The Cypriot Central Bank took over the operations of the Lebanese-owned FBME Bank in Cyprus Friday, a day after the United States Treasury Department announced it was blacklisting FBME for alleged links to Hezbollah.
“The Central Bank of Cyprus 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 asked the Cypriot authorities to manage our bank to see [with] their own eyes that there is nothing wrong in our branch. All these allegations against us are unfounded,” he said.
The U.S. Treasury Thursday accused FBME, which though chartered in Tanzania operates primarily in Cyprus, of facilitating financial activity for transnational organized crime and Hezbollah, calling it a “primary money laundering concern.”
“FBME promotes itself on the basis of its weak Anti-Money Laundering controls in order to attract illicit finance business from the darkest corners of the criminal underworld,” said Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network, a department of the U.S. Treasury, in a statement released Thursday. “Today’s action, effectively shutting FBME off from theU.S. financial system, is a necessary step to disrupt the bank’s efforts.”
According to the Federal Bank of Lebanon’s website, the two firms are “part of the Saabs’ financial group.”
The Federal Bank of Lebanon, owned by brothers Ayoub-Farid Saab and 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 boards 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 Central Bank officials Friday and would be issuing a statement on the bank’s website at the weekend.
Saab denied that the Federal Bank of Lebanon would be affected or forced to sell over FBME’s problems.
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 findings open 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 U.S. has sought to increase pressure on Hezbollah, which it considers a terrorist network, by cutting it off from international financing. Several foreign currency exchange dealers in Lebanon have been targeted over informal fund transfers, and the Lebanese Canadian Bank was wound down after being designated a primary money laundering concern.