l'BMl BANK

213'" Septembel 2015

E-mall Hing

Ms. Genrghadli
Governor

Central Bank of Ciirus

Madam;

Subject: On-slte inspection of FBME Bank Cyprus aranch's procedures tor the prevenliall
of money laundering and terrorist linaneing -- The prevention and suppression ol Money
Laundering Activities but of 2001

We have been provided a copy ol the letter (the "Letter") of the Central Bank at Cyprus lthe
"cac'l dated 12 September 1015, addressed to Mr Andrew Andronikou -- Special
Adminisuator oi the Cyprus Branch ("Cyprus Branch" or oi FBME Bank (also
referred to as "Bantu this letter relates to the on-site inspection by the use with the
collaboration of PriceWaterhouseCoopers, of the procedures tor the prevention at money
laundering and terrorist iinancmg adopted by the Cyprus Branch at FBME Bank Ltd.

The letter covers nine su biecl mallet areas as follows:

Risk Management Systems
compliance Unit

Customer identification and due diligence procedures

AML IT System and Monitoring ol Transactions

EU Regulation 1731/2005 on informatl'un on the payer accompanying transfers of
tunds (Electronic Funds Transfer)

Record Keeping

Staff awareness and training

Suspicious transaction recording

internal control procedures





As the CBC will hopefully agree with us, globally recognised principles are meant to be
preventive and are aspirational in nature, and as such are constantly evoMng to addressmg
constantly changing aveas of risk. This is noted very clearly in Section 3.3 ("High level findings
on the level at compliance with the Cyprus Legal Framework") of the Report by Deloitte

Page 1 1

 In regards to the cacs findings on page 13 paragraph (3) sub section (ii) where the CBC alleges
that the Bank did not prepare a note summarizing the results of the review, or submit to the senior
management the said review for consideration and approval, we refer to the comments made in the
previous paragraph as they referto the same customer-- In regards the
cock comments related to Vladimir Smirnov, including the corporate account Bailey Ventures,
which is owned by the wife of the former, it should be noted that the relationship was classified as
high risk PEP at the time of the unrboardl'ng. The summaries with comments on the annual review
have been carried out respectively and are signed by the MLCD or a senior compliance
officer/supervisor of the unit. The World-checks for each year's review is signed by the Mlcu,
copies of which are enclosed at Appendix 8. During the review for the Evzo13,a PEP enhanced due
diligence profile was prepared, and based on additional information identified from the public
databases on Vladimir Smirnov, it was concluded that the subject does not classify as PEP anymore
due to his status as a former senior executive of a stateruwned enterprise for the last 5 years The
ale-risking from high iisk PEP to normal risk was recommended by the investigating officer and was

 

approved by the MLCO lsee the enclosed PEP enhanced due diligence prolile which recommended
the change at Appendix 

uni in regards to the comments made rn paragraph (3) sub sectron (Ill) where rt is alleged that
the Bank did not take adequate measure to establish the source of wealth ol the customer, it should
be clearly mentioned that all referenced names no longer classitv as PEPs, however, in all respective
tiles the PEP enhanced due diligence profile continues to exist (which among other things
gives details ol the source oi wealth and source ol lunds and the educational/protessional
ba ground of the PEP, supporting documentation from various online sources on the busrnesses,
net worth and the wealth status) concluding that the suhreot person no longer as per>>,
based on the tacts stated in the profile and the MLCO approval was obtained tor changing the risk
status as per the requirements ol the AML Directive. Coples of the aforementioned proliles are
enclosed at Appendlx 3. The cac error on pornt arises because the MLCD has ensured that the
evolution ol the tile history is transparent and documented in the tile lthus identitying historical PEP
status) and oecause the can audit was superficial and/or lacking sufficient objectivitv to identify and
glve approprrate treatment to the documented downgrade from PEP status,