The Nexus of State Power and Terrorism Financing

In 2012, Bashar Hafez al-Assad demonstrated one of the harshest stances in suppressing local demonstrations. Claims of associating these demonstrations with the broader “revolutionary climate” in Arab regions¹ were widely discussed, not just hinted at. The impact of the bloody suppression attempts was significant enough to trigger the creation of the Free Syrian Army (FSA), with Assad’s opponents engaging in armed resistance.² The FSA was founded by Riad Al-Asa’ad,³ a former General who had deserted and fled to Istanbul. There, he also established the Syrian National Council (SNC) to coordinate the actions of various rebel groups, including the FSA. One such group, known as “Liwa al-Islam“,⁴ gained control of eastern Ghouta. By 2013, Hezbollah had openly declared its support for Bashar Assad, providing thousands of fighters to his cause.⁵ Meanwhile, an attempt by the UN Security Council to adopt a resolution on the situation was vetoed by China and Russia, with the latter pledging to seek a solution.⁶

The scope and focus of this essay do not warrant further elaboration on the Syrian civil war. We have chosen a level of analysis that allows for an appropriate discussion of the “Scientific Studies and Research Center“. This organization, operating under the Syrian Ministry of Defense, is responsible for the development of chemical weapons. Bashar Assad and the Syrian Government had employed such weapons in their attempt to regain control of eastern Ghouta.⁷

Bill Browder is the founder and CEO of Hermitage Capital Management, a British investment firm with a significant presence and activity in Russia. Through a joint venture, HSBC and Hermitage established a legal investment entity in Russia, which reportedly became the country’s largest investment portfolio between 2003 and 2005, with investments exceeding $4 billion. In his autobiography “Red Notice“,⁸ Browder recounts how, in 2005, he was unexpectedly denied entry to Russia during a business trip, citing “National Security” reasons. In response to this situation, Browder leveraged his invitation to the World Economic Forum in Davos, Switzerland, to personally appeal to Dmitry Medvedev, then Deputy Prime Minister of Russia, seeking his intervention to lift the entry ban. Although Browder initially felt reassured about the potential resolution of his predicament, a new development occurred in 2007. Their offices in Russia received a phone call from an individual claiming to be a tax official, who requested a meeting to discuss matters concerning the company and its Managing Director. When the meeting took place, 27 individuals arrived. However, instead of engaging in the expected official discussion, they proceeded to confiscate files and computers, alleging they had uncovered a “multi-million-dollar tax evasion” scheme. This claim was entirely false. Through document forgery, the group managed to illegally acquire legal ownership of the company. Their fraudulent activities didn’t stop there. Among numerous other legal and procedural violations, they altered tax returns and brazenly requested a tax refund of $230 million from Russian tax authorities, based on their fabricated profit calculations. …Their request was approved.

Sergei Magnitsky, a lawyer who had been working with Hermitage Capital and attempted to expose this fraudulent scheme to the Russian authorities, found himself in a tragic twist of fate. Instead of his evidence being acted upon, Magnitsky was himself accused of fraud and money laundering. The situation took an even more sinister turn when, during his pre-trial detention, Magnitsky was subjected to severe physical abuse by six prison guards, ultimately resulting in his death.

While these events may seem like the plot of a Hollywood thriller, their reality was underscored in July 2012 when Barack Obama signed into law an act named after the ill-fated lawyer, imposing sanctions on Russia. Known as the “Magnitsky Act“,⁹ this legislation was followed in 2016 by the “Global Magnitsky Act“. This expanded framework empowers the U.S. President to impose entry bans or asset sanctions on foreign individuals or entities under two main conditions: (a) if they are responsible for, or act on behalf of those responsible for, “extrajudicial killings” or other gross violations of internationally recognized human rights, or (b) if they are government officials complicit in significant acts of corruption.

Even as geopolitical tensions continue to evolve, Bill Browder remains a key figure in shaping international responses to the 2022 re-escalation Russia-Ukraine conflict. In a notable interview at the 2024 World Economic Forum in Davos, Bill Browder made headlines by forcefully advocating for the seizure of frozen Russian assets to fund Ukraine’s defense efforts.¹⁰ In a particularly striking comment, he framed this initiative as “Donald Trump insurance“, alluding to concerns that the former U.S. president might halt aid to Ukraine if re-elected. Browder’s stance underscores the enduring relevance of economic sanctions in international diplomacy and illustrates the intricate connections between global finance and geopolitical strategies.

