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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

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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 suppprt 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

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financial institution to be used to aid someone in unlawful activities. We fully support the concept of such proposals. 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. provisions of H.R. 2785 which would authorize the Secretary to delegate the power.

For that reason, we support the

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

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In light of the number of wire transfers that occur between institutions daily, we doubt this provision would be

cost-effective. Also, in light of the new Treasury regulation which enables Treasury to require a specific financial institution to provide copies of all wire transfers for a

particular period, we do not believe such a provision is

necessary.

In addition to the legislative initiatives needed to specifically address money laundering, we believe changes are needed in other laws, which may have been enacted without consideration of their potential effect on drug trafficking and money laundering problems, as the laws constitute constraints on our efforts in working with the law enforcement community. These barriers, which include the RFPA, certain state privacy acts, grand jury secrecy rules, and the procedures of various agencies, limit cooperation among Federal supervisory and law enforcement officials. While these statutes are designed to protect values we all support, they unduly restrain legitimate government information-gathering and the free flow of

information between and among agencies.

We have found that the RFPA in particular has interfered with our criminal referrals and has in all likelihood degraded the ability of the recipient agency to decide which of those referrals should be pursued. Similarly, the grand jury secrecy limits prevent the law enforcement community from working

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closely with our office and sharing information obtained before

a grand jury.

These limitations on the ability of Federal agencies to cooperate were highlighted in the Department of

Justice/Financial Institutions Regulatory Working Group

Agreement of April 2, 1985, with a unanimous recommendation that legislative relief be swiftly obtained. We believe that these overly restrictive statutory barriers to interagency cooperation should be examined and consideration given to reducing them so as to remove unnecessary impediments to law enforcement while at the same time protecting the important interests they were intended to preserve.

CONCLUSION

While much has been accomplished since January 1985, we recognize that more needs to be done. First, as we have indicated, we believe that continued coordination and cooperation among the agencies which share BSA compliance and enforcement responsibilities are critical. Second, greater use of available data to target compliance and enforcement efforts will, we believe, significantly increase the return on our resources. To assist us in our efforts, we encourage the Congress to consider favorably those legislative proposals before it which would eliminate present restraints on our

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