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I think that if we can move these people out in the open, if we can identify how they are laundering the money, who they are, where they are moving money, so that we can begin to dry up their mechanism, and then begin to take their assets from them; we can make some dent in this gigantic drug trafficking business that exists in this country.

We look forward to working with you.

Mr. Powis. Well, thank you, Mr. Chairman. I want to thank you for your interest in this matter, and for so many other enforcement matters that you've taken the lead in.

Thank you very much.

Mr. HUGHES. Thank you. We appreciate your testimony. Thank you.

Our last witnesses today are Mr. MacDonell Tyre, and Mr. E. Gene Powers. Mr. Tyre is president and chief executive officer and chairman of the board of the Royal Trust Bank of St. Petersburg, FL.

Mr. Tyre has had 35 years experience in the banking industry, mostly in positions of major responsibility.

Mr. Tyre served for many years with the Trust Co., of Georgia in Atlanta, and with the Sun First National Bank, Orlando, FL, reaching the position of president, chief executive officer and chairman of the board.

In 1977, he came to Century First National Bank which subsequently merged with Royal Trust Bank. Mr. Tyre is accompanied by Mr. E. Gene Powers, senior vice president and cashier of Royal Trust Bank.

Mr. Powers, a native of Florida, has almost 30 years of experience in banking in Florida communities.

Gentlemen, we're just delighted to have you with us today, and we're particularly indebted to you for coming such a long distance.

My colleague, Larry Smith, who I think you heard me say at the outset, if you didn't, expresses his regrets. He was on his way this morning, and, unfortunately, his wife, Sheila, was taken to the hospital, and, so, Larry, of course, had to go out to Bethesda. But, he wanted to extend to you his personal greetings and welcome you to the subcommittee. Mr. TYRE. Thank you very much. I'd like to say right offhand that next-if you have another hearing in February-we'll invite you down to Florida to have it.

Mr. HUGHES. Makes more sense to me. Of course, I'm in my home area, you know. TESTIMONY OF MacDONELL TYRE, PRESIDENT, CHIEF EXECUTIVE OFFICER, AND CHAIRMAN OF THE BOARD, ROYAL TRUST BANK, ST. PETERSBURG, FL

Mr. TYRE. Mr. Chairman, members of the subcommittee, my name is MacDonell Tyre. I am president, chairman of the board, and chief executive officer of Royal Trust Bank of Florida, N.A.

With me today is E. Gene Powers, the senior vice president of Royal Trust Bank of Florida, N.A.

It is my pleasure to be with you today to discuss how we joined forces with the Internal Revenue Service in 1981 to stop one instance of illegal laundering of drug money in central Florida.

Through the years, Royal Trust has maintained a cooperative working relationship with the FBI and the IRS.

In August of 1981, our manager in the main office suspected that a money laundering scheme was operating through our bank. She became aware that two new customers were making cash deposits to various checking accounts two or three times a day.

The deposits were always just under $10,000. Within 1 day, the customers were making several deposits in the $9,700 to $9,900 range to different tellers at the drive-in windows.

Often, they deposited cashier's checks from other local banks. Their accounts had a lot of activity.

We suspected that these new customers were trying to avoid disclosure of their transactions by splitting their deposits and circumventing the requirements of the Bank Secrecy Act to file currency transaction reports with the IRS.

I should explain that until the middle of 1981, there had been a great deal of confusion about whether such deposit splitting could be used to avoid filing the currency transaction reports.

Neither the Bank Secrecy Act nor the Treasury Department reg. ulations said anything about how to handle multiple transactions under $10,000.

In 1981, however, a new version of the currency transaction report, Form 4789, was sent out to the banks. The new form, which bears the revision date of September 1980, although it wasn't circulated until 1981, made it clear that the Treasury considered multiple transactions under $10,000 to be reportable, if a bank was aware of the customer splitting up the deposits to get under the $10,000 limit. We had some time before set up procedures to make sure CTR's were filed whenever the bank became aware of unusual cash transactions that might come under the regulations.

The bank manager, after consulting with management, immediately contacted the FBI who referred to the IRS. At the meeting, she and other bank officers, and the IRS officials, said they believed this was indeed a laundering operation.

They informed us at that time that a joint task force had been formed by the IRS and U.S. Customs called Operation Greenback in Tampa to investigate such activities, and asked us to cooperate in their investigation, to which we agreed.

A transmitting device and a tape recorder were secretly installed in one of the bank offices. A bank officer was also fitted with a recorder.