While Bill Browder has been lauded for his role in fighting corruption and spearheading the Magnitsky Act, his career is not without controversy. In 2017, a surprising development occurred when the U.S. State Department revoked Browder’s Electronic System for Travel Authorization (ESTA) waiver, effectively cancelling his permission to enter the United States. This action triggered a wave of criticism from both sides of the political aisle in Congress and media circles. Although the U.S. government later dismissed the incident as an “administrative mistake“, it nevertheless raised significant questions about Browder’s legal status and his relationship with American authorities. Moreover, this episode brought attention to the intricate legal framework of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996. This act notably restricts judicial review of certain executive decisions, suggesting that the ESTA revocation might not be an isolated incident. Indeed, it’s plausible that other, earlier administrative actions may have been taken against Browder by the U.S. government, hidden from public view due to these legal constraints.¹¹

Clearly, Bill Browder follows a distinct political line and is not purely a businessman or economist. For instance, he criticizes South Africa for its contradictory stance, as on one hand it has close ties with Russia (e.g., joint naval exercises), while simultaneously condemning Israel for human rights violations. This implies that one’s position towards Russia is intrinsically linked to one’s stance towards Israel, and vice versa.¹²

Various reports have shed light on unique aspects of Bill Browder’s background. Browder grew up in the shadow of a family history deeply rooted in communism. His grandfather, Earl Browder, was an iconic figure in the American communist movement, leading the Communist Party of the USA for over a decade before World War II. Bill Browder’s grandparents’ home in New York was a living museum of communist ideology, with walls covered in photographs and posters of Stalin, Lenin, and Mao. Earl, born into a poor Protestant family, had transformed into an ardent supporter of the Bolsheviks, spending several years in the Soviet Union from 1927. There, he married Raisa, a Jewish woman from Kaliningrad, whose previous husband, an editor of Pravda, had fallen victim to Stalin’s purges. Earl Browder’s story is filled with dramatic twists and clandestine activities. During World War II, British-American documents revealed that Earl, and possibly Raisa, had been involved in recruiting spies within the USA on behalf of Stalin’s regime. His political career peaked when he appeared as a candidate for the US presidency on the cover of Time magazine. However, his downfall came abruptly after the war, when the changing political atmosphere led to his removal from the party and his marginalization. Despite adversities, Earl remained faithful to his ideological beliefs until the end of his life.¹³

The Putin-Browder feud escalated dramatically during a 2018 joint press conference in Helsinki with President Donald Trump. There, Putin made the bold claim that Browder’s associates had donated $ 400 million to Hillary Clinton’s campaign, money that, according to Putin, had been illegally acquired in Russia without paying taxes.¹⁴Investigations revealed that Ziff Brothers Investments, a New York venture capital firm directly linked to Bill Browder, had indeed made political donations, but on a much smaller scale. Specifically, the company had donated $ 17.700 directly to Clinton’s campaign and $ 296.966 to the Democratic National Committee (DNC). In total, Ziff Brothers Investments had made donations of $1,7 million in the 2016 election cycle, with the majority going to Democratic committees, but also a significant amount to Republicans (aimed at promoting the passage of Magnitsky Act laws in the majority of Western countries).

This complex web of financial and political maneuvering has had far-reaching consequences, notably in Cyprus. The island nation found itself thrust into the spotlight of international efforts to combat money laundering and terrorist financing, facing intense pressure to take a stance on Russia and the Hermitage Capital Management case. Cyprus’s position was further complicated by its recent banking crisis, which saw a controversial ‘haircut’ on deposits and a major restructuring of its banking system. These measures inflicted significant financial losses on depositors and Cypriot citizens alike. In the aftermath, the EU and international officials have maintained their criticism of Cyprus, arguing that the country’s efforts to curb Russian money laundering remain insufficient.

