Equality before the Law? Not with CBC or FinCEN

20 July 2016

At the end of last week it was announced by the Central Bank of Cyprus (CBC) that Hellenic Bank, a financial institution registered in the Republic of Cyprus, had failed to comply with anti-money laundering and terrorist financing legislation, and ‘know-your-customer’ obligations. These omissions or weaknesses, said the CBC, arose from “… on-site examinations conducted in September 2014, covering Hellenic Bank’s activities in the preceding years.”

The penalty: a €1.1 million fine and an undertaking from Hellenic to improve their systems. The announcement added that the Bank, a Cypriot-owned institution, will be also able to benefit from a 15% discount on the fine by cooperating with the CBC. Hellenic also closed 8,000 accounts to comply with the CBC.

Compare this to the actions of the CBC almost exactly two years before when they accused FBME of the same weaknesses. Instead of a fine, the CBC invoked a spurious law to take over the Cyprus branch of FBME Bank, a Lebanese-owned and Tanzanian registered entity. They suspended all operations at the Bank for six weeks, destroyed an operational subsidiary which was never accused of any wrong doing, caused inordinate harm to depositors by restricting their access to their own funds and have attempted to liquidate the branch since late 2015. On top of that, they imposed a €1.2 million fine on FBME, with no discount and no offer of cooperation with the Bank. In any case, FBME contested the fine and the matter was referred to the Administrative Court in Cyprus where it is still pending. No accounts have been closed at FBME subsequent to its passing into the control of the CBC.

And the bottom line on this is that the action against FBME and its depositors was based on a report which itself has turned out to be incorrect and dubious!

At the same time, the CBC has failed to reveal the documentary evidence supporting its draconian measures against FBME. It is also important to point out that the assumption of guilt made by the CBC against FBME is unsupported by various investigations conducted by international forensic accountants.

Also silent on the Hellenic Bank case is the Financial Crimes Enforcement Network (FinCEN), an agency of the US Department of the Treasury. Observers of FBME’s case will note that it was FinCEN that sparked the allegations in July 2014 against FBME, only to refuse to disclose the evidence supposedly supporting its accusations. FBME’s legal challenge against FinCEN remains pending in the USA.

As things stand there is no available explanation for why FinCEN has failed to act in the case of Hellenic Bank and its acknowledged anti-money laundering deficiencies, even while FinCEN strives to impose the harshest possible sanction against FBME Bank without any discernible basis.

A basic tenet of democracy is that all stand equal under the law; everyone is entitled to fair treatment according to the same rules. Yet that tenet is now being violated in Cyprus, quite obviously and grossly. It is impossible to fathom how and why two such apparently similar sets of accusations – the first against FBME in 2014 and the second in 2016 against Hellenic Bank for misdemeanours that go back two years and longer – should yield such profoundly different treatment.

And it is tougher still to understand why it is that FBME should be facing the death penalty while Hellenic gets off with a light fine, even though the accusations against the former are questionable at best, while those against the latter are incontestable.