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turn, be forwarded to Board staff. Division staff will then take the responsibility for forwarding any referral form involving a violation of the Bank Secrecy Act to the appropriate offices of the U.S. Department of the Treasury and the Internal Revenue Service.

Notification of Financial Institutions

Each of the matters set forth above should be brought to the attention of the financial institutions in your district as expeditiously as possible. Particular emphasis should be given to the de minimus exception to the reporting requirements (e.g., a crime involving less than $2,500 with no apparent suspect) since this one area has been the most troublesome to the banking community.

If your have any questions, please call Herb Biern (ext. 2620) or Susan Meyers, who is acting as coordinator for all criminal referral matters at the Board (ext. 2781). Also, please forward to Ma. Meyers, for Board records, a copy of your correspondence to the financial institutions in your district relating to this matter.

WILLIAM TAYLOR

DIRECTOR

CROSS REFERENCE: 85-22 (FIS)

Mr. MCCOLLUM. It bothers me that even three or four banks' attorneys object to providing that information. Sounds like if you have several hundred who are willing to do that, we still have a problem with somebody interpreting the act differently than the broad interpretation.

Governor SEGER. Again, I am not a lawyer but as I understand it, various States have different State laws that enter into this also. Mr. MCCOLLUM. Perhaps we ought to provide an override to make it very clear that regardless of State laws that the information at least on this form assuming we agree that it is the kind of information we want revealed should be provided.

I want to ask you about penalties under the Bank Secrecy Act. The punishment to the bank for not complying is only possible, there has to be willful intent. My understanding is that in reality that that is almost always missing and while people have been, banks have been given fines, and quite steep fines they have accepted that rather than contest it.

My question to you is, should we not change the statute in the area of the bank secrecy fines so that you can have a fine at some level for negligently failing to report. Right now there is no standard of that nature in the act. It is willful.

Would you have a comment on that?

Governor SEGER. I think I would rather provide you with that answer rather than give an off the cuff answer.

Mr. MCCOLLUM. I would like to have that answer.

During the hearing before the House Banking Committee on May 14, you asked that I respond to the following question:

"Should we not change the statute in the area of the bank secrecy fines so that you can have a fine at some level for negligently failing to report. Right now there is no standard of that nature in the Act. It is 'willful'."

I am pleased to enclose a copy of the response to your question, which I am also forwarding to the Committee for inclusion in the record.

Please let me know if I can be of further assistance.

Sincerely,

Martle & Sege

Enclosure

In response to a question from Congressman McCollum, Governor Seger subsequently furnished the following response for the record:

I would generally defer to the opinion of the Departments of Treasury and Justice on such a law enforcement issue, since they are the primary enforcement agencies for the Bank Secrecy Act. One thing, however, that is troubling about the concept of a fine for negligently failing to report is that I fear that it might, in practice, result in penalties to banks for clerical errors and omissions in CTR filings that may occur despite a bank's best efforts to comply with the Bank Secrecy

Act.

Mr. MCCOLLUM. Second, the bankers will say later today in their testimony that they would like a provision in the law that would grant them immunity if they discover an error in failing to report Bank Secrecy Act provisions, and they report it themselves.

Would you favor or oppose an immunity for a bank that voluntarily discloses a failure to report?

Governor SEGER. I must say as a citizen, I would feel that makes sense. If someone does a self-analysis, steps forward and says, you know, we have goofed, we have missed these, we have not carried out this responsibility the way we should but we are coming clean, I think they ought to be treated in a different way than someone who has had to be caught.

Mr. MCCOLLUM. The last area I would like to ask you about deals with the Treasury subpoena powers. I don't recall in looking at your testimony and hearing what you have said this morning that you commented on the request that the Treasury Department has made for being given broader powers than they now have to get at the records when they are looking for compliance directly at the Treasury Department.

My understanding is that some of the agencies that come under the supervision for bank reporting purposes do have powers but that the Treasury Department inhouse does not. Does the Fed have any objections to our giving them the broader powers they are requesting?

Governor SEGER. I think I will turn that over to Mr. Biern, too. Mr. MCCOLLUM. If Mr. Biern wouldn't mind responding, I would appreciate it.

Governor SEGER. I couldn't remember that we had an objection but he just said we don't. We do not.

Mr. MCCOLLUM. You don't. Good.

Governor SEGER. We do not have an objection.

Mr. MCCOLLUM. That covers the questions I wanted to ask. I yield back, Mr. Chairman, thank you.

Chairman ST GERMAIN. Governor Seger, I have additional questions I would like to submit in writing, and as I stated, I agree with you in quite a few instances, but I am not too sympathetic to the change on the international basis, to the international branches doing business over there.

But other than that, we are pretty much in sync. So we want to thank you. We will submit additional questions to you in writing and hopefully we will be with you a week from tomorrow in the great State of Rhode Island. We are one of the smallest States with one of the biggest names.

By the way, you will be in my congressional district as well, Newport.

Governor SEGER. I know that, that is why I need to go.

Chairman ST GERMAIN. Thank you.

I hope you come up to testify more frequently. You are very, very vibrant and you did a good job.

Governor SEGER. Thank you.

[The following correspondence contains Chairman St Germain's written questions and Governor Seger's responses:]