FBME, one of Tanzania’s largest commercial banks, has been cut off from accessing the US financial system on suspicions that the bank has facilitated money laundering, terrorist financing and organised crime.
However, in an exclusive interview with the ‘Sunday News’ yesterday, the Treasury Registrar, Mr Lawrence Mafuru, allayed fears that the bank will cease to operate in the country, noting that the institution will continue with operations.
“The bank is still operating and serving its customers in the country. “Under the Bank of Tanzania (BoT) supervision, I have been assigned to ensure that innocent customers banking with FBME are protected in terms of their deposits and there is no disruption in the bank’s day-to-day activities,” said Mr Mafuru.
He further said that the bank will continue to operate locally, since it was not all customers who were black listed. “We are deployed at the bank to ensure close supervision of the bank so that no one tampers with evidence of any reported money laundering, to ensure the evidence remain watertight following the investigation,” Mr Mafuru stressed.
He also said that he could not rule out that in future the bank could be sold. “It is upon the shareholders to decide if they want to keep the bank or dispose it as they deem it important,” he said.
BoT, meanwhile, took over the management of FBME’s four branches in Tanzania and put them under the supervision of Mr Mafuru.
The action finalises a 2014 ruling from the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) naming FBME “a foreign financial institution of primary money laundering concern” under the Patriot Act.
“It demonstrates that the United States will not allow a compromised foreign bank to send dirty funds through the US financial system,” FinCEN director Jennifer Shasky Calvery said in a statement.
The agency argued that the bank has shown a lax approach to its anti-money-laundering (AML) controls, thereby opening itself up to being used by criminal elements for illegal activities, including terrorism.
When these concerns first surfaced, FBME denied the allegations and argued that an audit found the bank “in compliance with applicable AML rules of the Central Bank of Cyprus and the European Union.”
Despite this insistence, the central bank of Cyprus took over operations of the bank last year upon FinCEN’s initial ruling. (Though headquartered in Tanzania, FBME the bulk of its business through Cyprus.)
As a result of the ruling, American financial institutions are now barred from doing business with FBME or trading on its behalf. Institutions in other countries might not face the same restrictions, but effectively they have been put on notice by FinCEN of the risks involved in dealing with FBME.
There are implications for Tanzania as well. As recently as a year ago, Tanzania managed to get itself removed from a list of countries considered to be at high risk for money-laundering activity.
This latest development could raise concerns as to whether east Africa’s second-largest economy is doing enough to tackle the problem. A return to the list could compromise trade inflows and foreign investment.
In 2013, a much-needed financial bailout for Cyprus by the European Union got delayed due to money laundering concerns (paywall) centred around activities by FBME.
At the time, the lender said that it was ‘fully applying’ AML regulations in both Tanzania and Cyprus.
Originally published on DailyNews Tanzania
