Skip to Content

NY.gov Portal State Agency Listing

Translate | Disclaimer

Banking Department Issues Cease and Desist Order Against United Orient Bank


State of New York Banking Department
New York, New York


In the Matter of  
United Orient Bank
New York, New York

Order to Cease and Desist Issued Upon Consent 

WHEREAS, UNITED ORIENT BANK, NEW YORK, NEW YOR (the “Bank”), is a New York state-chartered insured nonmember bank having its principal place of business at 10 Chatham Square, New York, New York 10038, and is at all times mentioned herein subject to the New York Banking Law and related rules and regulations promulgated thereunder; and

WHEREAS, in recognition of their common goals to ensure compliance with all applicable federal and state laws, rules and regulations by the Bank, the New York State Banking Department (the “Banking Department”) and the Bank mutually have agreed to enter into this Order to Cease and Desist Issued Upon Consent (the “Order”); and

WHEREAS, the Banking Department together with the Federal Deposit Insurance Corporation (the “FDIC”) recently engaged in a joint examination of the Bank, as of September 30, 2002 (the “Joint Examination”); and

WHEREAS, as a result of said Joint Examination, the Banking Department has identified certain supervisory concerns relating to the conduct of the Bank’s business, including the following unsafe or unsound banking practices and violations:

  1. Operating the Bank with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits; and

  2. Operating the Bank with a Board of Directors (the “Board”) which has failed to provide adequate supervision over and direction to the active management of the Bank; and

  3. Engaging in violations of applicable federal and state laws and regulations including, but not limited to, the Currency and Foreign Transactions Reporting Act (31 United States Code Sections 5311 et seq.) and the accompanying regulations issued thereunder by the United States Department of the Treasury (31 Code of Federal Regulations Part 103.11 et seq. (“Part 103”)) (collectively referred to as the “Bank Secrecy Act”, hereinafter, the "BSA"), and the rules and regulations relating to suspicious activity reporting and BSA compliance requirements of the FDIC (12 C.F.R. Part 326.8 (“Part 326.8”) and 12 C.F.R. Part 353 (“Part 353”)), and  3 N.Y. Comp. Codes R. and Regs. Part 300 ("Part 300"), relating to reports required to be filed with the Banking Department, as more fully described on pages 14 through 23 of the joint Report of Examination of the Bank by the FDIC and the Banking Department as of September 30, 2002 (the "Joint Examination Report"); and

  4. Engaging in hazardous lending and lax collection practices; and

  5. Operating the Bank in such a manner so as to produce low earnings; and

  6. Operating the Bank with inadequate internal routine and controls policies, including, but not limited to, inadequate audit policies and procedures; and

  7. Operating the Bank with an inadequate ethics policy; and

  8. Operating the Bank with inadequate investment policies and procedures.

WHEREAS, the Superintendent of Banks of the State of New York (the “Superintendent”) has determined that the Bank has failed to establish the controls necessary to ensure that the Banks operates in a safe, prudent and lawful manner; and

WHEREAS, given the foregoing, the Superintendent is concerned that the Bank has failed to conduct its operations in a safe and sound manner by failing to take appropriate steps to assure that its employees act consistently in compliance with all applicable federal and state laws and regulations; and

WHEREAS, the Superintendent possesses the authority under the New York Banking Law Section 39 to issue an order to the Bank to discontinue unlawful or unsafe practices; and

WHEREAS, the Superintendent believes that prompt enforcement action is necessary to address numerous supervisory concerns with regard of the Bank and further believes that additional enforcement action may be necessary to address any other supervisory concerns which may come to the attention of the Banking Department; and

WHEREAS, on September 30, 2003, at a duly constituted meeting, the Board adopted resolutions:

  1. Authorizing and directing Mr. Chi Cheung Lee, President and Chief Executive Officer, to enter into this Order on behalf of the Bank and consenting to compliance by the Bank and each of its insiders, as defined in Part 11 of the General Regulations of the Banking Board (“Part 11”), and its successors and assigns, with each and every provision of this Order; and

  2. Waiving any and all rights that the Bank may have pursuant to the New York Banking Law Sections 39 and 44 with respect to (1) the issuance of a notice of charges and of hearing on any matter set forth in this Order; (2) a hearing for the purpose of taking evidence on any matters set forth in this Order; (3) judicial review of this Order; and (4) the challenging or contesting of, in any manner, the basis, issuance, validity, terms, effectiveness or enforceability of this Order or any provision thereof.

