White-Collar Crimes: The Rise and Fall of FBME Bank Tanzania

FBME was the only bank in Tanzania with few branches but had strong financial muscles. Data shows that as of September 2013, FBME was the largest commercial bank in Tanzania, with a total asset base valued at approximately $2.716 billion, which is about Sh4.4 trillion.

Founded by two brothers Ayoub-Farid Michel Saab and Fadi Michel Saab chairman and managing director respectively collectively known as (Saabs) Lebanese nationals, the Federal Bank of Middle East (FBME) was a subsidiary of the Federal Bank of Lebanon established its parent company and operational headquarters in Tanzania in 2003.

Apart from Tanzanian, FBME also operated in both Cyprus and Russia. In 2014, the US-Financial Crimes Enforcement Network (FinCEN) that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes, accused FBME of facilitating financial transactions for multinational organized crime organizations and Hezbollah.

This caused the Central Bank of Cyprus to exercise its statutory management. This is management according to specific laws of a particular country or state. Usually, authorities or responsible regulatory bodies take possession and control of a company due to unsafe and unsound business practices so as to protect the parties who are likely to be financially affected.

Once a bank is put under the central bank’s management there is a specific body known as the Deposit Insurance Guarantee Board that is responsible to protect all depositors financially and mostly ensure that they get their money or compensation in case the bank fails while they have deposited their money.

The Saabs file for an injunction order

In May 2015, the Saabs filed for an injunction order at the International Chamber of Commerce (ICC) requiring Cypriot banking authorities to abstain from taking any measures that would destroy irrevocably the business of FBME Cyprus.

Under International Investment Laws, nationals of a certain state can claim their rights in international dispute settlement organs against a certain state or its agency. This is only possible when the two states have signed either a Bilateral Investment Treaty (BIT) or a Multilateral Investment Treaty (MIT).

Lebanon, in which the Saabs were nationals, had signed a BIT with Cyprus which helped the two to successfully obtain an order under the ICC. However, on December 21, 2015, the Central Bank of Cyprus proceeded and revoked the branch license of FBME bank in Cyprus. The move was not without staff strikes and numerous court cases that according to reports are still ongoing.

In the same vein, on May 5, 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.

According to the BOT’s Notice to Depositors, Creditors and Debtors all of them were informed that the liquidator shall, in due course, inform them of payout plan, debt collection and other similar arrangements in line with the provisions of the law of Tanzania.

In Tanzania, FBME had four branches thus Main Branch at Samora Avenue, Dar es Salaam, Tanzania, Zanzibar Branch at Kisiwandui, Zanzibar, Arusha Branch at 47 Old Moshi/Haile Selassie Road, Arusha, Tanzania and Mwanza Branch at Station Road, Mwanza, Tanzania.

FBME’s strong financial muscles

Sources familiar with the matters say that this was the only bank with few branches but had strong financial muscles. Data shows that as of September 2013, FBME was the largest commercial bank in Tanzania, with a total asset base valued at approximately $2.716 billion (about Sh6.2 trillion).

Its asset base by then was slightly near the current asset value of the  largest commercial bank CRDB Bank Plc which according to its latest financial report  in 2021 asset value reached  Sh8.8 trillion, roughly about $3.8 billion, and corresponded to some 20 percent of total bank assets in the country.

Following closely, NMB Bank accumulated total assets of Sh8.7 trillion, approximately about $3.75 billion. In its turn, the National Bank of Commerce (NBC) had assets valued at Sh2.26 trillion, which is equivalent to $975 million.

To make the matter worse, a British daily newspaper The Guardian had on December 24, 2017, reported that the United States asked the Central Bank of Cyprus for financial information about FBME, specifically into information that the bank was used by wealthy Russians with political connections accused by the US government of money laundering.

This was part of the FBI’s investigation into possible connections between the Russian government and the 2016 U.S. presidential campaign of Donald Trump

An international dispute against Tanzania

Following its license revocation in Tanzania, in 2019 Saab filed an international dispute against Tanzania in the case of Ayoub-Farid Michel Saab v. the United Republic of Tanzania (ICSID Case No. ARB/19/8) relaying on the Netherlands – United Republic of Tanzania BIT (2001).

Mind you these were Lebanese and Tanzania had no BIT with Lebanon. How was this possible? Saab appeared as a Netherland national. He acquired nationality there presumably for this particular purpose, the strategy is widely known as treaty shopping. Tanzania and the Netherlands had signed BIT.

Little did he know that, in September 2018, Tanzania took the international arbitration community by surprise when it issued its notice of its intent to terminate the Agreement on Encouragement and Reciprocal Protection of Investments between Tanzania and the Netherlands which was set to expire on 1 April 2019 (Netherlands BIT).

Article 14 (2) of the Netherlands BIT provides that if either party did not terminate the treaty within six months of the expiration date, the bilateral investment treaty would automatically renew for an additional ten years, that is, to 2029.

This case is still pending. Rumours have it that he is intending to appear under UK-Tanzania BIT which is currently in force. Will he succeed? Let’s wait and see!

Emmanuel Mwesiga is experienced in commercial and corporate law transactions and advisory. He can be reached through e.mwesiga@yahoo.com or follow him on Twitter at @EsquireMK. These are the writer’s own opinions and do not necessarily reflect the viewpoints of The Chanzo Initiative. Want to publish in this space? Contact our editors at editor@thechanzo.com for further inquiries.

Emmanuel K. Mwesiga

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