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FDIC exam finds 'deficiencies' in Cathay Bancorp's Safeguards.


WHEN it comes to Cathay General Bancorp, investors apparently figure at what they don t know won't hurt them.

In a cryptic filing with the Securities and Exchange Commission on June 18, Cathay General said its board had signed a memorandum of understanding A Memorandum of Understanding (MoU) is a legal document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action and may not imply a legal commitment.  with the Federal Deposit Insurance Corp. after a routine examination found "certain deficiencies" in the bank's compliance with the Bank Secrecy Act The Bank Secrecy Act of 1970 (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) requires U.S.A. financial institutions to assist U.S. government agencies to detect and prevent money laundering. .

Wall Street analysts acknowledged that Cathay needs to upgrade its safeguards against money laundering The process of taking the proceeds of criminal activity and making them appear legal.

Laundering allows criminals to transform illegally obtained gain into seemingly legitimate funds.
. The bank specifically has trouble keeping track of cash transactions of $10,000 or more, particularly those that are transferred among several accounts by individual customers. However, there's very little detail available on the extent of the problem. The bank has 90 days to comply with the act.

"The issues involved in the agreement appear fairly mild, in our opinion," stated analysts Brian Conn and Joe Morford at RBC Capital Markets RBC Capital Markets is the corporate and investment banking division of Royal Bank of Canada ("RBC"). Broker dealers
Depending on the jurisdiction, the division uses different broker dealer subsidiaries of RBC:
  • Canada: RBC Dominion Securities Inc
 in San Francisco, in a report issued last week.

Cathay plans to hire an independent consultant, enhance internal controls, dedicate a portion of its staff to compliance issues and to regularly adopt employee training on compliance, the company said in its SEC filing.

Perry Oei, Cathay's general counsel, would not discuss specifics of the bank's anti-laundering procedures other than to say: "We made our disclosure in the 8-K."

Analysts estimate it will take $100,000 to improve compliance, which is not expected to have an impact on earnings. In addition, Cathay disclosed that the memorandum with the FDIC FDIC

See: Federal Deposit Insurance Corporation


FDIC

See Federal Deposit Insurance Corporation (FDIC).
 could limit or delay its ability to obtain regulatory approval for any expansion plans. Currently, the company is focused on digesting its acquisition of GBC GBC Game Boy Color
GBC Global Business Coalition
GBC Green Building Council
GBC George Brown College
GBC Great Basin College (Nevada)
GBC General Binding Corporation
GBC Greater Baltimore Committee
GBC Goldey-Beacom College
 Bancorp in October 2003.
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Title Annotation:Wall Street West
Author:Berry, Kate
Publication:Los Angeles Business Journal
Article Type:Brief Article
Geographic Code:1USA
Date:Jun 28, 2004
Words:277
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