Mr. WALKER. Well, we have detailed analysts over from Customs for the purpose of assisting Mr. Stankey. We have also added a deputy, in effect, to his position who should be on board within 1 week or 2 weeks. That has required clearance through OPM and so forth. We asked him what his requirements are for staff and we are meeting those requirements as he asked for them. He has not asked for additional resources. If he does so, we will do everything possible to supply that. We are not being penny pinchers in this particular area. This is too important an area.

Mr. HUGHES. Well, I won't belabor the point but it seems to me that taking 6 months to develop a regulation is much too long. To take over a year to deal with the foreign financial transaction problems is just unacceptable. To take over 2 years to deal with money laundering is just inexcusable. If it is a resource problem, then it has got to be corrected. If it is a bureaucratic problem, then we have to correct that. These financial investigations and finding the proper tools is too important to permit that much slippage. The Congress has given the Department of the Treasury authority, as you well know, in the Bank Secrecy Act.

One of my colleagues from West Virginia was talking about smurfing, and a lot of the Florida banks have already voluntarily agreed that they will not accept or not issue cashier's checks except for depositors. It seems to me that you could develop some regulation to deal with that problem.

It seems to me that with regard to people taking very large sums of money out of the country, that you could promulgate regulations that require somebody transporting $50,000 out of the country to give you 24 hours notice, not an hour notice at the airport, 24 hours notice. You could be doing a lot of things that deal with the large transactions that would not be burdensome to a lot of people. Because how many people are transporting that kind of money?

Mr. WALKER. Well, that particular one that you have just referred to, of course, would be subject to reporting requirements anyway if it is in excess of $10,000. But

Mr. HUGHES. True, except if you are carrying currency out of the country then you are going to involve a regulation anyway to deal with somebody taking more than $10,000. In the omnibus crime legislation you don't have to have just one standard. You can use a set of standards. You could have anyone taking between $10,000 and $20,000 out of the country, they have to give one hour notice before departure. For those transporting over $50,000 out of the country, you could require a 24 hours notice and it seems to me that

Mr. WALKER. We wouldn't be directing that particular regulation at the kind of people that we are after because the people who would be taking that kind of money out of the country would not be too inclined to give notice to Treasury.

Mr. HUGHES. That is true. But the reason that we should promulgate those regulations is so that we can prosecute when they fail to give notice. The average money launderer that would comply with that is crazy and that is the reason we promulgate them because we know that in many instances they aren't going to comply with them. But, the problem is that if we say an hour before departure then your task is a lot harder. If you give a longer amount of time

then it is made much easier. But I only give those by way of examples to indicate the kind of authority that you have to develop, administratively, rules to deal with these problems.

The gentleman from Florida.

Mr. MCCOLLUM. Thank you, Mr. Chairman.

One of the things, I think, that Chairman Hughes' questions point up, is the need for this power that we have talked about, in order to get at these situations where you have got those independent agencies out there, that you have just described to us, who may or may not be cooperating to the degree that you want them to cooperate or that I want them to cooperate.

If you had this administrative summons power, couldn't you better deal with the independent agencies out there at those various agencies that you don't have under the wing of the Treasury right now?

Mr. WALKER. Well, as we have discussed, I think that having this summons authority would enable Treasury to conduct selective examinations of selective banks and require reports to be filed to enable us to have a better idea of whether the regulatory agencies were, when they reported no violations, doing a complete examination or not doing a complete examination. To that extent, I think that it would be very helpful.

Mr. MCCOLLUM. Couldn't you also summon some of the paper work from the agencies to see if they were in fact complying?

Mr. WALKER. That is an interesting notion that has not really been considered before. It would depend, of course, on the nature of the language.

Mr. MCCOLLUM. The real problem that we have with the independent agencies is that they, up until the Bank of Boston case, just simply weren't putting a lot of emphasis on this problem. They had a lot of other things to do when they got into a bank to audit and look at it. I understand that need too, but this was way down the pole somewhere.

I want to ask one quick question. And I know we have a couple of other very important witnesses today and I don't want to keep Mr. Walker here. But you reported in your testimony, and it is shown on that chart, that there's 2.8 billion dollars worth of money that has been laundered and that you have documented in the process of these Operation Greenback type operations, and yet only about $81 or $82 million of currency has been seized.

