FBME Bank has been consistently operating in Cyprus for over 30 years. The Notices point out that during this time period, FBME has twice changed its country of incorporation. However, the Notices do not provide the context for these moves, which in both cases involved changing circumstances in FBME’s country of incorporation that hindered FBME’s ability to function as a legitimate international commercial bank.
In 1977, Michel Ayoub Saab and his son Ayoub-Farid M. Saab moved to Cyprus. Later that same year, the Federal Bank of Lebanon (“FBL”), a Lebanese retail bank owned by the Saab family, opened a representative office in Cyprus. Cyprus had close proximity to Lebanon, was a stable country, and had established good international communications networks.
In 1982, the Saab family sought to incorporate an international commercial bank in Cyprus. The CBC, however, was unwilling as a matter of policy to take on home supervisory responsibility over international banks that were not among the large international banks. Instead, the CBC required the Saab family to establish its international bank in Cyprus as a subsidiary of a bank headquartered outside Cyprus. Accordingly, in 1982, the Saab family formed FBME (then named Federal Bank of the Middle East Ltd.) in Cyprus as a subsidiary of FBL, with fifty-one percent of the shares owned by FBL and forty-nine percent owned by Michel Ayoub Saab, Ayoub-Farid M. Saab, and Fadi M. Saab.
In 1985, security deteriorated in Lebanon due to the Syrian occupation. The Saab family, who are members of the Lebanese-Christian minority, became concerned about the possibility of the occupying power nationalizing Lebanese banks, including FBL, which had been occurring elsewhere in the region at the time. The Saab family therefore decided to protect FBME by removing FBL from its ownership structure. In 1986, Michel Ayoub Saab, Ayoub-Farid M. Saab, and Fadi M. Saab acquired FBL’s fifty-one percent ownership interest in FBME. At that time, FBME and FBL became unrelated legal entities. FBME was no longer a subsidiary of FBL, and the two entities have remained separate to the present day, although they are both presently owned by Ayoub-Farid M. Saab and Fadi M. Saab.
In 1985, the FBME bank update discussed with the CBC its options for incorporating the Bank in a foreign jurisdiction and maintaining a Cyprus branch. The CBC expressed to FBME that it would be advisable if FBME approached the Cayman Islands Monetary Authority (“CIMA”) for a full banking license. The CBC made the necessary introductions and the Saabs took steps to apply for a “Banking License B” for a Cayman Islands incorporated company, Federal Bank of the Middle East Ltd (“FBME-CY”), which would allow a fully operating branch then to be based in Cyprus. Consequently, in 1986 FBME-CY changed its country of incorporation and primary banking license to the Cayman Islands. FBME’s international banking business operations remained in Cyprus.
With the approval of the CBC and CIMA, FBME therefore incorporated itself in the Cayman Islands, and the Cyprus operations became a branch of the Bank. In 1987, the Cyprus branch received a license from the CBC to carry out banking business in Cyprus. In 1991, Michel Ayoub Saab passed away, and Ayoub-Farid M. Saab and Fadi M. Saab inherited their father’s shares and became equal owners of FBME.
FBME’s decision to move its headquarters to Tanzania was not motivated by any attempt to escape Cayman regulation, as the Notice seems to suggest. In 2001, fifteen years after FBME was incorporated in the Cayman Islands, the Cayman Islands amended its banking legislation to require all banks headquartered in the Cayman Islands to establish a physical presence there or cease conducting business in the Islands after April 2003.
CIMA viewed this change in the law as a requirement to have a substantial physical and management presence in the Cayman Islands, which would have involved at least one of the Saab brothers residing in the Islands. Given the Bank’s international customer base (in particular its geographic spread) and the fact that its existing work force was located primarily in Cyprus, the Bank decided that it made little business sense to establish a substantial physical and management presence in the Cayman Islands. It therefore, once again, became necessary for FBME to find a new jurisdiction from which it could obtain a “Home License.”
By this time, the Bank had already been doing some business in Africa and had targeted the continent as a region for expansion. FBME investigated various countries and spoke with different regulatory authorities, including representatives from the International Monetary Fund and the World Bank while visiting the Central Bank in Tanzania. The opportunity arose in 2003 for FBME to acquire from the Bank of Tanzania certain assets of Delphis Bank, which the Bank of Tanzania then held in receivership. FBME did not acquire Delphis Bank, but purchased certain assets and assumed certain liabilities. CIMA enabled this process to be accomplished by extending the April 2003 deadline first to July 2003, and then again to September 2003. Neither of these two extensions was linked by CIMA to any change in the capital structure of the Bank.
FBME moved its headquarters to Tanzania, obtained a license from the Bank of Tanzania, and began operations on September 12, 2003. Due to these changes and the fact that its customer base was primarily from Europe and the Commonwealth of Independent States (“CIS”), the Federal Bank of the Middle East Ltd. formally changed and shortened its name to FBME Bank Ltd. on August 4, 2005.
FBME is headquartered in Tanzania 5 and operates primarily in Cyprus, owing to its legacy connection to the island. FBME is the longest established international bank in Cyprus, having operated continuously on the island since 1982. As of July 15, 2014, FBME had 375 employees, including 225 in Cyprus.
FBME bank has a geographically diverse client base of international companies and individuals located in more than fifty countries. The Bank specializes in international commercial transactions accommodating high net worth individuals’ banking needs, ranging from portfolio management to payment solutions. Of FBME’s current customers, approximately 33.2% of deposits are from Europe, 35.4% are from the CIS market, 13.0% are from Asia, 11.3% are from sub-Saharan Africa, 4.3% are from the Americas, 2.5% are from the Middle East and Northern Africa, and 0.3% are from other locations. In 2013, the Bank had assets (e.g. cash balances, customer loans, property, etc.) of approximately 2.78bn US Dollars; liabilities (e.g. customer deposits) of 2.6bn US Dollars and total capital and reserves of 173m US Dollars. FBME’s prudent financial management has proven successful, allowing the Bank to maintain a healthy financial condition amidst recent financial crises both internationally and in Cyprus. As of July 18, 2014, FBME's Cyprus branch had a liquidity ratio of 104%.
FBME is committed to complying with the laws and regulations of the Bank of Tanzania and the CBC. The Bank’s Compliance Program has evolved in response to developing legal authorities within Europe, including the EU's MLD3, as implemented in Cyprus by The Prevention and Suppression of Money Laundering Activities Law (which came into force in Cyprus on January 1, 2008) (the “Law”). The CBC subsequently issued local directives, most recently the CBC 4th Directive which sets forth specific policy, procedures and control systems that all credit institutions should implement for the effective prevention of money laundering and terrorist financing so as to achieve full compliance with the Law (as amended since 2008).