Supreme Court affirms ruling barring CBC from liquidating FMBE

The Supreme Court rejected on Thursday the Central Bank of Cyprus’s (CBC) appeal against a first instance ruling banning it from liquidating FBME Bank Ltd, opening the way for the liquidation of the lender in Tanzania where it is headquartered.

“Nothing was presented by the appellants which would justify our intervention in how the first instance court evaluated evidence submitted to it with respect to the legal aspect of the case,” the Supreme Court said in its verdict obtained by the Cyprus Business Mail.

The Supreme Court accepted the conclusion of the first-instance court, that “the Central Bank of Cyprus cannot issue a (banking) licence to a foreign financial institution, if this has not obtained a (banking) licence issued by the foreign country in question”.

In July 2014, the CBC placed FBME Bank, which the Financial Enforcement Network (FinCEN) of the US Treasury branded as a financial institution of primary money laundering concern effectively barring it from transacting in US dollars, under administration and subsequently resolution. In 2015, the Cypriot bank supervisor revoked FBME’s licence to operate a branch in Cyprus and fined it €1.2m for failing to comply with anti-money laundering legislation.

The following year, the central bank decided to seek the liquidation of the bank in Cyprus which a first-instance court rejected in May last year. Days before that, Bank of Tanzania, which supervises lenders in the African country, also stripped FBME of its banking licence and ordered the liquidation of the bank.

“This means that the (banking) licence issued by the foreign country is of importance as it is recognised and respected by the Central Bank of Cyprus,” the three judges added in their unanimous ruling.

“Therefore, we are in absolute agreement with the conclusion of the first-instance court that there existed no issue in revoking the licence (…) of FBME because FBME never received such a licence from the Central Bank (of Cyprus),” the court said.

The court said that it considers as “plausibly correct” the interpretation the first-instance court gave to the reference “(banking) licence of a licenced financial institution” as stipulated in article 33Bbis(a)(b) does not concern the licence to operate a branch, under the law and instead concerns a licence issued to the financial institution, established in the foreign country, to carry out banking business in Cyprus.

The Cyprus Business Mail understands that the CBC is expected to review the ruling in the coming days before deciding its next steps. Bank of Tanzania currently is seeking the recognition of a liquidator it appointed also in Cyprus. The Cyprus branch operations accounted for 90 per cent of FBME’s total business.

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