Amidst these complex international pressures, the Cypriot Government faced a pivotal decision regarding the Hermitage Capital Management case: whether to provide judicial assistance to Russia. In a significant ruling, Cypriot Courts determined that the legal prerequisites for such assistance were indeed met, effectively passing the execution to the Cypriot Minister of Justice at the time. His lawyers in Nicosia attempted to prevent cooperation between Cyprus and Russia through legal channels, but the court rejected their request, ruling that they ultimately failed to demonstrate how Bill Browder would suffer “irreparable damage” as a result of this cooperation. ¹⁵

This case throws into sharp relief the precarious position Cyprus found itself in, forced to walk a tightrope between fulfilling its international obligations to combat money laundering and maintaining its delicate diplomatic ties with Russia. The intensity of the scrutiny Cyprus faced is exemplified by the scathing remarks from European politicians. In a particularly damning statement, a Member of the European Parliament declared: “Cyprus operates as a laundromat for Russian oligarchs and other criminals. It sells European citizenship to anyone with enough money, without caring about its origin. This is a betrayal of European values“. The criticism was not isolated. Dutch MP Pieter Omtzigt echoed these sentiments, stating bluntly: “Cyprus is proving to be Europe’s weak link in relation to Russian corruption“.¹⁶ These pointed accusations not only highlighted the perceived shortcomings in Cyprus’s financial regulations but also underscored the broader tensions within the EU regarding the influence of Russian capital. The language used – “laundromat“, “betrayal“, “weak link” – speaks to the depth of concern and frustration among some European leaders about Cyprus’s role in the complex web of international finance and politics.

The credibility of Bill Browder’s narrative faced a significant challenge shortly after the Cypriot Courts rejected his claims. In November 2019, Der Spiegel, a respected German news magazine, published an extensive investigative report that cast doubt on Browder’s account of events.¹⁷ The Spiegel article questioned a central tenet of Browder’s story: that Sergei Magnitsky was murdered for exposing a massive tax fraud. Instead, the report suggested that Magnitsky’s tragic death was more likely the result of neglect and mistreatment – sadly common occurrences in the Russian penal system – rather than a targeted assassination. Crucially, the article argued that there was insufficient evidence to support Browder’s claim of deliberate murder. When Browder complained about the report, Der Spiegel stood firm, defending its journalism.¹⁸ This stance was later vindicated in January 2020 when the German Press Council, an industry self-regulatory body, rejected Browder’s allegations and complaints against the magazine.¹⁹ Perhaps most damaging to Browder’s credibility is the transcript of Bill Browder’s 2015 deposition in American Courts, where he admits that he has no personal knowledge of many of the claims he has made regarding the $230 million fraud case and that he relies on information from his team and/or testimony obtained illegally (pages 38-39, 199-202 are particularly noteworthy).

In a significant development, American journalist Michael Weiss revealed in his reporting that a confidential report from the Central Bank of Cyprus concerning FBME Bank had been leaked.²⁰ Weiss’s article, published on CNN, not only disclosed this information but also included the full 47-page document, making it publicly accessible for the first time. This leaked document is particularly noteworthy as it contains the findings of an internal investigation conducted by the Central Bank of Cyprus. The investigation was part of broader efforts to combat money laundering and other illicit financial activities, a pressing concern in the international banking sector. The leak of such a sensitive document is unusual and potentially consequential, as it provides rare insight into the regulatory scrutiny faced by FBME Bank. This level of transparency is uncommon in banking investigations, especially those involving allegations of money laundering. Weiss’s article, by making this report available, offers a unique window into the inner workings of financial regulation and the challenges faced by authorities in tracking and preventing the flow of illicit funds through the banking system.

The leaked report from the Central Bank of Cyprus reveals significant oversights in FBME’s client documentation. Page 18 of the report highlights that crucial information was missing from numerous client files, with “Tredwell Marketing Ltd” cited as a notable example. This finding aligns with investigations by various financial journalists, including Matei Rosca, financial editor at Politico, writing for “S&P Global Market Intelligence“. Rosca’s work identifies “Tredwell” as a British Virgin Islands-based company engaged in transactions with “Balec Ventures“. Significantly, Balec’s director was subject to U.S. sanctions related to the “Syrian Chemical Weapons Program“.^21,22,23 The gravity of these connections is underscored by the FinCEN’s (Financial Crimes Enforcement Network) “announcement of findings” on July 24, 2014. The U.S. Treasury Department’s statement, rewriting from bureaucratic language, asserts: “At least one FBME client served as a front company for an entity sanctioned by the U.S. for its involvement with the Syrian Scientific Studies and Research Center (SSRC) – a key player in Syria’s chemical weapons program. This front company utilized its FBME account to access the U.S. banking system. The SSRC front shared a Caribbean island address with 111 other companies, at least one of which also held an FBME account“. This official statement not only corroborates the journalistic investigations but also highlights the complex web of shell companies and the potential abuse of the international banking system for activities related to weapons of mass destruction. The alignment between the leaked Cypriot report, independent journalism, and U.S. government findings paints a troubling picture of FBME’s operations and its potential role in facilitating illicit activities of global concern

