Financial Crime World

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Tanzania’s White-Collar Crime Saga: FBME Bank’s Rise and Fall

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A financial institution with a reputation for strong financial muscles has been embroiled in a web of controversy, sparking concerns about white-collar crimes in Tanzania’s finance sector.

A Brief History of FBME

Founded by Lebanese nationals Ayoub-Farid Michel Saab and Fadi Michel Saab in 2003, the Federal Bank of Middle East (FBME) was a subsidiary of the Federal Bank of Lebanon. The bank had branches not only in Tanzania but also in Cyprus and Russia.

Accusations of Facilitating Criminal Transactions

However, its operations came under scrutiny after the US Financial Crimes Enforcement Network accused FBME of facilitating financial transactions for multinational organized crime organizations and Hezbollah.

A Series of Controversies

Injunction Order at ICC

In May 2015, the Saabs filed an injunction order at the International Chamber of Commerce (ICC) to prevent Cypriot banking authorities from taking measures that would destroy FBME Cyprus’ business. The move was possible due to a Bilateral Investment Treaty between Lebanon and Cyprus.

Revocation of Branch License in Cyprus

On December 21, 2015, the Central Bank of Cyprus revoked the branch license of FBME bank in Cyprus.

Discontinuation of Banking Operations in Tanzania

The controversy did not stop there. In May 2017, the Bank of Tanzania discontinued all banking operations of FBME Bank Ltd, revoked its banking business license, placed it under liquidation, and appointed the Deposit Insurance Board as a liquidator. The bank’s four branches in Tanzania were affected by this decision.

Investigation into Possible Connections with Russian Government Officials

The United States also requested financial information about FBME from the Central Bank of Cyprus in December 2017 as part of an investigation into possible connections between Russian government officials and the 2016 US presidential campaign.

The Impact on Tanzania’s Finance Sector

  • Data shows that FBME was the largest commercial bank in Tanzania with a total asset base valued at approximately $2.716 billion as of September 2013.
  • Its assets were only slightly lower than those of CRDB Bank Plc, the country’s largest commercial bank, which had an asset value of Sh8.8 trillion (approximately $3.8 billion).

The Current Situation

In 2019, Saab filed an international dispute against Tanzania at the International Centre for Settlement of Investment Disputes (ICSID), citing a treaty shopping strategy. However, Tanzania’s notice to terminate its bilateral investment treaty with the Netherlands has put this case in jeopardy. Rumors suggest that Saab may attempt to appear under a UK-Tanzania BIT currently in force.

Conclusion

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The FBME saga highlights the need for stricter regulations and enforcement mechanisms to combat white-collar crimes in Tanzania’s finance sector. As the country continues to grapple with the fallout from this controversy, it is essential to prioritize transparency and accountability to protect investors and maintain public trust.