NOW, THEREFORE, before the taking of any testimony or the making of any findings of fact or conclusions of law, and without this Order constituting an admission or denial of any allegation made or implied by the Banking Department in connection with this proceeding, and solely for the purpose of settlement of this proceeding without a protracted or extended hearing, and pursuant to the aforesaid resolutions:

IT IS HEREBY ORDERED that the Bank, and each of its insiders, as defined in Part 11, and its successors and assigns, shall cease and desist from committing any further violations of the nature described herein and shall take affirmative action as follows:

  1.  

  1. During the life of this Order, the Bank shall have management qualified to restore the Bank to a sound condition. 

  2. Management shall be assessed on its ability to:

  1. Comply with the requirements of this Order;

  2. Improve and thereafter maintain the Bank in a safe and sound condition, including asset quality, management effectiveness, capital adequacy, liquidity adequacy, and earnings adequacy; and

  3. Comply with all applicable state and federal laws, and with regulations of the FDIC and of the Banking Department and with policy statements of the Federal Financial Institutions Examination Council ("FFIEC").

  1.  

  1. During the life of this Order, the Bank shall notify in writing the Banking Department of any resignation or terminations of any members of its Board or of any of its senior executive officers within fifteen (15) days of the event.

  2. The Bank shall comply with all applicable federal and state laws and regulations relating to a change in any member of its Board or any senior executive officer and the procedures for filing notice of such changes with the Banking Department as well as applicable delegations of authority.

  1.  

  1. To ensure both compliance with this Order and to facilitate having and retaining qualified management for the Bank, the Board, within sixty (60) days from the effective date of this Order, shall undertake an in-depth analysis and review of the Bank’s managerial requirements and make a written report (the "Board Management Report") on the Bank’s management needs.  The Board Management Report shall incorporate an analysis of the Bank's management and staffing requirements and, at a minimum, shall (1) provide a review of the composition, policies and practices of the Bank’s current operating management, (2) provide a recommendation of whether current operating management should be changed, or the terms and conditions under which current operating management should be continued, (3) provide an evaluation of each Bank officer, indicating whether these officers possess the ability, experience and other qualifications required to perform present and anticipated duties, including adherence to the Bank’s established policies and practices and maintenance of the Bank in a safe and sound condition, (4) identify both the number and type of positions needed to properly supervise the Bank’s lending functions, giving appropriate consideration to the Bank’s loan volume, customer base and the number of problem credits, (5) provide a clear and concise description of the general duties and responsibilities for each Bank officer and their key support staff, (6) identify the skills, experience and compensation required for each position, (7) establish a plan to recruit, hire or replace personnel based upon ability and experience, (8) establish a plan providing for periodic evaluation of each individual’s job performance and (9) provide for periodic review of the Bank’s management procedures to periodically review and update the Board Management Policy.

  2. The Board shall obtain the services of an outside consultant (the “Consultant”), acceptable to the Banking Department, who is knowledgeable in the area of bank management and personnel evaluation to assist the Board in reviewing the Bank’s management needs and in preparing the Board Management Report.  The acceptability of the Consultant to the Banking Department shall be based upon the Consultant’s ability to advise the Bank in each of the areas identified in Paragraph 2(a) above.

  3. Within ninety (90) days from the effective date of this Order, the Board, with the assistance of the Consultant, shall prepare a written plan of implementation (the “Plan”), addressing the findings of the Board Management Report.  The Plan shall specify the actions to be taken by the Board and the timeframes for each action.

  4. Within one hundred twenty (120) days from the effective date of this Order, the Board shall prepare a written report (the “Board Written Report”), which shall contain (i) a recitation identifying the recommendations made by the Consultant which have been incorporated in the Board Management Report and the Plan, (ii) a recitation identifying the recommendations made by the Consultant which were not incorporated in the Board Management Report and the Plan and the reasons for not including such recommendations and (iii) a copy of any report prepared by the Consultant.

  5. Promptly after the preparation of the Board Management Report, the Plan and the Board Written Report, but in any event no later than one hundred twenty-five (125) days from the effective date of this Order, a copy of the Board Management Report, the Plan and the Board Written Report shall be submitted to the Banking Department for review and comment.  Within thirty (30) days from the receipt of any comment, and after consideration of such comment, the Board shall approve the Board Management Report and the Plan, which approvals shall be noted in the official minute books of the Board.  It shall remain the responsibility of the Board to fully implement the Plan within the specified timeframes.  In the event the Plan, or any portion thereof, is not implemented, the Board immediately in writing shall advise the Banking Department of the specific reasons for deviating from the Plan.

