The Bank of Miami financed businesses in Latin America and the Caribbean — a risky enterprise that regulators scrutinized for potential ties to money laundering and possible criminal misdeeds.
These overseas accounts are heavily regulated by examiners, especially post-9/11, which led the federal government to begin looking for suspicious activity among depositors.
Regulators paid especially close attention to the bank's Capital Markets Group, which helped customers get loans so that they could buy and sell bonds issued by Latin American governments.
The federal Office of the Comptroller of the Currency, or OCC, found numerous violations
in this division, criticizing the bank because it kept shoddy records, did not have a proper system to monitor suspicious accounts, and had failed to identify "politically exposed" customers with whom it did business.
Citing the Bank Secrecy Act, which compels bankers to document questionable accounts belonging to potential money launderers or terrorism financiers, federal regulators forced The Bank of Miami to shut down the Capital Markets Group in 2004.
They later fined the bank $250,000.
The increased scrutiny of its international business hurt the bank. Its total loans shrunk from $730 million in June 2002 to $440 million in June 2006.
It tried to recover by focusing on commercial real estate lending. One of its largest loans went to the Jerk Machine, a restaurant that had been sued three times in connection with claims of unpaid overtime before doing business with Bank of Miami. Jerk Machine ended up owing the bank more than $3.5 million.
After the OCC shuttered the lender in October 2010, regulators said the bank had focused too often on making loans to real estate developers and companies that made residential mortgages. When the economy faltered, many of these loans went bad.
The Bank of Miami also failed to set limits on how much one customer could borrow, and did not properly analyze a borrower's financial information, the FDIC found.