William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

8 Responses to “FBME Bank Shut Out of US Financial System for “illicit finance business from the darkest corners of the criminal underworld”!”

  1. MarkNicosia said

    The Cyprus financial system crisis and subsequent bail out were in 2013 not 2011 & 2012 as you suggest.
    Interesting that, in 8 pages of findings based on half-truths and innuendo, not one mention of Russia or Russians is made. This despite the fact that an estimated 75% of FBME’s business is Russian related. Herein hides the agenda!


  2. The Cyprus financial crisis began in 2011 with the Greek crisis when Greek bondholders were initially asked for a 50% haircut on the face value of bonds. Cypriot banks held these Greek bonds within their portfolios to such an extent that Moody’s downgraded Cypriot debt in the 1st quarter of 2012. Russia also tried to shore up Cypriot banks with a January 2012 loan. In 2012 Parliament also sought to shore up the financial system as part of the Cypriot outreach to the IMF and to the EU. So, commentators state that 2011 is the initial date of the crisis, with the first large loan to shore up the finances in the beginning of 2012.

    If you think that FINCEN has a hidden agenda regarding FBME, then write it up here in the comments or elsewhere. I do not see the Russian hidden angle that you mention, other than FINCEN may think that Russian organized crime may stand behind certain of the underlying crimes of the money laundering allegations. A Hezbollah angle – that is at least feasible. But I am not sure that going after banks that transfer funds to Hezbollah qualifies as a “hidden” agenda. Politics and punditry aside, Hezbollah is on the OFAC list.

    FINCEN is, of course, laying out its best case in this Section 311 action. FBME may have plausible explanations and defenses. The Cyprus Central Bank took over FBME on Friday (see http://www.centralbank.gov.cy/nqcontent.cfm?a_id=13713) FBME’s owners claim they asked the Cypriot Central Bank to do so in a Lebanese article that I read on this topic. Information will certainly unfold in the coming week. Meanwhile, I am interested to hear FBME’s refutation of the allegations, but to date I have read any other than the general statement it is “running a clean operation”.


  3. MarkNicosia said

    When is a crisis a crisis? The Cypriots, (including the Minister of Finance), did not know they had a crisis until 2013. Arguably, one could trace the debacle back to 2008 in the US.

    My point is that the majority of shell companies, (the devil’s work according to FinCEN), in Cyprus generally & FBME in particular, are Russian related. They are legitimate vehicles by which beneficial owners can benefit from the low corporate tax and, more importantly, a legal jurisdiction based on British Law. They are then able to do business in the former Soviet Union whilst protected from the avaricious grasp of Putin & his cronies.

    I suggest that Treasury thinks it’s helping the Administration in the sanctions against Putin but is actually helping him.

    So, an individual in Lebanon, alleged to be a fundraiser for Hezbollah, (a legitimate political party and govt. coalition partner), decides to buy some second hand cars for import from US. He pays the agent, in US$, to the latter’s a/c which happens to be with FBME. Would there have been the same reaction if the a/c had been with Citibank, HSBC or Deutsche?

    I understand that several of the accusations in the Findings were reported by the bank to MOKAS, the Cyprus govt. unit to combat money laundering. MOKAS took ownership of the cases and demonstrated to Treasury how clever they were.

    It’s early for a response from FBME as they must still be in shock as they were given no warning and heard about it Friday a.m. Unfortunately, FinCEN and OFAC run roughshod and are playing to a domestic gallery. This action is probably fatal for FBME but who cares? They have all the buzz words: Offshore, Lebanon, Cyprus, Russia.


  4. It is certainly fair to say that the US crisis precipitated the Greek crisis, which in turn led to the Cypriot crisis. On the other hand, Greek public expenditures and commitments (pension) relative to public revenues were (and still are) unsustainable. The Greek crisis is a crisis of government debt, whereas the US crisis was a crisis of bank debt. So, the US banking crisis, and the very poor management thereof, precipitated the global banking crisis, but I suspect the Greek crisis was coming with or without the US one.

