In the wake of a series of sanctions imposed on foreign banks, Morgan Stanley’s Seoul branch was given a warning for conducting a loan business here without establishing an operating system, financial authorities said Thursday.

According to the Financial Supervisory Service, the Seoul banking office of Morgan Stanley in 2011 assigned the task of loan-screening to Morgan Stanley Income Securities in Seoul and Morgan Stanley’s banking office in Hong Kong.

The Morgan Stanley Seoul office, however, was not properly equipped to review loan viability or to filter unproductive investments.

This irregular transfer of operations caused total damages of 3 billion won ($2.9 million) to the company, according to the financial watchdog.

“(Morgan Stanley) has violated the obligation that banks are to take direct charge of all the essential processes of their loan businesses,” said an FSS official.

Two of the bank’s key officials, too, were reprimanded for arranging this irregular practice.

This unprecedented sanction on the U.S.-based financial company took place amid a heightening surveillance on foreign financial companies here.

Since last year, the FSS has found that the Seoul branches of several foreign financial groups, such as BNP Paribas, HSBC, Barclays and Deutsche Bank, were involved in illicit transactions of investment goods.

Earlier this month, the Seoul branch of the Bank of China was also given a warning for establishing a local office without reporting it to the FSS.

Goldman Sachs, too, was warned this month for selling $1.1 billion worth of foreign bonds from September 2012 to April last year, without acquiring the requisite approval from financial authorities.

Meanwhile, a number of irregularities involving local bank officials have also been revealed recently.

Several officials from the state-run Industrial Bank of Korea were discovered to have misappropriated a total of 150 million won. All of the suspected officials were dismissed, after an internal probe, according to the IBK.

The Tokyo branches of Kookmin Bank and Woori Bank are also being investigated by the FSS investigation for embezzlement and illicit loans.

By Bae Hyun-jung (tellme@heraldcorp.com)