Notice of Finding That FBME Bank Ltd. Is a Financial Institution of Primary Money Laundering Concern

Dated: July 8, 2014.
Julie P. Agarwal,
Secretary, Maritime Administration. [FR Doc. 2014–16592 Filed 7–21–14; 8:45 am] BILLING CODE 4910–81–P DEPARTMENT OF THE TREASURY Financial Crimes Enforcement Network Notice of Finding That FBME Bank Ltd., Formerly Known as Federal Bank of the Middle East, Ltd., Is a Financial Institution of Primary Money Laundering Concern AGENCY: Financial Crimes Enforcement Network (‘‘FinCEN’’), Treasury. ACTION: Notice of finding. SUMMARY: This document provides notice that, pursuant to the authority contained in 31 U.S.C. 5318A, the Director of FinCEN found on July 15, 2014, that reasonable grounds exist for concluding that FBME Bank Ltd. (‘‘FBME’’ or the ‘‘Bank’’), formerly known as Federal Bank of the Middle East, Ltd., defined to include all of its branches, subsidiaries, and offices, is a financial institution operating outside of the United States of primary money laundering concern. DATES: The finding referred to in this notice was effective as of July 15, 2014. FOR FURTHER INFORMATION CONTACT:
FinCEN, (800) 767–2825.
SUPPLEMENTARY INFORMATION:
I. Statutory Provisions
On October 26, 2001, the President signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the ‘‘USA PATRIOT Act’’), Public Law 107–
56. Title III of the USA PATRIOT Act
amends the anti-money laundering (‘‘AML’’) provisions of the Bank Secrecy Act (‘‘BSA’’), codified at 12 U.S.C. 1829b, 12 U.S.C 1951–1959, and 31 U.S.C. 5311–5314, 5316–5332, to promote the prevention, detection, and prosecution of international money laundering and the financing of terrorism. Regulations implementing the BSA appear at 31 CFR Chapter X. The authority of the Secretary of the Treasury (the ‘‘Secretary’’) to administer the BSA and its implementing regulations has been delegated to the Director of FinCEN.
Section 311 of the USA PATRIOT Act
(‘‘Section 311’’), codified at 31 U.S.C. 5318A, grants the Director of FinCEN the authority, upon finding that reasonable grounds exist for concluding that a foreign jurisdiction, financial institution, class of transaction, or type of account is of ‘‘primary money laundering concern,’’ to require domestic financial institutions and financial agencies to take certain ‘‘special measures’’ to address the primary money laundering concern.
II. History of FBME and Jurisdictions of
Operation
FBME was established in 1982 in Cyprus as the Federal Bank of the Middle East, Ltd., a subsidiary of the private Lebanese bank, Federal Bank of Lebanon. Both FBME and the Federal Bank of Lebanon are owned by Ayoub￾Farid M. Saab and Fadi M. Saab. In 1986, FBME changed its country of incorporation to the Cayman Islands, and its banking presence in Cyprus was re-registered as a branch of the Cayman Islands entity. In 2003, FBME left the Cayman Islands due to problems with capital adequacy regulations and re￾established itself in Tanzania by acquiring Delphis Bank, a small Tanzanian financial institution with three bank branches. At the same time, FBME’s Cypriot operations became a branch of FBME Tanzania Ltd. In 2005, FBME formally changed its name from Federal Bank of the Middle East, Ltd. to FBME Bank Ltd. Since 2003, FBME has been headquartered in Tanzania. FBME headquarters is widely regarded as the largest bank in Tanzania based on its $2 billion asset size, but it has only four branches. While FBME is presently headquartered in Tanzania, FBME transacts over 90% of its global banking business and holds over 90% of its assets in its Cyprus branch. FBME has always maintained a significant presence in Cyprus. FBME has stated, however, that it is not in direct competition with local retail banks in Cyprus for several reasons, including that it does not issue checks, has no retail counters, and its Cypriot customers are limited to mainly staff, contractors, and professionals providing services to FBME. The Central Bank of Cyprus (‘‘CBC’’), which supervises and regulates all Cypriot banks, including branches of foreign financial institutions such as FBME, has found FBME’s compliance with Cypriot banking laws and AML regulations deficient on at least two occasions. As evidenced by its failure to comply with the Cypriot AML law, FBME’s weak AML controls and customer due diligence resulted in a fine by the CBC in 2008. In addition, in 2013, FBME took active steps to evade oversight by the Cypriot regulatory authorities. In November 2013, the CBC stated that FBME may be subject to sanctions and a fine of up to 240 million euro for alleged violations of capital controls.
III. The Extent To Which FBME Has
Been Used To Facilitate or Promote Money Laundering In or Through Cyprus and Tanzania

1. FBME Facilitates Money Laundering,
   Terrorist Financing, Transnational Organized Crime, Fraud Schemes, Sanctions Evasion, Weapons Proliferation, Corruption by Politically￾Exposed Persons, and Other Financial Crimes FBME facilitated a substantial volume of money laundering through the Bank for many years. FBME is used by its customers to facilitate money laundering, terrorist financing, transnational organized crime, fraud, sanctions evasion, and other illicit activity internationally and through the U.S. financial system. FBME has systemic failures in its AML controls that attract high-risk shell companies, that is, companies formed for the sole purpose of holding property or funds and that do not engage in any legitimate business activity. FBME performs a significant volume of transactions and activities that have little or no transparency and often no apparent legitimate business purpose. Through relationships developed by FBME’s management since at least 2006, as well its large shell company customer base, FBME facilitates the activities of international terrorist financiers, organized crime figures, and money launderers. For example, since at least early 2011, the head of an international narcotics trafficking and money laundering network has used shell companies’ accounts at FBME to engage in financial activity. In late 2012, the head of the same international narcotics trafficking and money laundering network continued to express interest in conducting financial transactions through accounts with FBME in Cyprus. Separately, in 2008, an FBME customer received a deposit of hundreds of thousands of dollars from a financier for Lebanese Hezbollah. FBME also facilitates financial activity for transnational organized crime. As of 2008, a financial advisor for a major transnational organized crime figure who banked entirely at FBME in Cyprus maintained a relationship with the owners of FBME. FBME facilitated transactions for entities that perpetrate fraud and cybercrime against victims from around the world, including in the United States. For example, in 2009, FBME facilitated the transfer of over $100,000