FBMEchief defends FBME controversial licence

Prof Benno Ndulu  

By Costantine Sebastian , The Citizen Reporter

In Summary

FBME is under the management of the Bank of Tanzania (BoT) following allegations of grand financial crimes.

Dar es Salaam. The central bank has defended FBME Bank for doing business without meeting a key licensing condition .

FBME is under the management of the Bank of Tanzania (BoT) following allegations of grand financial crimes.

The bank was licensed when Mr Daudi Ballali was at the helm of BoT and continued to hold such a licence when Prof Benno Ndulu became the central bank governor in 2008.

Since the beginning, BoT board members doubted the authenticity of the licence.

The bank, which moved its headquarters from the Cayman Islands to Tanzania in 2003, has continued to enjoy the waivers. The bank is owned by two brothers of Lebanese origin.

Prof Ndulu said FBME has enjoyed the privilege because it has a genuine reason to be granted the waivers.

“Let me share with you the history of entry of FBME into this country to provide a context of decisions made back then when it was licensed to do business in the country in 2003,” Prof Ndulu said.

“I was not personally there but the institution made the decision and I am its head now and speaking on its behalf,” he noted in an email statement to The Citizen on Sunday on Friday.

According to it, in 2003 a bank called Delphis failed financially and put at risk the interests of its Tanzanian depositors. Delphis itself had taken over operations of Trust Bank, a subsidiary of a Kenyan bank, which had failed in May 2000.

To protect depositors’ interests, BoT took over operations of the failed bank and appointed a statutory manager in March 2003 to oversee orderly closure of its operations.

The central bank subsequently appointed the Deposit Insurance Board (DIB) as its liquidator in June 2003.

Prof Ndulu further noted that following a search for a bank to buy Delphis assets and liabilities and continue operations, BoT and DIB agreed to sell them to FBME, which had expressed interest.

 It assumed all deposit liabilities and applied for a license to operate as a takeover bank and was granted a licence on July 11, 2003, and began operations in September 2003 after signing a takeover agreement.

The waiver for ownership limits was given then taking into account the particular role that FBME was going to play, he explained.

“By the way for your information several countries across the world, including the US do not have this shareholding limit as I mentioned in my earlier note to you. You may wish to review the statement FBME made on its website regarding the money laundering issues and its engagement with US authority on the same since it has a 60-day window for clarification.”

He said the statement made reference to an Anti-Money Laundering (AML) audit conducted by KPMG, which BoT has had access to and seen. On Thursday, FBME said it had engaged KPMG Germany to conduct the AML audit in April 2013 and the concluding report “made best-practice recommendations which have been subsequently implemented by FBME”.

On the same day, the Central Bank of Cyprus (CBC) suspended FBME to operate for two days, a week after placing it under administration after the US Treasury said it deemed the bank a “primary money laundering concern”.

FBME officials reacted to the move by saying “it was a victim of a hostile takeover”.

“As a result [of the suspension], FBME Bank’s Cyprus branch will not execute any customer payment or other instructions during this time,” the CBC statement said.

In Tanzania, the bank has been allowed to continue opening for business.

BoT said it has taken over control of FBME Bank because of the potential effect of the Cypriot move could unleash on the country’s banking system. According to the statement on the takeover, the decision was made to ensure the deposits of customers were safe and the entire money sector in the country was safeguarded.

Despite being headquartered in Tanzania, the bank does most of its business in Cyprus where its two branches were taken over by the central bank after the US government revelation of its money-laundering activities and financing of other international crimes