While journalistic speculation has linked ‘Balec Ventures’ to the laundering of funds from the “Hermitage Capital Management” fraud ^24,25,26, we must focus on the more concrete evidence provided by the 2017 announcement from the New York prosecutor’s office. This announcement revealed a settlement between the U.S. Government and the Cypriot “Prevezon Holdings Ltd” regarding money laundering charges involving eleven luxury Manhattan apartments. The government alleged these properties were acquired with proceeds from the “Hermitage Capital Management” fraud. The U.S. legal documents database, “docketalarm.com“, includes “Exhibit 2“, filed on 15/12/17 as document #555 in the New York Southern District Court. This exhibit, also cited by “AsianSentinel“,²⁷ represents the U.S. Government lawyers’ attempt to map out the complex transactions involved. It depicts the “Cyprus branch” of the laundering process as involving the companies “Pilogeno Consulting Ltd” and “Altem Invest Limited“, with the latter holding an account at FBME.

The speculation surrounding these connections was fueled by leaked excerpts from a 2014 “transaction report” by Ernst & Young (EY). Initially, EY claimed no direct links between FBME clients and the SSRC or the Magnitsky case. However, a closer reading of a letter from the law firm Hogan Lovells, which communicated EY’s 2014 report to FinCEN on behalf of FBME, revealed multiple recommendations to FBME regarding record-keeping practices. Page 27 of the leaked report explicitly mentions $ 2.037 transactions between 2006 and 2014, involving FBME clients and Balec, totaling approximately $255 million. It also confirms that “Maribo Group Ltd“, an FBME client, settled a $33,6 million debt owed by the Syrian Government to Russia (based on data provided by Germany’s Commerz Bank). The report’s findings often include caveats about events prior to August 2011 (or other dates), which likely intrigued journalists given that EY’s transaction data dated back to 2006. In Volume 81, Issue 62 of the U.S. Federal Register (31/05/16), FinCEN explains why it didn’t heavily consider EY’s positions. In paragraph 5, FinCEN interprets the report as compatible with its own conclusions, confirming the Bank’s weaknesses in anti-money laundering (AML) and know your customer (KYC) procedures, regardless of specific conclusions about client associations with particular activities.

At this juncture, it’s tempting to delve deeper into the intricate details of the FBME case. However, I believe the information presented thus far provides a robust foundation for understanding the complex mechanisms and far-reaching consequences of these sophisticated financial practices. By refraining from further elaboration, we can shift our focus to a more critical examination of the broader issues at play. Specifically, this approach allows us to explore the systemic challenges in combating the financing of terrorism and organized crime within the modern global banking system. This perspective is crucial as it illuminates the multifaceted obstacles confronting regulatory bodies and financial institutions. These entities are engaged in an ongoing struggle to adapt their oversight and compliance mechanisms to an ever-evolving landscape of financial crime. By examining the FBME case through this wider lens, we can better appreciate the intricate dance between illicit financial actors and those tasked with maintaining the integrity of the global financial system. This analysis will shed light on the sophisticated methods employed by criminal networks to exploit banking systems, as well as the complex legal, technological, and diplomatic challenges faced by those working to prevent such exploitation. Ultimately, this approach allows us to move beyond the specifics of a single case and towards a more comprehensive understanding of the systemic vulnerabilities and potential solutions in the fight against financial crime in the 21st century.

