We also vigorously supported the work of the IRS/Financial Institutions Regulatory Working Group which was created in December 1985 after the IRS was delegated additional responsibilities under BSA. This group will play an important role in facilitating communications among the agencies with BSA enforcement and compliance responsibilities, and in providing a vehicle for resolving problems. We have also developed a set of uniform guidelines and procedures for handling BSA referrals which will create a consistent method of dealing with

identified violations.

THE FUTURE

Despite this progress, we believe that we must continue to do more. To ensure that the progress of the last year is not lost, on-going training and industry awareness efforts are critical. In light of the Deficit Reduction Act of 1985 (Gramm-Rudman-Hollings), however, although OCC remains committed to such efforts, we may not be able to maintain the same pace during 1986. Resources have been severely strained,

and it has been necessary to make across-the-board reductions in training expenditures. Moreover, District training conferences and OCC attendance at public conferences and seminars, which have been valuable vehicles for sharing

information on BSA and other important topics, have been cancelled or reduced.

In addition to on-going training and education efforts, we believe that progress is essential in two critical areas if gains are to be made in the Federal Government's efforts to ensure compliance with the BSA. These areas are (1) increased coordination among the agencies with compliance and enforcement responsibilities and (2) more effective use of available data for targeting compliance and enforcement efforts.

Increased Interagency Coordination

We have great faith in the benefits which can be derived from the interagency working group process. As discussed above, the Justice Department's working group, in which we are a very active participant, has proven how effectively the bank regulators can work together with the law enforcement community. We believe this experience can be used as a model for success in the BSA area, and as an active participant in the IRS/Financial Institutions Regulatory Working Group, we are looking forward to the same accomplishments in the BSA area.

Improved Targeting

Improved communications and utilization of available BSA and other financial data could, we believe, significantly increase the return on our enforcement and compliance resources.

Clearly, neither OCC nor any of the other financial

institutions regulatory agencies has the resources necessary to find all compliance violations through the examination process itself. Instead, our examiners continually make judgments based on available information as to where problems are most likely to exist, targeting their efforts in an attempt to identify and correct the most serious deficiencies.

This approach is not unlike that used by the IRS in its tax enforcement efforts. Clearly, the IRS cannot and should not

audit each and every taxpayer. Instead, it has been quite successful in developing statistical routines and profiles to select for audit those returns most likely to contain

compliance problems. Similar efforts are needed in the BSA compliance and enforcement area.

We have had some success in targeting BSA compliance efforts using computer analyses provided to us periodically by the Customs Service. The analyses which have, for instance, identified banks whose currency shipments to or from the Federal Reserve Banks have been out of proportion to the number of Currency Transaction Reports (CRT) they have filed, have to date, focused only on certain geographic areas. We think this approach has great value and would like to see it used even more. We have actively encouraged Treasury efforts through the IRS/Financial Institutions Regulatory Working Group to increase the use of available data and to develop statistical tools for

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analyzing the CTRS and other financial data to target institutions for intensive compliance review. We also are working to gain on-line access to the Treasury Financial Law Enforcement Center's CTR database to permit our examiners to test, as part of their examinations, whether the CTRS in a bank's file have in fact been filed with the Treasury.

Legislative Initiatives

A great deal can be accomplished through initiatives in the two areas I have discussed increased interagency cooperation and coordination and improved use of available resources to target compliance and enforcement issues. We believe that additional legislation is necessary, however, to eliminate restraints on interagency cooperation and coordination and to specifically make money laundering a crime.

We agree with the general concept and intent of the various money laundering bills that have been proposed and support H.R. 2785, the Administration's proposal. We in no way countenance financial institutions being used to facilitate or conceal crime and therefore we look forward to working with the subcommittee in its review of the various proposals.

Among other things, these bills would specifically make it a substantive crime for anyone to knowingly use or allow a

financial institution to be used to aid someone in unlawful We fully support the concept of such proposals.

activities.

We believe, however, that care must be taken to ensure that the law does not proscribe inadvertent conduct by an unwitting participant.

We likewise believe that the proposed modifications to the Right to Financial Privacy Act (RFPA) are necessary to enable individuals and institutions to make referrals of suspicious activities to the law enforcement community without

inadvertently exposing themselves to potential substantial liability for violations of the RFPA or other Federal or state privacy acts.

As to the new summons power given in the Administration's bill to the Secretary of the Treasury, we believe it may be appropriate under certain circumstances for that power to be delegated by the Secretary to the financial institutions regulatory agencies in order to further an examination or a civil investigation. For that reason, we support the provisions of H.R. 2785 which would authorize the Secretary to delegate the power.

would

The bill introduced by Representative Hughes, H.R. 1474, make "wire and other electronic transfers" subject to being reported on a Currency or Monetary Instrument Report (CMIR).