  1. Immediately upon the effective date of this Order, the Bank shall: (a) not enter into any agreements with present and former officers of the Bank which constitute "golden parachute payments", as that term is defined in section 18(k)(4) of the Federal Deposit Insurance Act (the “Act”) (12 United States Code

Section  1818(k)(4)); (b) rescind all agreements or portions of all agreements with present and former officers of the Bank which constitute "golden parachute payments"; (c) cease making any payments to present and former officers of the Bank which constitute "golden parachute payments", as that term is defined in Section 18(k)(4) of the Act; and (d) take all legal steps necessary to obtain full reimbursement from all former officers of the Bank of any payments already made to them which constitute "golden parachute payments", as that term is defined in Section 18(k)(4) of the Act.

  1. Within sixty (60) days from the effective date of this Order, the Bank shall develop, adopt and implement a written ethics policy and procedure with regard to the ethical conduct and other standards of conduct and responsibilities for its directors, officers, employees, agents and other persons participating in the conduct of the affairs of the Bank (the "Ethics Program".)  At a minimum, the Ethics Program shall address the following:

  1. Ethical and other conduct and responsibilities of individuals in (i) the acceptance of gifts, entertainment, favors and loans; (ii) the use of official information; (iii) the employment of relatives; (iv) the use of Bank property; (v) the incurrence of travel expenses; and (vi) the repaying or satisfying or meeting the obligations of indebtedness to the Bank or any other financial institution. 

  2. The financial interests and obligations of individuals that appear to conflict with that individual's duties and responsibilities such as:

  1. Participating in any manner in any transaction or loan in which the individual, the individual's spouse, child, partner, or organization is involved; or in which the individual serves as an officer, director, trustee, partner, or employee, or has a financial interest;

  2. Purchasing of Bank property;

  3. Providing goods or services to the Bank; and

  4. Outside employment and other activities.

  1. An annual written method of reporting each individual's compliance with the Ethics Program to an Ethics Counselor or committee, which shall review compliance with the Ethics Program and report its findings to the Board.

  1. The Bank shall conduct a review (the “Review”) of cash transactions, sales of monetary instruments, and funds transfer activity within the Bank.  The Review shall be designed to determine whether suspicious activity involving accounts or transactions at, by, or through the Bank was properly identified and reported by the Bank in accordance with applicable suspicious reporting regulations, and to evaluate compliance with the currency transaction reporting requirements of the BSA and the rules and regulations thereunder.

  1. Within thirty (30) days from the effective date of this Order, the Bank shall submit to the FDIC and the Banking Department an acceptable written plan for the Review, which shall cover all transactions during the period January 1, 2001 through the effective date of this Order.  This written plan shall set forth the proposed methodology for the Review; the types of accounts, transactions, and banking activities to be reviewed; the proposed resources to be dedicated to the Review; the scope of the written report covering the Review; and the expected date of completion of the Review, not to exceed ninety (90) days from the effective date of this Order.

  2. Within one hundred twenty (120) days from the effective date of this Order, the Bank shall submit to the FDIC and the Banking Department:

  1. A written report setting forth the findings, conclusions, and recommendations of the Review;

  2. An acceptable written plan setting forth the actions the Bank will take to respond to the findings, conclusions, and recommendations.

  1. Upon completion of the Review, the Bank shall ensure that all transactions previously required to be reported have been reported in accordance with applicable regulations and guidelines.

  2. The Bank shall maintain all work papers, work product, drafts and interim reports relating to the Review so that they may be readily available to the FDIC and the Banking Department upon request.

  1. Within thirty (30) days from the effective date of this Order, the Bank shall establish an adequate plan to comply in all material respects with the BSA, Part 326.8, Part 353 and Part 300 (the “BSA Plan”).  Thereafter, the Bank shall comply in all material respects with the BSA Plan.  Such BSA Plan, at a minimum, shall include taking the following measures:

  1. Eliminate and correct all violations of BSA, Part 326.8, Part 353 and Part 300, as cited in the Joint Examination Report;

  2. Establish and maintain an effective internal compliance program and system of internal controls pursuant to Part 326.8, including, but not limited to:

  1. Monitoring of incoming and outgoing funds transfers by both account holders and non-account holders for suspicious or unusual activities;

  2. Monitoring of purchases of monetary instruments by both account holders and non-account holders for suspicious or unusual activities;

  3. Establishing a system to ensure compliance with the recordkeeping and reporting requirements for currency transactions over $10,000 and that is capable of aggregating multiple cash transactions for any one business day, or other appropriate business period, from all branches by account number, by name(s) of the account holder(s), and by transactor(s), and identifying any cash transactions that may have been structured to avoid currency transaction reporting requirements; and

  4. Identifying and verifying the identity of account holders and transactions as required for recordkeeping and reporting of currency transactions over $10,000.