The endeavor to establish connections between terrorism and organized crime is far from novel in the field of criminology and security studies. A seminal work in this area comes from L. I. Louise and J. T. Picarelli, who offer a nuanced analysis by distinguishing between the “methodology of action” and the underlying “motives” of these criminal entities. Their research reveals intriguing parallels and divergences between these two forms of organized criminal activity. A key observation is the contrast in territorial dynamics: Chinese mafias, for instance, generally adhere to a code of mutual respect regarding their respective areas of control. This territorial integrity, however, is less evident in terrorist organizations. The authors note a significant evolution in the structure of terrorist groups such as Hezbollah, Al Qaeda, and Al Gamma al Islamiya. These organizations exhibit a trend towards decentralization, moving away from rigid hierarchical structures. This shift has led to a more distributed operational model, where different cells or factions within the larger organization specialize in specific functions. Particularly noteworthy is the bifurcation of activities within terrorist networks. Some elements focus exclusively on financial operations, seeking to secure and manage funding streams. Others concentrate on what Louise and Picarelli term “communicative actions“.²⁸ This category likely encompasses a range of activities designed to disseminate the group’s message and ideology, including what we might classify as ‘symbolic terrorist attacks’ – high-profile actions intended more for their psychological and propaganda value than for direct tactical gains. This organizational flexibility and specialization present new challenges for counterterrorism and law enforcement efforts. It suggests that effective strategies must be equally adaptable, targeting not just the visible, violent aspects of terrorism but also the sophisticated financial networks that sustain these organizations.

John Robb, a veteran of U.S. Army Counter-Terrorism Operations with subsequent experience in management and entrepreneurship, introduces the concept of “Symbolic Terrorism” in his book “Brave New War: The Next Stage of Terrorism and the End of Globalization“. Robb challenges the prevailing pessimistic view that sees modern societies as inherently vulnerable to terrorism due to their open nature, diverse populations, and critical infrastructure. This perspective often argues that these factors create asymmetric threats and fertile grounds for radicalization, leaving societies helpless against terrorism. Drawing from his experience as a mission commander in Panama, El Salvador, and Turkey, Robb proposes a contrasting viewpoint. He argues that large-scale terrorist operations like 9/11 are difficult to replicate or sustain. He suggests that public opinion becomes desensitized over time, media interest wanes, and each subsequent attack would need to be of greater magnitude to achieve the same symbolic impact. Robb posits that the 9/11 attacks set a bar that is unlikely to be surpassed, barring terrorist organizations gaining access to weapons or technologies of mass destruction.

Robb shifts our focus to small-scale and what he terms “guerilla terrorism“, a form to which destabilized states are particularly vulnerable. He cites Israel as an example, as well as the United Kingdom during the Troubles in Northern Ireland. Contrary to expectations, Robb argues that the impact of these smaller operations can be comparable to that of large-scale terrorist attacks. He observes that a series of carefully targeted, “selective strikes” can achieve a level of effectiveness disproportionate to their scale, potentially destabilizing societies as effectively as more dramatic, large-scale attacks.

It’s debatable whether Bin Laden could have foreseen the full extent of counter-terrorism costs that Western states would bear following the success of his plans. This uncertainty makes it challenging to establish a consistent profile of the terrorist mindset capable of planning such far-reaching attacks. Similarly speculative is any attempt to understand the mental state of the group who kidnapped two Jordanian catering company drivers near the Syrian border in 2004.²⁹ Their demand, revealed hours later, was for the company to cease its operations with the American government. The situation escalated when relatives of the drivers protested outside the company’s offices, threatening to “cut off the heads” of the owners. The kidnappers’ demand was met, directly challenging the viability of an American base in Baghdad’s Buffer Zone. The repercussions were swift: within days, a car bomb exploded in southern Baghdad near a police station.³⁰

In the document published by journalist Michael Weiss, page 14 reveals that the Central Bank of Cyprus (CBC) identified a concerning practice at FBME Bank. The report notes that numerous customers were using FBME branch addresses as their personal addresses in banking transactions. Alarmingly, the bank appeared to ignore both the motives behind this practice and the associated risks, failing to implement any measures to mitigate potential violations of Law 188(I)/2007. This law specifically mandates: “58. An obliged entity shall implement adequate and appropriate policies, controls, and procedures, proportionate to its nature and size, to effectively mitigate and manage risks associated with money laundering and terrorist financing. These measures should address: […] (d) internal control, risk assessment, and management aimed at preventing money laundering and terrorist financing.” By allowing this address practice without proper scrutiny, FBME potentially contravened these legal requirements, particularly in terms of risk management and prevention of illicit financial activities.

A crucial element in FBME’s operations was the role of “referred agents“. These individuals acted as intermediaries, facilitating banking services for third parties. Notably, in most cases, there was no direct contractual relationship between the end client and the bank, raising significant regulatory concerns. The compensation structure for these agents was substantial: they received commissions of 6% on loan interest or 10% for other services, such as credit card issuances. This high level of compensation potentially incentivized the expansion of this informal network. Perhaps most alarming, according to page six of the report, even FBME’s owners appeared to act as “referred agents“. This suggests that bank accounts in their names might have been used as part of these quasi-banking or “shadow banking” services, further blurring the lines between legitimate banking operations and potentially illicit financial activities. This system of “referred agents” effectively created a parallel banking structure within FBME, operating outside standard regulatory frameworks and potentially facilitating a range of questionable financial practices.

