From Bangkok Post online. 18 June 1006.
http://www.bangkokpost.net/170606_Busin ... _biz01.php
Regulators' report disciplines BBL
New York branch will tighten scrutiny
US regulators have ordered Bangkok Bank's New York office to temporarily halt wire transfers and demand drafts pending the improvement of compliance with US anti-money-laundering laws.
The 25-page directive, dated April 20, ordered Bangkok Bank to stop wires until it set up an approved software system to allow the identification of potentially suspicious activities and monitor transactions to meet the US Bank Secrecy Act (BSA).
Bangkok Bank must also retain a BSA consultant to review compliance with the law, as well as "conduct due dilligence in order to assess the legitimacy" of any wires going through the New York branch.
The Comptroller of the Currency (OCC), a unit of the US Treasury Department, also ordered Bangkok Bank to "cease and desist from issuing, processing, or honouring demand drafts until such time as the branch has developed a Bank Secrecy Act/anti-money-laundering programme ... that will result in the effective monitoring, detection, and reporting of suspicious activities in the issuance, processing, and payment of demand drafts".
Bangkok Bank also agreed to implement new training for a BSA compliance officer to use the branch's Gifts (Global Integrated Funds transfer and Telecommunications System) software and also hire a "new, capable, full-time risk manager who shall be vested with sufficient executive authority to ensure the branch's compliance with the Bank Secrecy Act".
The consent order also states that Bangkok Bank must retain an independent consultant to examine the bank's staff, risk assessment procedures and internal controls related to BSA compliance.
Within six months, the consultant is also required to review all non-wire account activity at Bangkok Bank's New York branch since March 31, 2004 for possible suspicious action, and all wire activity since Sept 30, 2003, when the bank implemented the Gifts system.
Bangkok Bank executives said the regulatory action followed a standard audit of foreign banks by US regulators.
Bordin Unakul, a bank executive vice-president, said other foreign banks had also been compelled to make changes to comply with stiffer anti-money-laundering laws in the US.
"The form is a standard one that banks take with the OCC to improve internal controls and audit systems to comply with US anti-money-laundering laws," Mr Bordin said.
"It's an analysis by the US regulators, not an indication of wrongdoing. Rather, the order is a caution for the bank to tighten its controls."
Mr Bordin said that since the 9/11 attacks in the US, regulators had been significantly tightening financial rules and anti-money-laundering laws to track transactions possibly carried out by terrorists.
He said the bank was in the process of complying with the US order, and had already appointed a new risk manager for the New York branch.
Bangkok Bank continued to provide fund transfer services, and was now reviewing proposals from two outside providers to subcontract work related to payment transactions by the branch.
"Outsourcing some of the work will not only help us reduce costs, but it will also help strengthen our relationship with local banks in the US as well," Mr Bordin said.
The US regulatory action identifying weaknesses in Bangkok Bank's internal controls mirrors a directive made last year by Japanese bank regulators against Bangkok Bank's Tokyo and Osaka branches.
Japan's Financial Services Authority in November announced that the two Bangkok Bank branches had been found to have "serious problems" in their internal audit procedures and risk controls, and had been "found to have repeatedly violated the duty of personal identity verification" when processing currency transactions and opening bank accounts.
"Remarkable inadequacy was found with respect to the construction of a system for guidance and training of executives and employees, and control of administrative work," the FSA said in a statement.
A review by the bank after an FSA inspection in September found a number of "suspicious transactions".
Samart Buranawattanachoke, an assistant governor at the Bank of Thailand, said the central bank would request information from Bangkok Bank to examine whether its New York branch had affected local operations.
He said corrective measures would not be introduced right away."It is normal for financial regulators to examine commercial banks in their respective countries and punish or order them to correct what may not comply with standards."