JCC re­sumes mo­nop­oly as clear­ing house

Financial Mirror (Cyprus) - - FRONT PAGE -

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 banksowned 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.

No other com­pany has shown in­ter­est to step in to fill the vac­uum.

A Cen­tral Bank spokesper­son told the Fi­nan­cial Mir­ror that the is­su­ing and/or ac­quir­ing of pay­ment in­stru­ments re­quires ap­proval from the Cen­tral Bank of Cyprus, but the com­plex­ity of the pro­ce­dures in­volved and the nec­es­sary doc­u­men­ta­tion, in­clud­ing ac­tiv­ity re­port and busi­ness plan, were such that it was not pos­si­ble to sub­mit and ap­prove such a re­quest in such a short pe­riod of time from the date of the sus­pen­sion of FBME Card Ser­vices Ltd to date.

Last week, a court 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 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 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). Officials at the in­de­pen­dent Com­mis­sion could not be reached for com­ment.

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.

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all due to

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.

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