  1. Test for compliance with BSA pursuant to Part  326.8, using a qualified, trained, and experienced third party, such as an independent public accountant or specialist in this subject matter, who is not, in any manner, affiliated with the Bank.  Thereafter, such independent testing shall be conducted on an annual basis.  Written reports documenting the testing results and providing recommendations for improvements shall be prepared and presented to the Board of the Bank and noted in official minute books of the Board;

  2. Designate a qualified individual or individuals responsible for coordinating and monitoring day-to-day compliance with the BSA pursuant to Part 326.8.  Such individual or individuals shall: (i) have sufficient executive authority to monitor and ensure compliance with the BSA and Part 326.8; (ii) report directly to the Board of the Bank; (iii) be completely independent of the Bank’s senior management; and (iv) be responsible for assuring the proper filing of Currency Transaction Reports, Reports of International Transportation of Currency or Monetary Instruments, and Suspicious Activity Reports relating to the BSA (“SARs”) and to Part 300;

  3. Provide training for appropriate personnel pursuant to Part 326.8.  Such training shall ensure that all appropriate personnel are aware of, and comply with, the requirements of the BSA, including the currency and monetary instruments reporting requirements and the reporting requirements associated with SARs and with Part 300; and

  4. The Board shall monitor and confirm the completion of actions taken by management to comply with the terms of this paragraph.  The Board shall certify in writing to the Banking Department when all of the above actions have been accomplished.  All actions taken by the Board pursuant to this paragraph shall be duly noted in the official minute books of the Board.

  1. Within forty-five (45) days from the effective date of this Order, the Bank shall establish and implement policies and procedures to advise the Board of significant SAR filings and of all reports filed under Part 300.  At a minimum, the Board should be advised in detail of all SAR filings involving  employees, contractors, officers and Board members and agents of the Bank.  The policies and procedures also shall include guidelines to determine which SAR filings are significant.

  2. Within forty-five (45) days from the effective date of this Order, the Bank shall develop, adopt and implement a written customer due diligence program (the “Customer Due Diligence Program“).  Such Customer Due Diligence Program and its implementation shall be in a manner acceptable to the Banking Department, as determined at subsequent examinations or visitations of the Bank.  At a minimum, the Customer Due Diligence Program shall provide for the following:

  1. A risk focused assessment of the customer base of the Bank to determine the appropriate level of enhanced due diligence necessary for those categories of customers which the Bank has reason to believe pose a heightened risk of illicit activities at or through the Bank; and

  2. For those customers whose transactions require enhanced due diligence, procedures to:

  1. Determine the appropriate documentation necessary to confirm the identity and business activities of the customer;

  2. Understand the normal and expected transactions of the customer; and

  3. Reasonably ensure the identification and timely, accurate and complete reporting of known or suspected criminal activity against or involving the Bank to law enforcement and supervisory authorities, as required by the suspicious activity reporting provisions of Part 353  and of Part 300.

  1. Within thirty (30) days from the effective date of this Order, the Bank shall amend its audit policies, procedures, and practices, both with regard to internal audits and with regard to external audits, so that the Insured Institution's compliance with the BSA, Part 103, Part 353 and with Part 300  become subject to periodic review as part of the Bank's routine auditing.  As long as this Order shall remain in effect, the Bank’s internal and external audits shall include reviews of these areas, with significant exceptions reported directly to the Board of the Bank.

  2. Within sixty (60) days from the effective date of this Order, the Bank shall review its written loan policy and make all changes necessary to provide for the safe and sound administration of all aspects of the lending function.  Specific procedures shall be included for prior approval of loans to directors, officers and principal shareholders and their related interests in compliance with all applicable laws and regulations.  Loan documentation, repayment programs, collection and charge-off procedures and internal loan review shall also be included as a part of the reviews.  The Bank shall adopt all changes necessary and appropriate and management shall reaffirm its intent to comply with this loan policy, as amended.  Evidence of management's reaffirmation shall be reduced to writing.  The policy and its implementation shall be in a form and manner acceptable to the Banking Department.

  3. Within sixty (60) days from the effective date of this Order, the Bank shall adopt and implement a written policy for the operation of the Bank in such a manner as to provide internal routine and controls consistent with safe and sound banking practices.  Such policy and its implementation shall be satisfactory to the Banking Department as determined at subsequent examinations or visitations.