The IRS agents briefed the officer and suggested questions to ask the customers. The bank also met with the first customer to find out whether the customer was aware of the CTR reporting require ments. The customer, who claimed to be a currency exchanger, said he knew about currency transaction reports.

He claimed he was only trying to bypass the redtape harassment caused by the forms.

After the bank officer met with the customer, he reported to the agents that the customer had also hinted that he'd be willing to pay the bank officer a commission for his help. The IRS then decided to bring in an undercover agent.

We set the agent up as a new employee, gave him a desk as an operations officer. In subsequent meetings, the agent gained the confidence of the customer and together they began laundering money through the bank. All of this laundering was monitored by the IŘS and the U.S. attorney.

During the period of investigation of approximately 6 months, over $3.5 million passed through the bank. With the bank and the IRS working together, by the time the investigation was concluded, $188,000 in U.Š. currency was seized, seven people were indicted, and five people were convicted.

The Bank Secrecy Act is not onerous in its requirements, certainly on banks, once its ambiguities were resolved, the bank and its legitimate customers had no problems complying with it.

We believe it to be—we believe it is a vital system which gives us the opportunity to help the Government fight money laundering.

If the IRS asked us for help, we'd do it. Since our first operation in 1981, we have contacted the IRS on at least two other occasions when we suspected illicit activities.

We have also provided our banking facilities to assist the IRS in investigations in which we are not directly involved.

In so doing, Royal Trust hopes to strengthen the community by blocking the use of our bank system for the laundering of illegal moneys.

That concludes my presentation, Mr. Chairman. If you or the other members have any questions, we'll do our best to answer them.

(Complete statement of Mr. Tyre follows:] STATEMENT OF MacDONELL TYRE, PRESIDENT, ROYAL TRUST BANK OF FLORIDA, N.A. Mr. Chairman and Members of the Subcommittee: My name is MacDonell Tyre. I am the President, Chairman of the Board and Chief Executive Officer of Royal Trust Bank of Florida, N.A. With me today is E. Gene Powers, the Senior Vice President of Royal Trust Bank of Florida, N.A.

It is my pleasure to meet with you today to discuss how we joined forces with the Internal Revenue Service in 1981 to stop one instance of illegal laundering of drug money in Central Florida. Through the years, Royal Trust has maintained a cooperative working relationship with the FBI and the IRS.

In August of 1981, our manager in the main office suspected that a money laundering scheme was operating through our Bank. She became aware that two new customers were making cash deposits to various checking accounts, two or three times a day. The deposits were always just under $10,000. Within one day, the customers were making several deposits in the $9,700 to $9,900 range to different tellers or to the drive-in window. Often, they deposited cashier's checks from other local banks. Their accounts had a lot of activity. We suspected that these new customers were trying to avoid disclosure of their

transactions by splitting their deposits and circumventing the requirement of the Bank Secrecy Act to file Currency Transaction Reports with the IRS.

I should explain that, until the middle of 1981, there had been a great deal of confusion about whether such deposit-splitting could be used avoid havin

to file Currency Transaction Reports. Neither the Bank Secrecy Act nor the Treasury Department Regulations said anything about how to handle multiple transactions under $10,000.

In 1981, however, a new version of the Currency Transaction Report, Form 4789, was sent out to banks. The new form (which bears the revision date of “September 1980" although it wasn't circulated until 1981) made it clear that the Treasury considered multiple transactions under $10,000 to be reportable, if a bank was aware that customers were splitting up their deposits to get under the $10,000 limit. We

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set up procedures to make sure CTRs were filed whenever the Bank became aware of unusual cash transactions that might come under the regulation.

The branch manager, after consulting with management, referred her to the IRS. After meeting her and other bank officials, the IRS agents said they believed that this was indeed a laundering operation. They informed us at that time that a joint task force had been formed by the IRS and U.S. Customs, called “Operation Greenback in Tampa” to investigate such activities and asked us to cooperate in their investigation.

A transmitting device and a tape recorder were secretly installed in one of the bank offices. A bank officer was also fitted with a recorder. The IRS agents briefed the officer and suggested questions to ask the customers.

The bank officer met with the first customer to find out whether the customer was aware of the CTR reporting requirements. The customer, who claimed to be a currency exchanger, said he knew about Currency Transaction Reports. He claimed that he was only trying to bypass the “red tape" harrassment caused by the forms.

