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Update on Treasury's Bank Secrecy Act Enforcement
Before turning to the legislative measures under discussion,
I would like to briefly update the Committee on Treasury's Bank
Secrecy Act enforcement activities since my predecessor testified
before you last year in your hearings following the Bank of
On February 14, 1986, we prepared for the Committee
a report on
these activities which we have made available for
I will highlight four topics from that
report - civil penalty assessment, improved Bank Secrecy Act
examination procedures, commitment of Treasury resources
Secrecy Act enforcement and regulatory amendments.
Civil Penalty Assessment
First, I would like to discuss Treasury's imposition of civil
penalties against financial institutions for past non-compliance.
In the wake of the publicity surrounding the Bank of Boston case,
to Treasury with past violations of the Bank Secrecy Act.
have come forward as a result of bank regulatory examinations, particularly those of the Comptroller of the currency. To date, fifteen civil penalties have been assessed under 31 u.s.c.
S 5321, ranging from $112,000 to $4.75 million in the case
of Bank of America.
instances, the cases are taking several months to conclude
because of the time required for banks to conduct an examination
of past compliance and to reconstruct past unreported trans
actions for late-filing of Currency Transaction Reports.
We want to emphasize that Treasury has not as yet closed the
door to volunteers, and we continue to encourage financial insti
tutions to come forward to disclose past violations.
volunteer banks will be dealt with more severely.
institutions that have not filed required Currency Transaction Reports for any reason have a continuing legal duty to do so.
Banks that become aware of past non-compliance and make no effort
Secrecy Act, including the imposition of publicly announced,
substantial civil penalties, where appropriate, has contributed
to enhanced awareness of the requirements of the Bank Secrecy
As a consequence, and as confirmed in our dealings with
many banks and the increased volume of Currency Transaction Reports, we believe that overall compliance has improved and that compliance has become a high priority with many major financial institutions.
Improved Examination Procedures
Another major initiative to ensure full compliance with the
Bank Secrecy Act has been treasury's work with bank supervisory
agencies to improve and standardize Bank Secrecy Act examination
As many of the civil penalty cases and the Bank of Boston
case demonstrated, the procedures being used by the examiners
were not sufficient to ensure that all violations of the Act
would be detected, particularly failures to report international
These procedures needed to be
improved, and a number of other issues also had to be considered
in order to make compliance examinations more effective.
issues included the maintenance of detailed workpapers, the
sharing of information among bank supervisory agencies, and the
uniform application of the examination procedures.
these matters, we have had a series of meetings with the Federal bank supervisory agencies and others who have an interest in improving the procedures used by examiners for checking the
compliance of financial institutions with the Bank Secrecy Act.
As a result of these consultations, we expect to send final
instructions on examination procedures to the supervisory
agencies this week. It is axiomatic that improved and aggressive examination will foster improved compliance.
interchange of ideas between Treasury and the agencies to which
Treasury has delegated Bank Secrecy Act enforcement respon
Therefore, I am convening a permanant Inter agency
Working Group on Bank Secrecy Compliance, consisting of repre
sentatives of Treasury, Customs, IRS, the SEC, and the bank
The group will be chaired by the Deputy
Assistant Secretary ( Law Enforcement) and will meet monthly or
more frequently as needed.
We will use this for um to discuss not
only examination procedures, but mutual enforcement problems and
Treasury policy initiatives including revisions to regulations.
commitment of Treasury Resources
In July, 1985, the Treasury Department established the Office of Financial Enforcement to assist in implementing and administering the Bank Secrecy Act regulations. The establishment of
this office provided a focal point for Bank Secrecy Act related
responsibilities under the Act, and there has been an increased
commitment of staff resources
to the office.
In addition to the increase in the Office of Financial
Enforcement, there has been a very large commitment of resources
by both the Customs and the IRS.
As Assistant Commissioner
Wassenaar testified yesterday, the IRS has established a separate division in Detroit to handle BSA reporting matters.
Since last year, we have strengthened the Treasury Bank
the President's Commission on Organized Crime last summer, money
laundering through casinos may have been even more widespread
than once thought. We believe that the new regulations have reduced the attactiveness of the use of casinos for money
A regulatory amendment pertaining to international trans
actions was published as a final rule last summer.
regulations, Treasury will be able in the future to reguire a
financial institution or
a selected group of financial institu
tions to report specified international transactions, including
wire transfers or cashier's checks, for defined periods of time.
We envision that this will require reporting of transactions with
financial institutions in designated foreign locations that would