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The Department of Justice Fraud Section set up a tracking system to track significant cases (e.g., those involving significant amounts, or bank insiders). The FBI is currently developing a nationwide criminal referral tracking system to compile violations in order to prosecute repetitive offenders even if the amounts are de minimis.

The working group also recommended that a joint training course be developed to cross-train FBI agents and examiners. The agencies and the Department of Justice committed resources to this, and a formal training course was developed. A series of joint training sessions have since been held both at the FBI Academy at Quantico and at selected sites around the country.

The working group also made specific recommendations for needed amendments to the Right to Financial Privacy Act (RFPA) and the Grand Jury Secrecy Rules. Subsequent to the group's recommendation, the Administration proposed legislation to eliminate the major impediments to law enforcement cooperation contained in the RFPA and the Grand Jury Secrecy Rules. The group strongly backed amendments to the RFPA which would facilitate the ready exchange of information between the agencies and law enforcement authorities without additional notice. The group also supported revisions to the Grand Jury Secrecy Rules which would permit law enforcement authorities to share Grand Jury information with the agencies upon an appropriate showing that such information would raise supervisory concerns.

On April 2, 1985, the Attorney General and senior officials of each of the bank regulatory agencies signed an Agreement summarizing the understandings reached by the members of the working group and committing to continued cooperation in each of these areas. Since that time, the group has added to its membership representatives from the National Credit Union Administration and the Farm Credit Administration and continues to conduct monthly meetings on a variety of law enforcement issues. Representatives of the supervisory agencies also use this group as a vehicle for conducting regular meetings on civil enforcement matters. Notwithstanding the significant progress accomplished through the working group, several very serious legal impediments still exist which interfere with full cooperation and coordination between and among the agencies and the law enforcement community. In addition to the the provisions of RFPA and the Grand Jury Secrecy Rules addressed by the working group, additional restrictions contained in various state privacy acts and the Freedom of Information Act continue to impede the full and open exchange of information. The OCC has testified previously before various committees of Congress concerning the specific problems raised by these statutes.

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Question 4.

Describe the progress. if any, that has been made between your agency and the Federal Reserve regarding the type of currency shipment reports that are made available by the Fed. Has your agency made use of such reports? Be specific.

The Customs Service has periodically provided OCC with computer data analyses which have proven to be very useful in targeting compliance efforts. These analyses have permitted comparison of the CTR data with the FRB's currency shipment data to identify cases where a bank's CTR filings fail to correlate appropriately with its currency shipments to or from the Fed. Increased access to such analyses would improve OCC's ability to target its BSA compliance efforts and thus substantially increase the OCC's ability to effectively monitor BSA compliance.

In addition to encouraging increased availability of targeting analyses, OCC is working through the IRS/Financial Institutions Regulatory Working Group to obtain direct on-line access for our examiners to the Treasury Financial Law Enforcement Center CTR database. This access would permit the examiners to ensure that the CTR filings indicated in a bank's records are in fact reflected in Treasury's database.

Question 5.

Describe the management controls over implementation of BSA responsibilities that were in place before January 1. 1985. and changes, if any, since that time.

Although an integrated system of controls over OCC's examination process was in place prior to January 1, 1985, no separate controls existed over BSA compliance activities. Examinations were conducted pursuant to the Comptroller's Handbook for National Bank Examiners or, where specific information was available raising questions about a bank's BSA compliance, under special instructions from the district or field offices. If compliance problems were uncovered during the examination, OCC district management personnel were alerted and responded with appropriate follow-up action.

Information regarding BSA compliance was provided to OCC Washington headquarters and Treasury via a quarterly report which provides compilation of the number of banks examined per calendar quarter and a listing of the BSA violations noted.

Since January 1, 1985 OCC has taken steps to strengthen management controls over BSA. BSA responsibility has been centralized under the Chief National Bank Examiner (CNBE) to streamline communication and provide effective monitoring of BSA compliance.

The CNBE's Office is responsible for: developing BSA examination policies and procedures; acting as liaison between OCC and other agencies charged

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with BSA oversight; maintaining lines of communication with respect to the BSA between the industry and OCC; reviewing BSA referral recommendations; and ensuring adequacy of examiner BSA training. Information flow has been better controlled by directing all BSA matters through the CNBE. Information such as U.S. Customs Service analyses of potential BSA compliance problems, Customs Service analyses of currency flows in certain areas of the United States, notification of IRS/Treasury BSA criminal investigations, and recommendations for referrals by bank examiners of banks in violation of BSA are all part of the flow of data through the CNBE's Office. These items are tracked by the CNBE's Office to ensure proper control and follow-up.

The CNBE's Office is supported by designated BSA specialists in each District. These individuals deal directly with examiners, bankers, and the CNBE's Office and are also available to conduct BSA training. This structure has served to streamline OCC's BSA oversight.

