The fbme bank dispute: After a report by the Financial Crimes Enforcement Network which is department of the US Treasury which alleged that the FBME Bank was raising money-laundering concerns, the Central Bank of Cyprus asked to investigate the bank. Two independent firms were appointed for the job. Ernst and Young and the international law firm Hogan Lovells. The CBC in the meantime set the bank under its management and control under a resolution in July 2014. In placing the Bank under resolution the Central Bank of Cyprus relied on a law that was enacted in 2013 especially for Laiki and the Bank of Cyprus arguing that they did what they did to protect the bank holders of the FBME. The Ernst and Young report concluded that FBME`s anti money laundering policies are in line with the EU and the Central Bank of Cyprus directives. The report which is a voluminous work of hundreds of pages was presented also to the Financial Crimes Enforcement Network ( FinCen).
The most severe restrictions were placed on the bank so much so that account holders could not have access to their funds. Gradually a small withdrawal of 2000 Euro per day was allowed, which was reduced to 1000 Euro per day, which was reduced to 300 Euro per day. Some account holders have complained that they were left with no money to pay their bills for food and heating. Dollar funds are completely frozen without any explanation by the Central Bank of Cyprus why this discrimination. But even when a fistful of euros are withdrawn they are forced to deposit it in another Cyprus bank and not allowed to transfer it abroad. After this drastic action by the Central Bank Of Cyprus the Shareholders of the Bank have filed a dispute with the International Chamber of Commerce demanding 500 million Euros as damages for illegal and or negligent acts by the Central Bank of Cyprus. After long delays and a heated trial with thousands of pages in evidence the case is gradually coming to a close. So it is expected that in June the International Chamber of Commerce will hand down its arbitration decision. Both sides declare confident that they will have judgment in their favor.
Shareholders File Lawsuit
One of the causes of action on which the Shareholders of FBME are basing their lawsuit is that the Republic of Cyprus had violated the agreement with Lebanon which provides terms and conditions for the protection of investments in Cyprus. The Central Bank of Cyprus counter argues that the bank is not Lebanese and therefore not a Lebanese investment. The two owners of the Bank are of Lebanese origin and claim that the bank is clearly and indisputably a Lebanese investment and therefore comes within the provisions of the interstate treaty. The Central Bank of Cyprus has been strongly criticized by the Lebanese side but also by international banking circles that it acted hastily and that the measures it took were very stringent without rigid evidence, basing its course of action on the very scanty report of the Financial Crimes Enforcement Network. This created bad impressions on foreign investors who might tend to shun Cyprus as a country of investing opportunities.
It shows a complete lack of experience a very expert and prominent banker told the media. `You don`t kill a bank on a scanty report. You must have indisputable evidence that the bank is networked with terrorist organizations. Besides you cannot sell a bank branch! You sell its operations. It is now well accepted that no one would buy this bank after all that was alleged against it even if it wins the mediation trial. Bank account holders will surely rush to transfer their money to other banks if the restrictions are lifted. FBME Bank was serving most foreign clients and its clientele basis was 90% international. The Central Bank of Cyprus is striving lately with very adverse and sour conditions on the island after the `haircut` of the deposits in the Bank of Cyprus and the collapse of the Laiki bank. However lately the banking system in Cyprus is picking up and with the full removal of all currency controls announce by the President on 03 April 2015 it is believed that the Cyprus banks will gradually return to normal banking conditions. In any case it is still possible for foreign investors to open bank accounts in Cyprus mush easier than in any other country. Many Cyprus banks offer very good , reliable , professional and fast banking services offering internet banking which is still not available in some countries, visa card, digipass, no minimum deposit terms, low bank fees and multicurrency accounts for all major currencies. For all you banking needs apply to us for fast and no fuss accounts in your absence and for low fees. See our article on How to Open a Bank Account In Cyprus. See also our article on Cyprus Bank Accounts.