The CBC also notes that beyond the “official information filing system“, informal filing methods were also used. A relatively new concept in the banking sector is that of “Politically Exposed Persons” (PEPs). Essentially, this is a technical term which, through various qualitative criteria, attempts to measure the risk of a person’s potential involvement in bribery and corruption circumstances while exercising political power. Directive 2006/70/EC in its second article classifies individuals into categories, such as officials of the (a) executive, (b) legislative, (c) judicial branches, and (d-g) other high-ranking officials of elective bodies, public administration, and the diplomatic corps. The referenced Article 3(8) of Directive 2005/60/EC includes natural persons entrusted with prominent public functions, as well as the relatives of the aforementioned persons. Although these directives have now been replaced by Directive 2015/849/EU, this particular definition has been expanded.³¹

The regulatory landscape for Cyprus’s banking sector is primarily shaped by Act 188(I)/2007. Article 59(4) of this law empowers the Central Bank of Cyprus (CBC) to issue regulations governing the operations and supervision of the banking system. A key regulation stemming from this authority was issued in December 2013. Article 149(I) of this regulation specifically mandates that banking institutions maintain a “reliable commercial electronic database” for files related to Politically Exposed Persons (PEPs). This requirement, while broadly worded, reflects the banking sector’s need to adapt to rapid technological advancements while fulfilling its institutional responsibilities. The term “reliable commercial electronic database” is significant. It implies a sophisticated, secure, and comprehensive system capable of managing the complex data associated with PEPs. Such a system is crucial for effective risk management and compliance with anti-money laundering regulations. However, FBME’s approach to this requirement was strikingly inadequate. The bank attempted to comply with these legal provisions by using a mere Excel spreadsheet. This rudimentary solution falls far short of the robust, secure database system implied by the regulation. It raises serious questions about FBME’s commitment to regulatory compliance and its capacity to effectively monitor and manage risks associated with PEPs. This discrepancy between the regulatory requirement for a ‘reliable commercial electronic database’ and FBME’s use of a basic spreadsheet highlights a significant area of concern in the bank’s operations and compliance practices.

The inadequacies of FBME’s record-keeping system become even more apparent when viewed in the context of informal money transfer systems like “hawala“. These traditional systems, known for their simplicity and flexibility, often operate with minimal documentation, prioritizing the efficient transfer of funds over detailed record-keeping. Surprisingly, FBME’s practices seem to mirror some aspects of these informal systems, despite the bank’s obligation to maintain rigorous financial records. The leaked report reveals a troubling similarity: FBME’s reliance on a basic Excel spreadsheet for managing crucial client information, including data on Politically Exposed Persons (PEPs). This spreadsheet was apparently used as the primary source for cross-referencing names with other databases, both internal and external to the bank. Such a practice is inherently unreliable, particularly when dealing with names that require transliteration into the Latin alphabet. The potential for variations in spelling or formatting could easily lead to misidentifications or, more concerningly, allow high-risk individuals to escape proper scrutiny. For instance, a name like “Mohammed” could be spelled in numerous ways when transliterated (e.g., Muhammad, Muhammed, Mohamad), and an Excel-based system is ill-equipped to handle such variations effectively. This limitation severely compromises the bank’s ability to conduct thorough and accurate due diligence, especially concerning PEPs and other high-risk clients. The parallel between FBME’s practices and the informal “hawala” system is particularly alarming in a regulated banking context. While “hawala” systems operate based on trust and minimal documentation, a licensed bank like FBME is expected to maintain robust, sophisticated systems for tracking and verifying client information. The use of a simple spreadsheet falls far short of these expectations and regulatory requirements, potentially facilitating money laundering and other financial crimes.

On December 21, 2015, following a careful examination of the positions of the Bank’s Administrator and the owners-shareholders, and after the CBC deemed the justifications and other comments insufficient, it decided to revoke the license granted to the Bank for the operation of its branch in Cyprus. Previously, the CBC had considered the possibility of imposing other measures, such as restrictions on the banking license, however, less intrusive remedial measures likely could not have restored the health of FBME’s banking activities in Cyprus.

