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    A sign taped to the door of a branch of Banco Madrid reads Office Closed, in Madrid

    Spain's Banco Madrid Files for Bankruptcy Amid Money-Laundering Scandal

    © REUTERS / Andrea Comas
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    Spain's Banco Madrid initiated insolvency proceedings after its parent company was implicated in a major money-laundering scandal prompting customers to withdraw their savings from the small private bank.

    "The decision is in response to the serious deterioration in Banco de Madrid, S.A.'s financial position as a result of the sizable withdrawals of funds made by customers and of the latest developments to come to light, which have affected the bank's ability to duly meet its obligations," the Bank of Spain said in a statement. The Bank of Spain took over the management of Banco Madrid, a subsidiary of Banca Privada d'Andorra (BPA).

    Last week, the US Treasury Department's Financial Crimes Enforcement Network (FinCEN) issued a statement saying that high–level managers at BPA,  "have knowingly facilitated transactions on behalf of third–party money launderers acting on behalf of transnational criminal organizations" for several years. BPA is Banco Madrid's parent company.

    Following the FinCEN announcement, the Bank of Spain has launched an investigation into BPA activities, expected to be complete in two months. Spanish authorities issued two arrest warrants for BPA managers. Joan Pau Miquel Prats, CEO of Banca Privada d'Andorra, was arrested on Friday.

    Banco Madrid has approximately 15,000 clients.

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    Tags:
    money-laundering, bankruptcy, bank, financial crime, Bank of Spain, Banca Privada d'Andorra (BPA), Banco Madrid, Spain
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