BabuK
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- Jul 30, 2008
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Federal Bank of Middle East (FBME)
A day after the local media reported plans by the Central Bank of Cyprus (CBC) to look for buyers to take over branches of the Tanzania-based Federal Bank of Middle East (FBME), the Bank of Tanzania (BoT) has moved to take over the management of the bank as of Thursday July 24, 2014.
A BoT statement issued yesterday in Dar es Salaam said that the move was in line with Section 56(1)(g)(iii) of the Banking and Financial Institutions Act of 2006.
The central bank said it came with a decision after U.S. government authorities accused it of involvement money laundering.
It said that the BoT was seeking to ensure the safety of customers deposits and safeguard the stability of the entire banking system.
Under BoT management, the public is assured that the banks operations will continue smoothly, the statement read in part.
Section 56 (1) g (iii) of the Banking and Financial Institutions Act, 2006 stipulates that the BoT may take possession of any bank or financial institution if the bank or financial institution is conducting its business in violation of any law or regulation, as is being said by the United States of the FBME.
It may also be taken over as in this case if it is credibly suspected of engaging in any unsafe or unsound practice that is likely to cause insolvency or substantial dissipation of assets or serious prejudice to the interests of depositors or the Deposit Insurance Fund.
The section similarly notes that BoT can take over any bank or financial institution if such institution refuses to comply with an order or directive it has been issued by the central bank, refuses to submit to or otherwise obstruct any inspection by the bank.
Other circumstances involves the licence of the bank or financial institution having been revoked, and in the current circumstances the Central Bank of Cyprus had already moved to take over the management of the bank by fears of illegal operations reported by the United States.
It is these fears generated abroad that made the bank come under central bank scrutiny as it was placed in Tanzania as its headquarters, virtually to operate in an offshore manner, rather than its original home, Cyprus.
A bank or financial institution can also be taken over if it ceases to be an insured institution by the deposit insurance board, or is adjudicated guilty of an offence under the Proceeds of Crime Act or the Prevention of Terrorism Act, 2002, similarly if the bank is being placed under voluntary liquidation.
A final element, section 56 (1) g (i) states that BoT may take possession of a bank if the capital of the bank or financial institution has fallen below the minimum required or such bank or financial institution is insolvent.
A Lebanese daily, The Daily Star broke the story and was cited in the local media, that the Central Bank of Cyprus (CBC) was looking for buyers to take over branches of the troubled financial institution valued at $2 billion.
The move comes a week after Cyprus took over the control of the international banking concern following grave allegations leveled against it by US federal agencies.
While FBME Bank is presently headquartered in Tanzania, it transacts over 90 per cent of its global business and holds over 90 per cent of its assets in its two branches located in Cyprus.
Data from the BoT show that by the end of 2013, FBME Bank had assets in Tanzania valued at $256 million (Sh431 billion).
Findings of an investigative team disclosed that the FBME Bank Ltd, formerly known as Federal Bank of the Middle East Ltd is a financial institution of primary money laundering.
FBME was alleged to have facilitated a substantial volume of money laundering for many years. FBME is used by its customers to facilitate money laundering, terrorist financing, transnational organised crime, fraud, sanctions evasion, and other illicit activity internationally and through the US financial system, the federal indictment declared.
In just one year, from April 2013 through April 2014, FBME conducted at least $387 million in wire transfers through the US financial system that exhibited
indicators of high-risk money laundering typologies, including widespread shell company activity, short-term surge wire activity, structuring, and high-risk business customers.
US authorities say FBME bank was for instance made at least 4,500 suspicious wire transfers through US correspondent accounts of at least $875 million between November 2006 and March 2013.
The Lebanese paper reported at mid week that the move by the Central Bank of Cyprus late on Monday came after allegations by key European Union partners that the islands once-bloated banking sector had been engaged in laundering money on behalf of some Russian interests.
However, Reuters reported yesterday that the family FBME Bank - which also has a representative office in Russia - has denied the U.S. allegations and accused the Cypriot Central Bank of a "hostile takeover". It said its lawyers had already made contact with U.S. authorities.
As the Bank of Tanzania announced to take over the management of FBME Tanzania, the Bank of Uganda announced that it had shut down the Global Trust Bank, the Monitor newspaper reported on its website.
It would be recalled that in 1999 the Central Bank of Uganda closed down the country's Greenland Bank before the Bank of Tanzania instituted similar measures to the bank Greenland Bank the same year, the Ugandan bank said in a statement.
SOURCE: THE GUARDIAN