Obviously, you don't always have currency ready to grab and seize, but is there anything that we could do to help you bring about statutory changes or anything that you could do with regulations, to increase the amount of cash or currency or money that is seized in this process? Because you, yourself, said earlier that seizing of cash or money was as important as anything else involved in this, and this is a relatively small portion that has been seized.

Mr. WALKER. Yes. In effect, what we have got here, when you talk about the amount seized, it is as though a snapshot is being taken of a scene that is really subject to a moving picture. What you see up there (on the chart) is the moving picture. That is over 36 months. But yet when Kattan was arrested it was a relatively small amount-several millions dollars but still compared to the total, a relatively small amount-was seized.

There is legislation pending which I have expressed support for, that would enable us to seize larger quantities of currency from the accounts, or from the bank itself in respect to CTR amounts. With regard to the CMIR's, if an individual fails to file a CMIR as he is leaving the country and he has $10 million, we can seize that money. If the bank fails to file a CTR and the money is put into an account and then the next day wired out, there is nothing under present law that we can seize. There are bills now that would work to remedy that problem, but they would obviously be imposing a burden on banks because you would be seizing the money from the banks.

Mr. MCCOLLUM. Obviously so. One last question. When the Bank of Boston case came along, there was a lot of new discoveries. One of the things was the exempt lists that has been referred to in that case where this particular branch, I believe it was the North Side, had a considerable amount of transactions involving two organizations that were controlled by Mafia and underworld figures, and that all has come out in the process of newspapers and what have you. But, what hasn't been clear to me, and I wondered if you could answer this: Has there yet been any documentation, to your knowledge, in the Bank of Boston case, of actual money laundering of drug moneys or other moneys?

We know that there was a failure to report and a failure to file and there is a connection that we can make some assumptions on, and I don't want you to reveal a Justice Department case here; but are we getting anywhere or is there going to be a case out of this?

Mr. WALKER. I have no direct evidence or no evidence at all, direct or indirect, that I am aware of. As you know, there are ongoing grand jury investigations which are focusing on the possibility of individuals at the bank being responsible.

Mr. MCCOLLUM. The branch manager, it seems to be so transparent in looking at the testimony, should have known that that money was from illicit sources. If we had had this money laundering as a crime, an act that you and I want to see passed, there might be a tool there that you don't have right now or the Department of Justice doesn't have. But anyway, that is as far as I am going to go. Thank you very much.

Mr. HUGHES. Mr. Mazzoli.

Mr. MAZZOLI. Thank you very much Mr. Chairman. I just need 30 seconds. Mr. Walker, you are in sort of an enviable position. Typically, when people from the administration come before panels they get their licks because they are going too far, too fast, and they have exceeded their authority and they have sort of gone against congressional intent.

You are in the wonderful position of having everybody saying that you are not going fast enough, far enough, you need more tools and more money and more resources, so I think that you just ought to take that as evidence that you are in charge of a very important effort which this committee and this Congress and this country salutes and supports. And it doesn't help you to get your job done if you don't ask your boss for the right resources, if you don't come to the Chairman and ask him for the legislative tools and if you don't prod your regulation writers to get off their duffs and get onto those tasks because it keeps you from doing the job

that we want you to do. So, I think that the committee is your friend and I think that it really does want to help and that is all that we ask. Do the best that you can and let us know how we can help you.

Mr. WALKER. I appreciate that.

Mr. MAZZOLI. Thank you.

Mr. HUGHES. The gentleman from Florida.

Mr. SHAW. No questions.

Mr. HUGHES. Thank you very much, Mr. Walker.

The next witness is Mr. C.T. Conover, Comptroller of the Currency of the United States Department of Treasury. Prior to assuming this position in 1981, Mr. Conover was engaged in banking and management consulting. He holds a bachelor's degree from Yale University and an M.B.A. in finance from the University of California.

Mr. Conover, welcome to the Subcommittee on Crime. We have your statement which will be made a part of the record in full. You may proceed.

STATEMENT OF C.T. CONOVER, COMPTROLLER OF CURRENCY OF
THE U.S. TREASURY DEPARTMENT, ACCOMPANIED BY ROBERT
SERINO, DEPUTY CHIEF COUNSEL, COMPTROLLER'S OFFICE
Mr. CONOVER. Thank you, Mr. Chairman.

