CYPRUS: FBME accuses Central Bank of fraud

The bank came under administration after the Cyprus regulators, acting on the behest of the US FinCEN authorities, claimed that FBME Bank was involved in money laundering and harboured accounts held by illegal or even terror groups.

The claims have been hotly denied and the shareholders are fighting the decision in Cyprus and international courts, claiming this is a scheme to strip the bank of its assets and hand it over to potential investors on the cheap.

The whole saga has added to the ill-repute gained by the local banking system and the Central Bank of Cyprus, after the latter failed to check second largest lender Laiki Bank, resulting in the latter’s collapse and loss of billions in deposits.

“The Special Administrator seeks to write to all depositors asking them to confirm their current deposits at the Cyprus Branch of FBME Bank Limited,” an announcement from FBME said.

“Since the branch license was revoked by the CBC, banking operations have ceased and as a consequence balance information in the systems cannot lawfully be updated and statements have not been issued. Effectively, the proposed plan involved knowingly providing inaccurate information to depositors and asking them to confirm the same as accurate. If implemented this will constitute a fraud on depositors.”

Last week, FBME said that Chris Iacovides, the special administrator, had sacked 140 if the bank’s staff, its majority.

“The CBC has applied to the District Court of Nicosia for the liquidation of the bank’s branch in Cyprus as well as the bank’s head office in Tanzania, alleging that they are insolvent and illiquid. FBME Bank Ltd is vigorously challenging the legality of the liquidation of the branch and head office, the sole purpose of which is to bring about the destruction of the bank by the Central Bank of Cyprus (CBC) while legal cases are still in front of the District Court in Nicosia,” the announcement said.

“On 22 December 2015 CBC applied in secret to the Cyprus judiciary to liquidate the branch but failed to keep the matter quiet because of the intervention in court of FBME Bank. This latest move by the CBC and its Administrator in making the bulk of its employee base redundant seeks to achieve the same destruction of the branch without gaining legal sanction. It will be vigorously opposed in the courts by FBME Bank.”

FBME said in a separate announcement that “currently the bank has capital and reserves of $162 mln over and above the funds available to cover all deposits and any cost saving would be deducted first from this. Accordingly, this purported cost saving has no benefit to depositors. Indeed, to the contrary, the ability of the bank to conserve its assets is adversely impacted because of the loss of staff. This action is arbitrary and has been taken contrary to law; the Special Administrator is not the employer of staff at FBME Bank Limited and he does not have the power to terminate employment contracts. This illegality is compounded by a refusal to pay the staff their lawful dues.”

Source: Financial Mirror