FinCEN Names FBME Bank as a Facilitator of Illicit Activity

The Financial Crimes Enforcement Network (FinCEN), on July 17, 2014, identified in a Finding the FBME Bank Ltd. (formerly known as the Federal Bank of the Middle East) as a foreign financial institution of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act. According to the finding, the bank is well-known for its willingness to evade Anti-Money Laundering (AML) regulations and is said to be favored by high-risk customers. Moreover, the finding states that FBME facilitated a substantial volume of money laundering through the Bank for many years. Specifically, FBME is used by its customers to facilitate money laundering, terrorist financing, transnational organized crime, fraud, sanctions evasion, and other illicit activity through the U.S. financial system. FinCEN also published a Notice of Proposed Rule Making (NPRM) identifying the financial institution as eligible for the implementation of the fifth special measure under Section 311 of the USA PATRIOT Act.

FinCEN’s finding announced that FBME has changed its country of incorporation numerous times and is now nominally based in Tanzania; however, 90 percent of its transactions flow through branches in Cyprus, where the bank has taken active steps to evade Cypriot regulatory authorities. The financial institution 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. According to FinCEN’s finding, FBME’s headquarters is widely regarded as the largest bank in Tanzania based on its $2 billion asset size, but maintains four branches.

FinCEN has delivered this finding to the Federal Register, along with a notice of proposed rulemaking. FinCEN is proposing instituting the fifth special measure which would prohibit U.S. financial institutions from opening or maintaining correspondent accounts (including payable through accounts) for FBME. According to FinCEN’s notice, only one U.S. financial institution currently maintain such an account for FBME.

Clients should contact Crowell with any questions they might have on ensuring their compliance programs are properly structured to identify and avoid dealing with such high-risk entities.