US Shuts Down Rogue Bank

After a three-year court battle, a US district court judge in Washington, DC has in effect put a rogue Tanzanian bank out of business that was accused of laundering money through its Cyprus branch for a failed Indonesian bank, the Russian Mafia, the Lebanon-based Shi’a Islamist group Hezbollah, al Qaeda and a long list of others.

US District Judge Christopher Cooper, in a ruling on April 14 granted a motion by the US Financial Crimes Enforcement Network, or FinCEN – the US Treasury Department’s lead financial money-laundering combatant – to bar FBME Bank from US operations. The so-called “Fifth Special Measure” of the Patriot Act blocks FBME from doing business in the United States or using US dollars and prohibits domestic financial institutions from opening or maintaining correspondent bank accounts on behalf of FBME.

FBME has fought the ruling tenaciously. On April 14, FBME again asked the court for a 14-day stay to request an appeal from the Washington, DC Circuit Court. The stay was granted after the US government didn’t object, but, FinCEN Said, “the government does not concede any of the factual or legal representations.”

The stay is considered to be a procedural matter and is not likely to materially affect the liquidation process. The court decision is now to be sent to the Central Bank of Cyprus and the Central Bank of Tanzania, which are expected to hire an accounting firm to begin the process of disposing of US$2.6 billion in depositors’ funds. Depositors are to be given 90 days to file claims for the return of their money. One source told Asia Sentinel hundreds of millions of dollars may go unclaimed because coming forward to do so would identify them.

FBME featured prominently in an Asia Sentinel story on April 10 regarding the laundering of hundreds of millions of dollars out of Indonesia for what was first known as Bank Century, then Bank Mutiara. The bank was later sold to a Japan-based concern and is now known as J Trust Bank. The parent’s investors include Wilbur Ross, the Commerce Secretary in the Trump administration, and the California Public Employees Retirement System.

In a 22-page statement on the ruling, the court called attention to hundreds of so-called SARS or Suspicious Activity Reports issued by other banks over FBME’s transactions. SARs are reports by banks and other financial institutions disclosing transactions that the institution knows or suspects to involve possible illegal activity. FinCEN reported at least 4,500 suspicious wire transfers to FBME through US accounts that were suspected of laundering as much as US$875 million between 2006 and 2013, the year before J Trust took over Mutiara.

According to the ruling, FinCEN considered “shell company activities accounting for hundreds of millions of dollars between 2006 [and] 2014,” accusing FBME, formerly known as the Federal Bank of the Middle East, of maintaining accounts for the head of an international drug trafficking network as well as a Syrian proliferator of weapons of mass destruction.

As Asia Sentinel reported, according to a 67-page report dated Aug. 14, 2014 by money laundering expert Peter Barrie Brown, who was commissioned by Quinn Emanuel Urquhart & Sullivan UK, lawyers for Bank Mutiara, it appears that a bewildering series of transactions between took place between FBME Bank, whose beneficial owners were Ayoub-Farid M and Fadi M Saab, Lebanese brothers, and the Indonesian bank.

In his report, which is in the public record at the New York Second Circuit Appellate Court, Brown said “the number of separate reasons for being suspicious are so many in total that I rate the whole arrangement and its operation to be the greatest collection of suspicious circumstances I have ever encountered in real life.”

“Sometimes, the third time really is the charm,” the judge wrote in his April 14 ruling. “The Financial Crime Enforcement Network first imposed the Patriot Act’s “fifth special measure” against Plaintiff FBME Bank Ltd….in July 2015. After this court preliminarily enjoined the rule, FinCEN sought a voluntary remand to correct certain deficiencies identified by the court, and for a second time promulgated a rule imposing the measure against the Bank. Most of the prior inadequacies were addressed, but in September 2016, the court returned the matter once again to the agency, noting that it had failed to respond to several significant comments FBME had submitted during the second rulemaking process.

“FinCEN supplemented its rule with responses to those comments, and now renews its motion for summary judgment. Finding that FinCEN has met its obligation to respond ‘in a reasoned manner’ to FBME’s comments, the Court will grant the agency’s motion.”