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You mentioned that you're going to have to expand, and you need some additional tools to do your job. I want to tell you that we will be around to help you to get those tools. I think that is the only way we are going to make an impact on the drug dollars that are really permeating the entire country.

Mr. Powis. Thank you, sir. Mr. ZEFERETTI. Thank you, Mr. Chairman. Mr. MINISH. Mr. Green? Mr. GREEN. Are there any law enforcement agencies' prosecutors who are not making effective use of the bank secrecy data because they do not have the proper training to use this kind of financial information for law enforcement purposes?

Mr. Powis. I am certain there are those situations, sir. There is still a lot to be done and that can be done, in making more people in enforcement and in the prosecution area aware of what is available. I do not think there is any question about that.

Mr. GREEN. Mr. Anderson suggested that you should be playing more of a lead role in training law enforcement people in the opportunities here.

What is your comment on that?

Mr. Powis. I think we would go along with that. We think we have done a fair amount. We think there is more that we can and should do.

I think that steps are being taken, in a very positive vein. Mr. John Walker, the Assistant Secretary who heads the Office of Enforcement and Operations, is very concerned about this area, and is very inclined to push to do something about it.

Recently, we had a meeting with Francis Mullen, who has just taken over as the Administrator of DEA, and we discussed, among other things at that meeting, the benefits of these types of investigations. And I believe there is going to be more DEA involvement in the task forces.

Mr. GREEN. Is there any problem under the Federal Privacy Act, in terms of utilizing this data?

Mr. Pows. We have not encountered that as a major kind of a problem, sir.

Mr. GREEN. There has been some concern that the cost of compliance is too great. And obviously, inflation does push up the number of transactions that are going to hit the threshold.

Would you think the threshold is at the right place now?

Or would you think that you could have a law that would be just as effective from your point of view, with a higher threshold?

Mr. Powis. I think we can effectively control that by regulation. I believe that we can, and I think we are prepared to do that if we see that the $10,000 or the $5,000 is not the right thing.

Mr. GREEN. I would like to raise with you, also, the question of the new kinds of financial institutions—the money market funds and the cash management accounts.

Do you perceive these as a problem?

And do you think that amendments are needed to induce them under the act?

Mr. Powis. The best advice I have, sir, is that this type of thing is covered by the act, and the broker does have to file a 4789. We believe that there is coverage there.

Mr. GREEN. Do you know if anyone is enforcing it, however?

We knew we had coverage of banks, but no one was looking to see if the law was being enforced.

Mr. Powis. In terms of brokerage houses, the SEC has enforcement in that area.

Mr. GREEN. Again, that is not their primary area of interest.

Do you know if they are looking at the broker-dealers and the money market funds?

Mr. Pows. For me to sit here and tell you that I know today that they are really checking this heavily—I cannot tell you. We think that a decent job is being done.

One of the larger cases that was made in the south Florida project came as a result of information from a brokerage house, involving some $37 million in transactions, over a relatively short period of time, by one individual. This is certainly an indication that we are getting cooperation.

Mr. GREEN. Would you know whether, when private sector auditors audit brokerage firms—and such audits are required-whether a standard audit procedure would include auditing for compliance with this act?

Mr. Powis. I do not know the answer to that, Mr. Green.
Mr. GREEN. Thank you, Mr. Chairman,

Chairman MINISH. Mr. Powis, it seems like you get more cooperation from the brokerage houses than you get from the banks you supervise.

Mr. Powis. In that particular case, certainly. I would say that, generally, the cooperation from the banks is good. The problem that we encounter from time to time occurs when the bank has a dishonest employee who possibly is hooked in, and in some rarer cases, where the bank perhaps has been controlled by some of the people who are involved in illegal activities.

I think that, generally, the level of compliance and the degree of cooperation from banks across the board has been pretty good.

Chairman MInish. Has that been stepped up, the compliance, in the last couple of years?

Mr. Powis. Yes. We are very satisfied with the amount of cooperation we have been getting lately from the bank supervisory agencies. We think that the steps that they have taken in recent times will greatly assist, and are assisting, the bank compliance.

Chairman MINISH. In my opinion, there is no cost that is too great, in terms of the compliance. This is a problem that everyone is interested in, and the cost ought to be secondary to getting the job done.

Mr. Powis. Mr. Chairman, I agree with you. It is very difficult to put a cost on stopping the flow of heroin. And how do you assess the harm that heroin does to a number of people, or what cocaine is doing right now? And it is coming in, in large quantities. I certainly agree with you.

Chairman MINISH. Earlier-I don't know whether you were in the room-in my opening statement, I said that we did not consider these hearings adversarial.

Mr. Powis. Yes.

Chairman MINISH. The last question I have for you is: How can this subcommittee help you?

What can we do to help you in pursuing this problem?

Mr. Powis. I certainly think I know you will continue the oversight and keep our feet to the fire. I think this whole situation ought to continue to be looked at to make sure that we are doing the right thing.

I think this subcommittee, and Mr. Zeferetti's committee, and anyone else who can help, could certainly help in terms of some legislative action involving the attempt provision, that would amend the law to make it an offense to attempt to take currency in or out of the country.

I think some relaxation of the customs search situation involving money going out of the country would be helpful, setting a reasonable cause or a probable cause type of requirement in terms of searches, rather than requiring the warrant. I think these kinds of things would be very helpful.

Chairman MINISH. I know it will be in the testimony, but if you can make these recommendations in the form of a letter to us, we will do what we can to be helpful. We do not speak for the entire Congress, but I am certain that the entire Congress looks upon this problem in the same fashion that you and the members of the subcommittee, including Mr. Green and Mr. Zeferetti, do.