In addition to the CNBE's Office, the Enforcement and Compliance (E&C) Division in Washington plays an important role in the BSA process. This Division is involved in the recommendation of BSA referrals to Treasury/IRS for assessment of civil and/or criminal penalties. A designated individual is responsible for tracking referrals through the use of the Enforcement and Compliance Information System (ECIS), making recommendations on the cases to pursue and providing advice to field examiners. The District Office legal staffs likewise work closely with the District BSA specialists, the E&C attorneys, and representatives of the law enforcement community to coordinate OCC's efforts.

Finally, policies and procedures are being established which will formalize the referral process and fix specific responsibilities. Copies have been provided to the IRS/Financial Institutions Regulatory Working Group for review. Once the document is put in final form, a uniform set of criteria and procedures will be in place for all federal financial institutions regulatory agencies.

Question 6.

Describe the initiatives your agency has taken to broaden knowledge of and exposure to reporting requirements of the BSA for those institutions you regulate.

OCC has advanced several different methods to broaden national bank knowledge of and exposure to the reporting requirements of BSA.

Circulars

Banking bulletins and banking circulars have been issued by OCC whenever needed to address problems with BSA. Since January 1, 1985, several new issuances dealing with BSA have been distributed.

Addressed lack of compliance with BSA, the requirements of the Act and the methods for bank management to provide information to OCC and the Department of the Treasury when violations are detected.

Banking Circular

193. Supplement 1. dated May 9. 1985

Transmitted a copy of a Treasury Department opinion regarding the filing of Form 4790, Report of International Transportation of Currency or Monetary Instrument. The opinion clarified Treasury's position regarding banks' hiring private courier services to effect the international transportation of currency through a common carrier.

Banking Circular · 193. Supplement 2. dated July 5, 1985

Identified Detroit as the new location to which to forward CTRs, and provided the name of a Treasury Department contact for BSA questions.

Banking Circular - 207, dated September 18, 1985

Transmitted copies of the Criminal Referral Form designed by the Justice/Financial Institutions Regulatory Working Group. These forms are to be used by financial institutions to report instances of known or suspected crimes. The BSA is specifically listed on these forms together with specific referral instructions.

Banking Bulletin - 85-27. dated December 20. 1985

Transmitted a copy of an IRS press release regarding the revised Form 4789 which was to become effective January 1, 1986, with implementation July 1, 1986.

Banking Circular

193. Supplement 3. dated January 27, 1986

Transmitted a copy of an IRS press release regarding IRS's new responsibility of reviewing exemption lists and reviewing requests for special exemptions.

Banking Circular - 193. Supplement 4. dated March 27, 1986

Distributed IRS's guidelines to banks who wish to request special exemptions from the financial reporting requirements of BSA.

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Many banks have been found to have submitted incomplete CTRs to IRS. These institutions are requested to correct and resubmit the CTRS. Because no formal criteria had been established for this process, banks would fill out a new CTR and submit it to IRS. The filing would be added to the data base causing a duplication. This bulletin provides IRS/Treasury's guidelines for filing amended CTRS to mitigate duplication.

Banking Circular - 171 and Supplement. dated January 3, 1985

In addition to banking issuances addressing BSA, OCC has issued banking bulletins to the industry and the public alerting them to potentially fraudulent schemes perpetrated by certain offshore shell banks that may be operating improperly or illegally in the U.S. These bulletins continued through the year and were used to gather information for the use of banks and the law enforcement community.

Comptroller's Manual for National Banks

This is the OCC's manual containing summaries of relevant laws and regulations (including those pertaining to BSA) applicable to national banks. This manual is used by OCC's examiners and is distributed to all national banks. An update to the manual was issued in July 1985 addressing several changes in the BSA. In October 1985, several clarifying and non-substantive changes in the BSA regulations were listed in the Federal Register and became effective November 21, 1985. These "housekeeping" amendments will be included in the next regular manual update.

Comptroller's Handbook for National Bank Examiners

The Handbook contains the bank examination procedures used by OCC examiners. Separate BSA procedures are set forth. All national banks have copies of these procedures. The OCC has been working with a task group at Treasury to update and revise these procedures. Upon completion of Treasury's review, these new procedures will replace OCC's existing procedures and will be adopted by all of the financial institutions regulatory agencies. The revised version will be distributed to examiners and national banks. Banks will be encouraged to implement the procedures internally to assess compliance with BSA.

American Bankers Association (ABA) Video Conference

Together with the Federal Reserve and the FDIC, OCC played a central role in the development of a training segment entitled "Examiners" for use by the ABA in a BSA video conference which was presented in 61 locations across the country between September and November, 1985. Between 5,600 and 6,000 individuals attended these presentations. The regulatory agencies' segment developed