Federal authorities warned banks across the country on Thursday to exercise caution in dealing with 43 entities that may be conducting banking business illegally.
Four institutions in Los Angeles and one each in San Diego and San Francisco were among the names on a list sent out by the Federal Deposit Insurance Corp., which regulates banks and insures bank deposits.
The FDIC notice said these “banks” apparently were operating illegally and added: “Any proposed transactions involving any of the listed entities should be viewed with extreme caution.”
A federal banking regulator said a bank in the Southwest discovered Thursday morning that it had lost $36,000 in a scheme involving a fraudulent cashier’s check drawn on one of the institutions, located on Montserrat in the West Indies. The regulator declined to identify the victimized bank and asked that his name be withheld.
Few Legitimate Uses
The regulator said the number of entities operating as banks in the United States without proper authorization or license has increased substantially in recent months.
Many banks on the FDIC warning list are located in Montserrat, where authorities have sold more than 200 bank charters in recent months, according to U.S. regulators. The names on the charters sound official and are often similar to those of established institutions.
The charters are re-sold at high mark-ups by organized businesses to U.S. citizens, who then operate them in this country, according to testimony at congressional hearings conducted in 1985.
Although neither selling nor buying such a charter is illegal, experts told Congress there are few legitimate uses for these banks and they said many are used in illegal schemes, including issuing worthless cashier’s checks and other types of financial instruments.
In the case that came to light Thursday, a customer at the Southwestern bank cashed a $36,000 cashier’s check drawn on Lux International Bancorp in Montserrat. The U.S. bank held the check for several days, assumed that it had cleared and gave the customer the cash.
By the time the bank discovered that no funds had been received to honor the check, the customer had disappeared.
For several months, federal law enforcement officials in California and other states have been investigating similar schemes involving worthless certified drafts drawn on nonexistent Mexican banks, including two of the 43 entities cited by the FDIC.
The Office of the Comptroller of the Currency in Washington also is investigating off-shore banks and provided the names that the FDIC issued Thursday.
James R. Dudine, an enforcement official with the FDIC in Washington, said the number of successful frauds pulled off using the questionable banks is relatively small.
“Most banks are astute enough not to get caught with this sort of stuff. But there are some real dangers,” he said.
Most of the U.S. names on the list were not listed with telephone operators.
One institution on the list is Banco Commercial Arabe in Los Angeles. Robert M. Talcott, an attorney for one of the institution’s principals, said it does not function as a bank, but as a financial services company that arranges loans and joint ventures. He said the company is in compliance with appropriate regulations.
No telephone listings could be found for the three other Los Angeles entities--Churchill International Bank, European Industrial Development Bank and Western Pacific Overseas Bank.
There also was no listing for First International Bank & Trust in San Diego. Officials said that entity should not be confused with a licensed, FDIC-insured bank with a similar name, First International Bank in Chula Vista.
Several in the West
A woman who identified herself as Julie Bone said Midcontinental Bank & Trust in Atlanta, another name on the list, is a legal entity, but she refused to provide any more information.
Below are the institutions on the FDIC list: Banco Commercial Arabe, Los Angeles; Banque Commerciale D’Haiti, Jamaica, N.Y.; British Bank of Commerce, Plymouth, Montserrat; British Bank of Commerce, Reno, Nev.; Caribbean Bankers Trust, Philipsburg, St. Maarten; Cayman Overseas Bank & Trust, Georgetown, Grand Cayman; Churchill International Bank, Beverly Hills; Citizens Bank & Trust, Anguilla; Crown International Bank, Plymouth, Montserrat; and European Industrial Development Bank, Los Angeles.
Also: European Industrial Development Bank, Plymouth, Montserrat; First Integrity Bank, San Francisco; First International Bank & Trust, San Diego; First Morgan Bank, Columbia, S.C.; First Morgan Bank, Montserrat; Gibraltar Overseas Bank, Rosemont, Ill.; Gibraltar Overseas Bank, Plymouth, Montserrat; Global Credit Reserve, Acapulco, Mexico; Industrial Trade Bank, Plymouth, Montserrat; Internationale Financial Trust, Acapulco; Lux International Bancorp, Plymouth, Montserrat; Manufacturers International Bank, Tampa, Fla.; Midcontinental Bank & Trust, McLean, Va.; and Midcontinental Bank & Trust, Atlanta.
Also: Northern International Bank, Sparks, Nev.; Northern International Bank, Reno, Nev.; Plymouth International Bank, Plymouth, Montserrat; Plymouth International Bank, Lake Havasu City, Ariz.; Regal Bank of Montserrat, Plymouth, Montserrat; Wellington International Bank & Trust, Montserrat; Wellington International Bank & Trust, Coral Gables, Fla.
Also: Western Pacific Overseas Bank, Los Angeles; Western Pacific Overseas Bank, Montserrat; World Arbitrage Bank, New York City; World Arbitrage Bank, Atlanta; Union Commercial Bank, New York City; United Bancorp International, Miami, Fla.; United Bancorp of Minnesota, Minneapolis; United Security Bank, Elmhurst, Ill.; United Security Bank, Plymouth, Montserrat; Union Bank of Commerce, Plymouth, Montserrat; Union Commercial Bank, Plymouth, Montserrat; and Windward Island Credit Exchange, Philipsburg, St. Maarten.