  4. Within sixty (60) days from the effective date of this Order, the Bank shall eliminate and correct all violations of law or regulations which are set forth in pages 14 through 23 of the Joint Examination Report.  In addition, henceforth, the Bank shall comply with all applicable federal and state laws and regulations.

  5.  

  1. Within sixty (60) days from the effective date of this Order, the Board shall develop, adopt and implement a written profit plan  (the “Written Profit Plan”) consisting of goals and strategies for improving the earnings of the Bank for each calendar year.  At a minimum, the Written Profit Plan shall include:

  1. The identity of the major areas and means by which the Board will seek to improve the  operating performance of the Bank;

  2. Realistic and comprehensive budgets;

  3. A budget review process to monitor the income and expenses of the Bank to compare actual figures with budgetary projections on not less than a quarterly basis;

  4. A description of the operating assumptions that form the basis for, and adequately support, major projected income and expense components; and

  5. Coordination of the Bank’s loan, investment and operating policies, and budget and profit planning with the funds management policy.

  1. Within the first thirty (30) days of each subsequent calendar year, the Board shall review and modify, as appropriate, the Written Profit Plan.  The Written Profit Plan and any subsequent modifications thereto shall be submitted to the Banking Department for review and comment.

  1. Within thirty (30) days from the effective date of this Order, the Board shall establish a committee comprised of Board members (the “Board Compliance Committee”) with the responsibility to ensure that the Bank complies with the provisions of this Order.  At least two-thirds of the members of the Board Compliance Committee shall be independent, outside directors.  The Board Compliance Committee shall report monthly in writing to the entire Board, and a copy of each monthly  report and any discussion relating to such monthly report or to this Order shall be included in the official minute books of the Board.  Nothing contained herein shall diminish the responsibility of the entire Board to ensure compliance with all the provisions of this Order.

  2. On the fifteenth day of the second month following the effective date of this Order, and on the fifteenth day of every third month thereafter, the Bank shall furnish a written progress report to the Banking Department detailing the form and manner of any actions taken to secure compliance with this Order and the results thereof.  Such quarterly reports may be discontinued only when the actions required under this Order have been accomplished in full and the Banking Department has given its written release to the Bank from making further quarterly reports as required by this paragraph.

  3. Within sixty (60) days from the effective date of this Order, and at least annually thereafter, the Board of the Bank shall review the Bank’s investment policy and practices (the “Investment Policy”) for adequacy and shall make the necessary revisions to address the actual and contemplated condition of the investment portfolio and any trading account.  At a minimum, the Investment Policy shall address the exceptions noted in the Joint Examination Report and shall be consistent with the FFIEC's Instructions for Consolidated Reports of Condition and Income, generally accepted accounting principles, and the loan, liquidity and asset/liability management policies of the Bank.  A copy of the Investment Policy, including all revision and amendments thereto, shall be submitted to the Banking Department upon adoption.

  4. All communications regarding this Order shall be sent to:      

  1. Mr. Anthony Calabrese
    Deputy Superintendent of Banks
    New York State Banking Department
    One State Street
    New York, New York  10004

  2. Mr. Chi Cheung Lee
    President and Chief Executive Officer
    United Orient Bank
    10 Chatham Square
    New York, New York  10038

  1. Upon the event of noncompliance with any provision of this Order, the Bank shall notify, in writing, the Banking Department within one day of such event.  Such written notification shall include a description of the event, the circumstances precipitating the event, all actions taken to correct the noncompliance and a date by which full compliance will be achieved.

  2. The provisions of this Order shall remain effective until modified, terminated or suspended in writing by the Banking Department.  Each provision of this Order shall be binding upon the Bank, its directors, officers, employees, agents, and its insiders, as defined in Part 11, and its successors and assigns.

  3. The provisions of this Order shall not bar, estop or otherwise prevent the Banking Department or any other federal or state agency or department from taking any other action affecting the Bank, or any current or former insiders, as defined in Part 11, and its successors and assigns.

  4. This Order arises out of confidential bank examinations and related communications material.  As such, its contents are subject to the New York Banking Law Section 36(10) and may not be disclosed without the prior written consent of the Banking Department.

  5. This Order shall become effective immediately upon execution by the Banking Department.

  By:                           

Diana Taylor
Superintendent of Banks
New York State Banking Department

Date:  ________________

By:  _________________________

Mr. Chi Cheung Lee
President and C.E.O.
United Orient Bank

Dated:  ________________