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H.R. 2785 contains much needed amendments to the Right to Financial Privacy Act of 1978. There is no question that the Right to Financial Privacy Act serves as a legal and psychological barrier to the flow of information from financial institutions and their

regulators to federal law enforcement agencies. Unimpeded information flows are essential to the successful investigation and prosecution of financial criminals and money launderers. This dysfunctional impact appears to reach well beyond the legitimate privacy concerns that Congress intended to protect.

As we have pointed out before, the Act, as interpreted by most
interested parties, extends the customer-privacy protections
to bank insiders who are often also customers of the bank.
Insider abuse of federally insured financial institutions is
unquestionably a major cause of bank failures and of losses
to the FDIC's insurance fund. We believe that insiders, by
virtue of their position in federally insured institutions,
ought to be treated differently than a bank's "arms-length"

customers.

The amendments to the Right to Financial Privacy Act contained in H.R. 2785 would correct this and other flaws, while preserving the privacy interests of law abiding bank customers.

Moreover,

financial institutions would be freed from the restrictions

and uncertainties now affecting their ability to make informative

criminal referrals.

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In conclusion, I am convinced that we are making progress in our efforts to deal with criminal conduct in the banking industry, despite the strain placed on our resources by unprecedented

bank failures and by budgetary considerations. The commitment by the Department of Justice evidenced in the signing of the interagency agreement and the efforts, to date, of the Bank Fraud Working Group are important examples of the type of progress that can be achieved by working together. This approach should

work equally well for the agencies charged with the responsibility to enforce the Bank Secrecy Act.

Thank you.

EMBARGOED UNTIL DELIVERY

STATEMENT OF ROBERT B. SERINO

DEPUTY CHIEF COUNSEL (OPERATIONS)

OFFICE OF THE COMPTROLLER OF THE CURRENCY

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

SUPERVISION, REGULATION AND INSURANCE

COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS

UNITED STATES HOUSE OF REPRESENTATIVES

April 17, 1986

Mr. Chairman and members of the Subcommittee:

Thank you for the opportunity to bring you up to date on the Office of the Comptroller of the Currency's (OCC) activities in the Bank Secrecy Act (BSA) area and to express our views on the legislative changes needed to facilitate our efforts to assist the law enforcement community in its criminal enforcement efforts. As supervisors of the national banking system, we share this Subcommittee's concern that our nation's financial institutions not be used wittingly or unwittingly to facilitate or conceal criminal activity. We recognize the importance of

our role in assisting the law enforcement community and have

worked actively to support their efforts.

While we believe

that we have made substantial progress in the past year, we recognize that much remains to be done.

The progress report which we provided to you earlier this week in response to specific questions posed in your letter of March 27, 1986, outlines our accomplishments in detail. In addition to questions regarding our progress, you also asked for our thoughts with respect to certain issues under the various provisions of the Financial Institutions Regulatory and Interest Rate Control Act of 1978 and for our analyses and comments on various money laundering bills now before the House. We have addressed these questions in detail in an attachment to this statement. I will not repeat what we have written, but I would like today to highlight for you certain key points.

First, we have improved our management control over the agency's BSA program. We have, for instance, established in the Chief National Bank Examiner's (CNBE) office a central clearinghouse for BSA operations. The Enforcement and Compliance Division of the OCC has been coordinating activities and giving legal guidance. In the Districts, we have

established focal points for BSA activities.

Bank secrecy

specialists and District Counsel are charged with additional

responsibilities.

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These changes have ensured a continuing

focus on BSA issues, a reliable flow of information on BSA matters, and a sound operating structure for BSA compliance activities. This new structure and the people involved have contributed substantially to our progress over the last year.

Second, we have intensified BSA training of our examiners. During the past year alone over half of our examiners received training in BSA matters. This training was put together by our BSA specialists and was presented at District staff training conferences. It was also given in OCC's White-Collar Crime course, which was presented four times in 1985, and in the Associate National Bank Examiner School for Advanced Study. On-the-job BSA training activities also have reached many of our other examiners. For instance, the new hires and junior assistant bank examiners training program provides for them to participate in a BSA compliance examination as part of their training. In addition, training profiles now reflect an examiner's knowledge of the BSA and OCC's examination

procedures, permitting us to target needed training.

Third, we have sought not only to train our examiners, but also to increase awareness within the industry. As part of our efforts in this area, we worked with the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (FRB) to develop a training segment for the American Bankers Association's one day video conference, which was repeated in