Mr. Chairman and members of the subcommittee, I am here today to discuss the Bank Secrecy Act. I am accompanied by Mr. Robert Serino, who is deputy chief counsel of the Comptroller's Office and formerly Director of our Enforcement and Compliance Division, which still reports to him.

The Comptroller's Office shares the public and congressional concern regarding the implementation of this act. We are taking a number of steps to strengthen our efforts to ensure compliance. Briefly, we are doing the following:

We are undertaking a thorough review of our past action vis-avis certain banks. We are making an effort to improve internal communications, to intensify examiner training and to continue efforts to improve inter-agency cooperation. We are also strengthening management controls over implementation of Bank Secrecy Act responsibilities and continuing to work with the TFLEC and the Treasury Department to evaluate and implement the recommendations of the President's Commission report.

We also believe that certain legislative initiatives would improve our ability to combat money laundering.

Congress recently assisted our efforts when it passed the Comprehensive Crime Control Act. We believe that additional legislation would be helpful in addressing the money laundering problem. A number of bills have been introduced this session, including legislation by Mr. Hughes and Mr. McCollum, and, we applaud the intent of these measures.

H.R. 1474, legislation introduced by the Chairman, would create a new category of crime called money laundering. It would prohibit individuals from knowingly engaging in a financial transaction that involves criminally derived property. We support the intent of

this section but suggest that the language be crafted carefully to avoid including conduct by unwitting participants.

The bill would also allow the Secretary of the Treasury to approve applications for all exemptions from the reporting requirements of the Bank Secrecy Act. We believe the objective of this provision could be achieved administratively under a recommendation of the President's Commission on Organized Crime.

Finally, this bill would make wire and other electronic transfers subject to CTR reporting requirements. We believe this provision may not be necessary in light of the new regulation that will enable Treasury to require a financial institution to provide copies of all wire transfers for a particular period.

H.R. 1367, introduced by Mr. McCollum, would also make it a substantive crime for someone to knowingly use a financial institution, or allow a financial institution to be used, to aid in unlawful activity. We support the intent of the proposed modification to the Right to Financial Privacy Act outlined in this bill because it would enable individuals or institutions to notify the law enforcement community of suspicious activities without running the risk of a civil law suit. As proposed, the bill would also grant new summons authority to the Secretary of the Treasury. This may be appropriate in some situations to further an examination or civil investigation. We believe the Secretary should also be permitted to delegate this authority to the appropriate agency.

The Comptroller's Office is firmly committed to preventing organized crime from using financial institutions to launder the proceeds of their illegal activities and we stand ready to work with the Congress and law enforcement authorities to bring an end to this criminal activity.

That concludes my remarks I would be happy to answer questions.

[The statement of Mr. Conover follows:]

STATEMENT OF C.T. CONOVER, COMPTROLLER of the CURRENCY

Mr. Chairman, members of the Subcommittee, I am here today to discuss compliance with the reporting provisions of the Bank Secrecy Act. The recent flurry of publicity about banks and other financial institutions with reported violations has raised public concerns regarding the implementation of that Act. Obviously there are widespread problems in this area affecting the entire financial services industry. While the Office of the Comptroller of the Currency has supervisory responsibility for only approximately 10 percent of the financial institutions subject to the Bank Secrecy Act, we fully share the Congressional and public concern. For that reason we are conducting an in-hours review of our procedures and actions in this area to determine how we can strengthen our enforcement of the Act.

We undertake this review with a clear position that we do not countenance financial institutions being used either wittingly or unwittingly to aid in money laundering. We have reviewed the interim report by the President's Commission on Organized Crime "The Cash Connection: Organized Crime, Financial Institutions and Money Laundering"-and we support its conclusions and recommendations. Specifically, we agree with the report where it concludes that: “. . . money laundering invariably has a deleterious effect upon the financial community. By corrupting officials and employees of financial institutions in furtherance of laundering schemes, money launderers undermine the integrity of those institutions and, if discovered by law enforcement agencies, can vitiate the reputations of those institutions for soundness and prudent judgment. Even if a financial institution is unwittingly made a conduit for laundering, the mere fact that money launderers saw fit to use that institution may seriously affect the public's perception of the institution.” (pp. 61-62)