After the bank officer met with the customer, he reported to the agents that the customer had also hinted that he'd be willing to pay the bank officer a commission for his help. The IRS then decided to bring in an undercover agent. We set the agent up as a new employee and gave him a desk as an Operations Officer. In subse quent meetings, the agent gained the customer's confidence and together they began laundering money through the Bank. All of this laundering was monitored by the IRS and the U.S. Attorney.

During the period of investigation of approximately six months, over $3,500,000 passed through the Bank. With the Bank and the IRS working together, by the time the investigation concluded, $188,000 in U.S. Currency was seized, seven people were indicted and five people were convicted.

The Bank Secrecy Act is not onerous in its requirements. Once its ambiguities were resolved, the Bank and its legitimate customers had no trouble complying with it. We believe it is a vital system which gives us the opportunity to help the government fight money laundering.

When the IRS asks for help, we do it. Since our first operation in 1981, we have contacted the IRS on at least two other occasions when we suspected illicit activities. We have also provided our banking facilities to assist the IRS in investigations in which we are not directly involved. In so doing, Royal Trust hopes to strengthen the community by blocking the use of our bank system for the laundering of illegal monies.

That concludes my presentation, Mr. Chairman. If you or the other members have any questions, I'll do my best to answer them.

Mr. HUGHES. Thank you, Mr. Tyre. How about Mr. Powers? Would you like to add anything?

Mr. POWERS. Mr. Tyre has made a joint statement.
Mr. HUGHES. All right. Fine.

How extensive, in your judgment, was and is money laundering in Florida today?

Mr. TYRE. I would say it's very extensive. There has been a lot of publicity about certain banks being under investigation, this sort of thing, and it has to be extensive for the amount of money that's involved.

Mr. HUGHES. I take it from what you have said that there are just certain tipoffs that-

Mr. TYRE. Well, in our particular-we have on our platform, we have a number of old hands, so to speak, ladies particularly, who know most of our customers, particularly the ones that come into the bank.

And, they are pretty nosy, and when a new guy comes in and plunks $10,000 in cash down, why, he's pretty soon being watched. And, they spotted two men from time to time, one on one side of the lobby, one on the other, each making deposits just slightly under $10,000.

This, incidentally, we had this spotted within a week after the account opened.

Mr. HUGHES. That's interesting. How big is the bank, the Royal Trust Bank? Mr. TYRE. Well, it's just our bank in St. Petersburg, which is about $325 million, depending on what day you look at the figures. The total system is about $1,200,000,000. Mr. HUGHES. Very good.

What problems do you envision that money laundering causes for legitimate businesses?

Mr. TYRE. Of course, a lot of things it causes is the fact that we have regulations that legitimate businesses have to abide by in order to stay legitimate.

The money laundering itself insofar as the bank is concerned creates a problem because if we don't report these violations, why, we're in trouble. Plus the fact that we're proud. We don't want our bank used for illegitimate purposes, and particularly for this kind of shenanigan with drug money. I have a particular abhorrence for that sort of thing. Mr. HUGHES. How does the Federal Government enforce compliance with the Bank Secrecy Act?

Mr. TYRE. As you probably know, we are examined by the Comptroller of the Currency, and as part of their examination, they investigate the systems we use for filing CTR's, and as a matter of fact, check the copies that we keep on file.

In addition to that, our own internal auditors check it out, and from time to time, we remind our tellers of the importance of complying with this regulation.

Mr. HUGHES. Does the fact that you have so many regulatory agencies involved often with inconsistent, not particularly compatible policies, present a problem?

Mr. TYRE. Sometimes, but not a particular problem in this case. We found them very cooperative. As you noticed in my report, when we ran into it, the first thing they did was call the FBI.

You know, banks are so thoroughly regulated that sometimes you're not sure which department is the right one to call.

But, historically, when we get in trouble, we call the FBI first, our bonding company next.

Mr. HUGHES. Are there ways, in your judgment, that the socalled underground economy undermines the legitimate economy in the community?

Mr. TYRE. I haven't had any direct experience with it, but sometimes I'm sure that in an attempt to launder money, it would be easy enough, I think, to try to influence some legitimate businessman to act as a go between in maybe laundering money.

Of course, that makes him a part of it at that time. I don't have any specific instances of that happening.

Mr. HUGHES. I'take it from your testimony that really the Bank Secrecy Act, particularly after the amended regulations and the new form, present really no major problem to the bank, it's not a particular onerous burden on the bank, and that your experience with the law enforcement community, and you've had direct experience, has been nothing but positive. Mr. TYRE. That's true. Mr. HUGHES. Well, let me thank you again for your testimony. I want to commend you and the Royal Trust Bank for your coopera

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