On July 21, 2014, the Republic of Cyprus issued Official Gazette Sheet No. 4802, outlining a less severe approach to addressing the issues surrounding FBME Bank. This document proposed a public auction as a milder alternative to outright license revocation, aiming to sell FBME’s operations to a new owner who could potentially rectify the bank’s compliance issues. However, this attempt at resolution faced multiple challenges. The process encountered various legal hurdles, likely related to Cyprus’s banking regulations and international financial laws. Additionally, the auction failed to attract significant interest from potential buyers, possibly due to the bank’s troubled reputation or the complexities involved in acquiring a financial institution under regulatory scrutiny. Most significantly, FBME mounted a vigorous defense against this forced sale. The bank employed every procedural means at its disposal to obstruct the process, including resorting to international arbitration. This use of international arbitration is particularly noteworthy, as it suggests the bank was leveraging international legal frameworks to challenge the actions of Cypriot authorities. Such an approach likely complicated and prolonged the resolution process, potentially straining diplomatic and legal relationships between Cyprus and other jurisdictions. The failure of this public auction attempt ultimately led to more drastic measures, culminating in the revocation of FBME’s banking license in December 2015. This sequence of events illustrates the challenges regulatory authorities face when dealing with non-compliant financial institutions, especially those with complex international operations.

The banking impact of the initial findings, however, had the immediate effect of other banks and financial institutions (e.g., VISA, MasterCard) being compelled or choosing to discontinue transactions with FBME.

The revocation of the banking license of the main legal entity was not based solely on the decision of the foreign regulatory authority FinCEN. On the contrary, the legitimacy of the revocation can also be justified on the basis of a natural consequence of this sequence of events. The impact and influence of the decision undoubtedly triggered the necessary characteristic mobility in journalistic, research, and banking communities, with the immediate consequence of observing various indications or suspicions, and especially points of correlation with a broader framework of events. The most extreme such example is the detection of acts, even if unintentional, of covering up incidents of child abuse.³²

According to the incidental interpretation (obiter dictum) of the ECJ’s judgments in the Yassin Abdullah Kadi case, only encouraging and guiding conclusions emerge regarding the FBME case, and the final satisfaction of Y. A. Kadi should be considered as the superfluous element of the actual circumstances there. In the Kadi case, the duration of the legal proceedings lasted about five years, while a decade had already passed from the sad event of “9/11” to the pronouncement of the decision. It is fair and reasonable for the Court to determine that the adjacent confiscation and freezing of Kadi’s property no longer serves any interpretation of Public Interest and Order. Upon second reading, we identify crucial reasoning regarding the method of detecting and addressing issues related to the suppression of terrorist financing sources.

The ECJ appears to have been particularly careful in renouncing the proximity relationship between the FinCEN report and the facts in dispute. It did not ignore the numerous material obstacles faced by authorities worldwide in their attempt to cooperate and suppress international crime. What it renounces is merely the legal-technical shell of this act, as when the Commission in 2008 attempts again to maintain the appellant in the relevant lists, this time including its own explanatory report and providing an opportunity for hearings when submitting the positions of the subject person, the Court then shows conciliation despite the fact that from UN Security Council Resolution No. 1904 onwards, a procedure for deletion and defense of such a registration is provided by the UN itself. The Court, examining the Commission’s second attempt, accepted constraints of confidentiality, state security, and the possibilities of other persons escaping or concealing their guilty traces. Specifically, it judged compensatively that partial access to the authority’s file or the disclosure of a summary of the file directly smooths out the possibilities of the registration becoming without a valid basis, while the Court is also said to be willing to undertake the control of any violation of the right to be heard on both sides.

From an academic perspective, the intentions of the EU Court may need to be interpreted as an attempt at balancing at the procedural level, in view of the postmodern turn of terrorism and in line with the common law doctrine of “proceeds not just profit“. This is a crystallized judicial reasoning that, on one hand, includes the ECJ’s lack of jurisdiction to measure the ” culpable value” of each operational activity, while on the other hand explicitly characterizes as satisfactory the proximity distance between the European Commission and the subject of EU Law. In the case of FBME, the corresponding report and registration of FinCEN served as the basis for mobilizing the Cypriot competent authority, which indeed proceeded to make observations with its own eyes, and the revocation of the banking license was a decision following the derivation of its own conclusions.