Cyprus & World News

CYPRUS: FBME clients, cards in limbo as central bank clueless

31 July, 2014

Complaints have been pouring in at the Financial Mirror from frustrated customers who have no access to their funds deposited at the FBME Bank branch in Cyprus that has been under Central Bank administration for two weeks over US allegations that it was involved in money laundering.

Complicating matters further, a cards clearing house owned directly by the same FBME Bank of Tanzania that separately operates the Cyprus bank branch, has effectively halted operations as its main banker, FBME Bank, is under Central Bank control.
The Financial Mirror has learned that IMSP, the trade name for FBME Card Services, has been using own funds to pay merchants, ever since FBME’s main correspondent Deutsche Bank has frozen all transactions.
IMSP clients, many of whom use its own POS terminals, but also that of JCC, the near-monopoly owned by the rest of the commercial banks of Cyprus, have been unable to accept card payments by VISA or MasterCard.
A hotelier in Nicosia district resorted to asking customers to pay in cash, causing security nightmares and a reminder of the March 2013 financial meltdown, while a food delivery company said it could not accept payments other than cash, frustrating their customers further.
To make things worse, IMSP merchants have been delayed to receive funds via Hellenic Bank which has decided to follow the arduous path of seeking approval from FBME Tanzania, while IMSP, for all the reasons mentioned earlier, cannot collect from VISA or MasterCard. Hellenic is one of the shareholders of JCC Card Payments, which is 75% controlled by Bank of Cyprus and the rest by the local subsidiaries of National Bank of Greece, Piraeus Bank and Alpha Bank.
“This takes us to the days when JCC had a monopolistic control over all card payments, and the Central Bank (of Cyprus) and the EU now refuse to do anything about it,” a merchant in the financial services sector said.
The Financial Mirror has also learned from the bank’s customers that the Central Bank and the administrator it appointed for FBME, Dinos Christofides, started allowing the processing only of incoming transactions on Thursday morning, but not outgoing or even internal transfers, such as to credit card accounts in order to allow customers to pay utilities.
“After working on a major deal for the past 12 months, worth about $150 mln which we are about to lose, we are now without cash to pay our day-to-day bills since July 15, my partner has lost the chance to pay a deposit on an apartment and we had to let go five staff,” said a Limassol-based wealth manager.
“It’s not that we are going to do a runner on FBME. Quite the contrary, we opened an account only with them because of the size of our business and we are happy to stay with them. I have proof and a paper trail to show that all our money came from (name withheld) bank in the U.K. This is not money laundering, so we should be treated differently.”
“But the central bank and the administrator refuse to acknowledge our problem and give some sort of documentation for us to seek a delay on our bills. I expect our Cyta line to be cut by the end of the day and the EAC has said they will terminate our electricity on Monday morning.”
Trying to find out when FBME’s banking operations can resume, much to the annoyance of thousands of customers who are, once again, giving Cyprus a bad name as a jurisdiction of incompetents, has proven an uphill battle.
A Central Bank spokesperson suggested we speak to the administrator directly and Dinos Christofides said he was not willing to make any statement to the press. An FBME spokesperson said the bank cannot make any statement as it is under administration. An FBME Card Services official was not available for any comment, despite being free of administration, but still remains subject to Central Bank supervision.
IMSP referred us to the announcement issued on Tuesday:
“As FBME Bank Ltd, FBME Card Services’ only banker, is under resolution, some difficulties have arisen which affect the smooth and prompt processing of the financial and contractual obligations of the company to its merchants. FBME Card Services Ltd is in constant communication with the Central Bank of Cyprus and the local banks, in order to ensure that all the outstanding amounts will be duly credited in the accounts of its merchants and that its systems will return to full operation.”
“However, recognising the problems that have arisen and in order to preserve the best interests of its clients until the resolution of the pending matters related to the completion of the transactions, FBME Card Services Ltd has temporarily suspended the processing capability of Visa and MasterCard from the IMSP POS terminals.
“We remain focused on the need for conserving the competition environment in the area of processing transactions with the use of cards, which was established with the launch of our company. From our side, we are undertaking all the necessary initiatives in order to resume operations normally the soonest possible.
“We are sure that in order to avoid the return of monopoly in the market and also for the protection of the competition and of the interests of the merchants and the Cypriot consumers, the authorities will act accordingly, in cooperation of course with the Central Bank of Cyprus.”
According to Financial Mirror estimates, IMSP, that was launched in early 2009 and taken over in 2012 by FBME Card Services (FBMECS), part of the FBME Bank Group, has a 4% market share of VISA and MasterCard transactions. It does not handle AmericanExpress. JCC Card Payments, established in 1989, controls the rest.
If Central Bank Governor Chrystalla Georghadji could shed further light on this matter and save Cyprus from further international embarrassment, the Financial Mirror (and thousands of frustrated FBME/IMSP customers) would be more than obliged.