    As to disparate treatment, the US penalized BNP Paribas nearly $9 billion for transacting with Iran (see https://profwilliambyrnes.com/2014/06/30/bnp-paribas-sa-pays-8-9-billion-settlement-to-usa-for-violating-sanctions/) and a small California importer, $25,000 for shipping lawn furniture with an Iranian shipping company (see Friday’s story). A Russian connection by itself is not going to draw the ire of FINCEN for a 311 action.

    FBME took a conscious decision to transact business with the USA through US correspondent banks and also to transact business with OFAC listed sanctioned organizations. If it did not want to attract FINCEN jurisdiction over its actions, then FBME should not have operated through correspondent banking in the US.

    When FBME decides to make public its side of the story, by example publishing its Big 4 AML self-study, then I will write about its perspective of FINCEN’s allegations.


  5. Jason said

    William, this has nothing to do with Money Laundering this is purely a political move on behalf of the US Treasury to block the Russian economy, yet again the US choosing to dictate and impose their beliefs on the rest of the world. Mark is spot on, 75% of FBMEs customers are Russian with the majority of off shore companies (shell companies) held by Russian clients. Take a look at what is currently going on the world and the latest situation with Malaysian airlines, Ukraine, Israel and Gaza to name a few.

    The FINCEN are looking at stopping the credit line that helps to fund probably not even 2% of the cost of arms and weapons, they (USA) do not wish to start a war with Russia or indeed dip into Palestine has this is simply a step too far for them so the only way they can TRY and stop this is by cutting off credit and harming the financial sector in Russia.

    Lets take a look at this even further.

    The report the FINCEN have put out on this matter is nothing short of a small joke, €100.000 on a client in Michigan to name but a few small and petty reasons the wise and wonderful Jenny Shasky has put forward under pressure from the US Government.

    The reality is that you could go and uncover the majority of off shore bank accounts around the world and uncover far, far more details in money laundering, lets face it some of the biggest corporates in the world are based in the Caymans and the USA´s neighbours Mexico have the largest drug cartels in the world, where do you think all of this money goes!!! Billions of USD, running through accounts that the FINCEN are fully aware of yet it is of no interest to them has it helps to drive an economy, albeit a black one in the US.

    FBME in monetry terms is small fry and it is simply a smoke screen for an hidden political agenda that the US Government are behind, the money that is been mentioned in their reports would not even touch the sides to fund any form of war, it is simply the mighty selecting what they wish in order to disrupt the movement of Russian money.

    Again political and nothing to do with bail outs, or laundering…….

    Lets go and audit the bank accounts of the 1,000´s of accounts in the Caymans and see who the real money launderers are oh and possibly Mexico City……..nope its too close to home and too benefical for Americans to close these down.

    Political not financial.


  6. I take your point that in the global context the amounts cited by FINCEN, at issue. are quite small. And why this relatively small bank, but not another?

    I just did a simple Google search, and looked 10 pages deep, and haven’t seen anything new posted by FBME defending itself other than what I have noted. I also note that FBME has 60 days from the date or the announcement before the order goes into effect. As soon as FBME publishes its side of the story, I will post a follow up. (Or by Comment, a reader may do so as well).

    The Central Bank of Cyprus (CBC) announces that the Resolution Authority has tonight issued a Decree, under the powers conferred to it by section 2A of the Resolution of Credit and Other Institutions Law, 2013 – 2014, which places the branch of FBME Bank Ltd in Cyprus under resolution. The Decree’s purpose is to sell the operations of the branch with the aim of protecting FBME depositors. (see http://www.centralbank.gov.cy/nqcontent.cfm?a_id=13720)

    I also read about an Italian PEP investigation involving the bank: http://allafrica.com/stories/201407220591.html


    • MarkNicosia said

      Resolution in order to protect depositors? In March 2013, the Central Bank put Cyprus Popular Bank and Bank of Cyprus into Resolution. That didn’t go so well for depositors with more than 100,000 euros, they received haircuts of 100% & 45% respectively.
      The reason for the Resolution was to avoid the bankrupt Cyprus government from being responsible for depos <E100k.


  7. […] of a Hizbullah business network across Western and Central Africa. And the removal of the Tanzanian/Cypriot bank FBME from the international financial system in part for moving funds for Hizbullah. However these […]


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