PUBLIC NOTICE :PROGRESS ON LIQUIDATION OF FBME BANK LTD

The Bank of Tanzania (BoT) continues to oversee the complex liquidation of FBME Bank Ltd, a process initiated in May 2017 following its designation by the US Financial Crimes Enforcement Network (FinCEN) as a primary money laundering concern. The Deposit Insurance Board (DIB) was appointed as the liquidator, tasked with recovering assets and reimbursing depositors and creditors. Significant progress has been made, including multiple rounds of compensation to local creditors, with a third payout in December 2025 bringing total reimbursements to 85% of verified claims for deposits exceeding the initial insured amount. The ongoing process highlights the intricate legal and international coordination required in cross-border bank insolvencies, particularly concerning frozen assets abroad and the application of Tanzania's evolving banking and compulsory liquidation regulations.

The liquidation of FBME Bank Ltd by the Bank of Tanzania (BoT) represents a significant and protracted enforcement action within the Tanzanian financial sector, underscoring the complexities inherent in resolving cross-border banking insolvencies. Initiated in May 2017, this process has been closely watched by legal professionals due to its international dimensions and the substantial claims involved. The BoT's public notices regarding the progress of this liquidation provide crucial insights into the regulatory framework governing bank failures in Tanzania and the practical challenges faced by liquidators in recovering assets and compensating affected parties.

This article delves into the legal and operational aspects of the FBME Bank Ltd liquidation, examining the statutory powers exercised by the Bank of Tanzania and the Deposit Insurance Board (DIB), the appointed liquidator. It will explore the background of the bank's collapse, the legal instruments guiding the liquidation process, and the ongoing efforts to reimburse depositors and other creditors. The case serves as a vital precedent for understanding the resolution mechanisms for distressed financial institutions in Tanzania, particularly in scenarios involving international regulatory scrutiny and frozen assets.

FBME Bank Ltd, once a significant commercial bank with its operational headquarters in Tanzania and substantial operations in Cyprus, came under intense international scrutiny in July 2014. The US Financial Crimes Enforcement Network (FinCEN) issued a Notice of Findings, identifying FBME as a financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act. This designation severely impacted the bank's ability to conduct international transactions, leading to the Bank of Tanzania taking over its management in July 2014 to safeguard the domestic financial system.

Following a US District Court ruling in April 2017 that upheld FinCEN's decision to ban FBME from accessing the US financial system, the Bank of Tanzania, exercising its powers under the Banking and Financial Institutions Act, 2006 (BFIA), revoked FBME's banking license and placed it under compulsory liquidation. The Deposit Insurance Board (DIB) was officially appointed as the liquidator effective May 8, 2017, pursuant to Sections 58(2)(a), 11(3)(i), 61(1), and 41(a) of the BFIA. This action marked the formal commencement of a complex process aimed at winding down the bank's affairs, realizing its assets, and distributing proceeds to its numerous creditors, both domestic and international.

The liquidation of FBME Bank Ltd is governed primarily by the Banking and Financial Institutions Act, 2006 (BFIA), and the Deposit Insurance Board Act, 1997. These statutes provide the legal framework for the licensing, regulation, supervision, and, crucially, the resolution of insolvent banks in Tanzania. The DIB, as the appointed liquidator, operates under these provisions, with its mandate including the determination of assets and liabilities, and the reimbursement of insured depositors and other creditors.

Initial reimbursement of insured deposits, capped at TZS 1,500,000 per depositor as per the BFIA at the time, commenced in November 2017. For claims exceeding this insured limit, depositors were advised that payments would be made after the collection of liquidation proceeds. This phased approach is typical in bank liquidations, prioritizing smaller, insured deposits to maintain public confidence while larger claims await asset realization. Notably, the maximum payout limit by the DIB from the Deposit Insurance Fund was subsequently increased to TZS 7,500,000 by Government Notice Number 157 of 2023, effective March 3, 2023, for future bank failures. However, the FBME liquidation, having commenced earlier, appears to be operating under the prior insured limit for initial payouts, with subsequent distributions addressing the uninsured portions of claims.

Recent public notices from the DIB indicate ongoing progress, with a third round of compensation announced in December 2025 for local creditors with deposits exceeding TZS 1.5 million. This payout brought the total amount reimbursed to local claimants to 85% of their verified claims, signifying substantial recovery efforts. However, the liquidation is complicated by the significant disparity between domestic and foreign exposures, with international creditors holding substantially larger claims. A key challenge remains the recovery of funds frozen by FinCEN, which continues to delay the full compensation process.

The international dimension of FBME's operations, particularly its Cyprus branch, has necessitated complex cross-jurisdictional coordination. The Nicosia District Court appointed Petros Ioannides as the liquidator for the Cyprus branch and as an agent of the DIB in Tanzania, highlighting the intricate legal and administrative efforts required to consolidate assets and manage claims across different legal systems. This coordination is crucial for maximizing asset recovery and ensuring equitable distribution to all verified creditors.

Furthermore, the Bank of Tanzania recently enacted the Banking and Financial Institutions (Compulsory Liquidation) Regulations, 2024 (G.N. No. 98 of 2024), under Section 71 of the BFIA. These regulations provide a more comprehensive framework for compulsory liquidation, empowering the BoT to appoint qualified liquidators and clarifying their responsibilities, including compliance with company laws. While these regulations were introduced after the FBME liquidation commenced, they reflect an ongoing effort to refine and strengthen the legal mechanisms for resolving bank failures, drawing lessons from complex cases like FBME.

The ongoing liquidation of FBME Bank Ltd by the Bank of Tanzania, through the Deposit Insurance Board, serves as a critical case study in the resolution of complex financial institution failures, particularly those with significant international implications. The progress made in reimbursing local creditors, despite the challenges posed by frozen assets and cross-border coordination, demonstrates the robustness of Tanzania's regulatory framework and the DIB's commitment to protecting depositors.

Practitioners should closely monitor future public notices from the Bank of Tanzania and the Deposit Insurance Board for updates on asset recovery, particularly concerning the international frozen funds, and further rounds of creditor payouts. The FBME case also highlights the increasing importance of understanding the interplay between domestic banking laws, international anti-money laundering regulations, and cross-jurisdictional insolvency proceedings. The recent enactment of the Banking and Financial Institutions (Compulsory Liquidation) Regulations, 2024, further solidifies the legal landscape for bank insolvencies in Tanzania, providing clearer guidelines for future cases and reinforcing the central bank's supervisory and resolution powers.