Credit card unit of FBME scrutinized

Add credit card processing for illegal gambling and pornography businesses, a service that is prohibited under U.S. law, to the list of potential crimes for which FBME Bank Ltd. is being investigated by the FBI and U.S. prosecutors in Brooklyn, N.Y. This is according to Bloomberg, which reported on the development on Dec. 16, 2017.

FBME, a small international bank, operates primarily in Cyprus and is licensed in Tanzania. The bank was previously shut out from the U.S. financial system when the Financial Crimes Enforcement Network division of the U.S. Treasury Department alleged it was laundering money for criminal enterprises and terrorist organizations, as well as for a Russian fraud scheme. When the new allegations came to light, the bank denied any knowledge of criminal behavior in its credit card processing division.

It also came to light that FBME allowed numerous clients to use its street address as their own, a practice that may not be technically improper, but which serves as a red flag to authorities, because it can make those clients' transactions more difficult to investigate. In addition, some of those businesses are alleged to have defrauded customers by offering free trial periods to access sites if customers provided credit card information to gain access, and then charged those individuals for the trial period. According to sources familiar with the investigation, fraudsters were able to analyze how many chargebacks for this practice could arise before pushing their fraud ratio to a tipping point.

In addition to digital gambling and pornography businesses, nutritional supplement ecommerce sales, which is commonly identified as a high-risk merchant category by the major card brands, was among the types of businesses served by FBME's card processing unit. FBME accessed the U.S. financial system through relationships with correspondent banks, including Deutsche Bank AG. The Treasury Department noted that FBME ran almost $390 million transactions through those banks in a one-year period during 2013 and 2014, and many of the transactions showed "high-risk money laundering typologies." Deutsche Bank, however, is not under investigation in this matter, Bloomberg reported.

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