to the court, Quinn Emanuel Counsel Derek Shaffer said FBME Ltd., the Cayman Islands holding company that owns the bank, would continue the fight. In a stunning oversight, apparently 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 due or be sued.
Although the Saabs are seeking to have the holding company reinstated in an attempt to allow it to continue the appeal against the US ruling, that would take up to eight weeks. The US government’s lawyers argued that the bank’s abandonment of the appeal, as ordered by the Tanzanian government, “may have rendered the case moot. FBME Bank was the party that had a direct interest in this case, as it is the entity to whom US banks have been barred from offering correspondent accounts.”
Although the Saabs have continued to fight the ruling, they may well be forced to abandon the process, sources said, since they would have to restart the appeal from scratch and the Justice Department is likely to file strong objections. A call for comment to Quinn Emanuel's Shaffer went unanswered. An attempt to substitute FBME Ltd’s shareholders as plaintiffs-appellants was denied.
“In light of the significant uncertainty regarding the status of the appeal and procedural questions that have arisen within the past two days, the parties agree that the court should immediately remove this case from the oral argument calendar,” the court said.
In April, after a three-year court battle, US District Court Judge Christopher Cooper granted a motion by the US Financial Crimes Enforcement Network, or FinCEN – the US Treasury Department’s lead financial money-laundering unit – to bar FBME Bank from US operations, affirming a March 2016 final ruling against FBME.
That in effect put the bank out of business, since it barred it 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 had fought the ruling tenaciously until the sudden withdrawal described in the Quinn Emanuel letter on Oct. 3.
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. Both Tanzania and Cyprus are now vying for jurisdiction over who will be in charge of the cleanup.
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.
*Story modified to reflect additional details on Oct. 13, 2017