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FBME Card Services (FBMECS) announced the redundancy of 70 of its 105 employees on Monday following the suspension of the company’s business since last Thursday. The company said staff “will receive their full entitlements from FBME in the August payroll plus in due course their compensation payment from the government.”
Merchants have been left in limbo over the inability of the authorities to allow the only alternative card clearing house to operate, after its primary bank, FBME Bank, was placed under administration by the Central Bank of Cyprus following allegations of money laundering by the US Treasury’s watchdog FinCEN unit.
FBMECS said it “sincerely regrets that this situation has been forced on it” because of its inability to operate which, in turn, is due to the disruption to payments since the Special Resolution measures were imposed on the Cyprus branch of FBME Bank Limited. It deplores the impact on these members of staff, their families and associates.
The card services, operating under the trade name IMSP, had struggled to grow its market share which had been contained at about 4%, compared to the dominance of banks-owned JCC Payment Systems.
FBMECS said it has been faced with an impossible situation. Remaining employees will be retained to run the company in its suspension, hopefully with a view to rebuilding operations.
The company was formed in 2002 to compete in the Cyprus and European markets, offering local customers a competitive choice to the only other local provider, JCC Card Services. Prior to the suspension FBME Card Services delivered a comprehensive range of card related products, offering services to partners, merchants, banks and cardholders around the world.
Last week, a court has rejected the injunction order sought by Tanzania-based FBME Bank to prevent the sale of its local branch operations by the resolution authority, that was appointed in order to protect the interest of depositors and customers.
The Central Bank of Cyprus said on Friday that the bank’s administration was decided after the failure of correspondent banks to conduct transaction following a US Treasury Dept. listing of the bank branch as a potential money launderer, and not directly at the request of the Treasury’s FinCEN service.
According to a decree issued on July 21, the resolution authority appointed Dinos Christofides as Special Administrator to undertake the day-to-day running of the bank and also the sale of FBME Bank’s Cyprus branch, but no other subsidiaries, such as the IMSP credit card clearing house that had a 4% market share, but suspended operations last Thursday.
IMSP had announced two weeks earlier that due to controls imposed by the Central Bank on its primary bank, FBME Bank, and the freezing of transactions by all overseas correspondent banks, it could not provide clearing services or collection on the part of its merchants, hampering the already troubled retail sector.
However, it said it would continue to settle all due to merchants and other providers.
JCC Payment Systems, 75%-owned by the Bank of Cyprus together with Hellenic Bank and the local subsidiaries of three Greek banks, commands the remaining 96% of the market and is now expected to become a monopoly once again, with the blessing of the Central Bank and the Competitions Protection Commission (EPA).
FBME Bank customers are frustrated by the whole situation, with the Financial Mirror receiving several complaints that they had no access or limited access to their accounts and that some could not pay rents, utilities, or other bills.
In a desperate plea to Administrator Christofides, the chief executive of Alter Ego Group, a Limassol-based wealth management company, Mike Gray, said that he has not had a satisfactory answer as regards transactions that were accepted, pending or outstanding.
“On each occasion that I have contacted the bank I have been told that no transactions are taking place! However, according to the Cyprus Mail ‘Since July 29 payments have resumed, but the administrator’s approval is required for each transaction.’ Therefore, I should be grateful for a indication of when my transaction will be finally processed, I can top my VISA card up and I can pay CYTA and EAC, which will allow my firm to conclude certain projects and invoice clients. Otherwise we are out of business,” said Gary.
The Financial Mirror learned last month that IMSP had been using own funds to pay merchants, ever since FBME’s main correspondent Deutsche Bank had frozen all transactions.
IMSP clients, many of whom used its own POS terminals, but also that of JCC, were unable to accept card payments by VISA or MasterCard.