I want to thank you very much for the cooperation. And I am sure that your intent to increase the activity in this field will be very helpful all around.

Mr. ZEFERETTI. Can I ask one other question?
Chairman MINISH. Sure.

Mr. ZEFERETTI. I am in complete accord with you. And although my committee is not a legislative committee, we are doing everything possible, as you can see from today, cooperating with this distinguished chairman, so that we can recommend what we feel is the kind of legislation that would be meaningful.

There has been some talk about using forfeiture moneys, narcotics forfeiture moneys, as a way of offsetting costs in our operations.

Have you any thoughts about this?

And if you could, how much forfeiture money did we make on Operation Greenback?

Was there any kind of indication of how high that was-Operation Greenback, the program-how much forfeiture money was involved in that? Do you know?

Mr. Powis. What we know of right now is $9 million. There is some indication that there has been a jeopardy assessment involving considerably more than that in another case.

Generally, I think anything that we could do to make such moneys available for the payment of rewards for people who caused the seizure to happen would be helpful.

Mr. ZEFERETTI. And use it to finance Government operations, really. We are talking about needing additional moneys for tools, and getting the kinds of surveillance equipment, the kinds of intelligence-maybe that is another way of going. It is just an idea, anyway.

Mr. Pows. If legislation like this were passed, there may be some problem in terms of the general revenue situation. But personally, I think that is a good idea.

Mr. ZEFERETTI. And I want to comment a little bit more on what you said earlier. There is a cooperative effort between your agency, DEA, and customs; and I would hope that you would continue at least some form of a task force meeting operation, where you can exchange that kind of intelligence, that kind of knowledge that makes it possible for everybody to do their jobs a little bit better, in a cooperative way.

Thank you again, Mr. Chairman.
Chairman MINISH. Thank you.

Thank you, Mr. Powis, Mr. Luke, and Mr. Stankey. If there is some way that we can be of help, pick up the phone and holler.

Mr. Powis. Thank you, sir.
Chairman MINISH. Right.
Will Mr. Ryan, Mr. Snyder, and Mr. Zito come forward, please.
I understand that you have individual statements.
Is that correct?
Mr. RYAN. Yes.
Mr. ZITO. Yes, sir.
Chairman MINISH. Mr. Zito, do you want to start off?
Mr. Zito. Yes, sir.

Chairman MINISH. You may read your statement, or you may put the statement in the record.

Mr. Zito. Thank you, Mr. Chairman.

I have a brief summary that I would like to enter into the record.

Chairman MINISH. It will be put into the record, without objection.



Mr. Zito. I am pleased to appear before this subcommittee to discuss the experiences and views of the Office of the Comptroller of the Currency, with respect to the monitoring and compliance of the act. The GAO report covers compliance of the reporting requirements, dissemination to law enforcement agencies of reports generated pursuant to the act, and the uses and usefulness of those reports to the law enforcement agencies, in carrying out their investigative responsibilities.

The Treasury Department has delegated to the Comptroller of the Currency the responsibility for monitoring compliance by national banks. Therefore, the only aspects of the report which I will address concern the OCC's monitoring of compliance with the act's requirements by national banks.

Our specific disagreements with the findings of the GAO report are detailed in our response to the GAO draft report. The OCC response letter, which I call to your attention, is appendix IX of the GAO's final report. We have also highlighted those differences in our prepared text. Let me briefly summarize our efforts in monitoring compliance with the act.

During the 11 years since the enactment of the Bank Secrecy Act, we have carried out our compliance monitoring responsibilities by continually reminding the national banking system and our examination staff of their respective duties under the act. During the past 15 months, we have worked with Treasury, the GAO, and the other bank regulatory agencies, to develop, test, and implement revised compliance examination procedures which we believe strike an appropriate balance between our compliance responsibilities and our concerns about increased regulatory burden.

83-873 0-81-5

I believe the OCC has demonstrated a commitment to compliance with the Bank Secrecy Act requirements to better fulfill our delegated responsibilities under the law. We have: One, emphasized the need for the industry to develop compliance, audit programs; two, met with accounting firms to emphasize the need for external audit coverage in the Bank Secrecy Act area; three, improved our examination procedures and our training; four, we have reported violations of the Bank Secrecy Act to the Treasury Department on a quarterly basis; five, we made specific referrals to the Treasury Department and the Justice Department and assigned examiners to assist in related investigations; six, we have taken administrative actions against banks for Bank Secrecy Act violations; and seven, we have denied, upheld, or conditionally approved corporate applications based on the compliance with the Bank Secrecy Act.

Prospectively, we feel that the key to efficient compliance monitoring depends to a great degree upon the targeting of specific financial institutions for extensive examinations and investigations. This must be based on the amount of cash shipped from the financial institution to the local Federal Reserve branch. This process could be automated and result in an effective early warning system, which could allow us to more efficiently target institutions for more intensive examination and investigation.

In conclusion, we appreciate the subcommittee's interest in the Bank Secrecy Act. Reexamination of the implementation and effectiveness of the Bank Secrecy Act has proved a useful exercise in pinpointing deficiencies in a variety of Bank Secrecy Act matters.

We believe that the recent tightening of the implementing regulations, improved examination procedures, and cooperation among the agencies should facilitate enforcement of the act and result in improved compliance.

The recent success of the Operation Greenback project in south Florida is directly attributable to the increased attention and coordinated effort. The OCC, which has spent thousands of workdays of its dedicated professional men and women, is pleased to contribute to this effort.

This concludes my prepared remarks, Mr. Chairman. I would be pleased to respond to questions.

[Mr. Zito's prepared statement, on behalf of the Office of the Comptroller of the Currency, follows:]

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