The Federal Reserve Board ordered Bangkok Metropolitan Bank on Thursday to shutter its U.S. operations, saying the bank's management cannot operate the institution safely and legally. The bank also agreed to pay a $3.5 million fine to the Justice Department for violating federal banking laws.
This is only the second time the Fed kicked a foreign bank out of the country. Daiwa Bank was the first.
Bangkok Metropolitan, which agreed to the order, has until Aug. 26 to close its New York and San Francisco offices. The Fed issued the order jointly with the New York and California state banking departments.
Bangkok Metropolitan said in a prepared statement that it was the victim of unauthorized transactions by employees who did not uphold the bank's "standards for integrity and professionalism." It added that no customers lost money.
The Fed charged that the bank knew borrowers were diverting proceeds from $35 million in loans yet didn't intervene. It also said the bank didn't explain why $34 million in checks were drawn against the New York agency It said these checks may have been part of a money-laundering scheme.
The Fed also charged that bank officials falsified regulatory reports, kept inaccurate financial records, and made misleading statements to examiners.
Steven Lucas, a partner at the Washington law firm of Winston & Strawn, said this shows the Fed will not tolerate illegal activities. "If there are other bad apples out there, they better take notice," he said.