Three Republican senators Tuesday sharply criticized as "weak" and "abysmal" the enforcement by federal bank examiners of laws against money laundering and heard the U.S. comptroller of the currency concede that his office needs to do a better job of policing the nation's banks.
The harsh criticism and promises of action were made at a Senate hearing into how the First National Bank of Boston and other institutions may have been misused by reputed organized crime elements. Officers of the Bank of Boston last month pleaded guilty to failure to report $1.2 billion in cash transactions with nine foreign banks, a violation of the U.S. Currency and Foreign Transactions Reporting Act of 1970.
Paid $5000,000 Fine
The Boston bank, which paid a $500,000 fine, acknowledged earlier last month that it had also accepted cash deposits of $7.3 million over a four-year period from relatives of Gennaro Angiulo, who is considered by law enforcement officials to be the head of New England's most powerful organized crime network.
William L. Brown, the bank's board chairman, told senators that it was "an honest mistake...very poor judgment" for the bank to have helped the Angiulo family launder what may have been illicit funds. He said that no reports of the cash transactions were made to the Treasury Department because a branch manager had placed the Angiulos on a special list exempting them from the banking act's reporting provisions.
Sen. William V. Roth Jr. (R-Del.), chairman of the Senate permanent investigations subcommittee, which conducted the hearing, said that money laundering--the act of disguising illegal proceeds by funneling them into legitimate banking channels--is "the glue that holds criminal activity together."
"Neither the target institutions (the banks) nor the regulatory agencies fully understand the importance of this matter," Roth said. "There is evidence that bank examiners are not properly trained in the requirements of the law. That must be changed."
Sen. Warren B. Rudman (R-N.H.), the panel's vice chairman, agreed that more needs to be done.
"Although banks are frequently unwitting partners in such money-laundering schemes, the fact remains that they are often essential links in the criminal process," Rudman, a former New Hampshire attorney general, said. "But the record of enforcement for this act has been nothing short of abysmal."
Sen. Alfonse M. D'Amato (R-N.Y.), referring to enforcement as "weak and casual," said that he was introducing legislation that would give the Treasury Department more power to subpoena bank records and provide stiffer penalties for violations.
In response to the charges, Comptroller of the Currency C.T. Conover said that examiners make surprise visits to national banks at least annually.
Promises to Improve
But, as to enforcing the statute against money laundering, Conover said, "We are not satisfied with our performance overall." He said that an internal review has shown that many examiners are not fully familiar with the currency reporting act and have not given priority to enforcing it.
He promised to "improve our training and our internal and external communications."
Conover said that bank examiners in Massachusetts in 1982 ignored warnings form other Treasury Department officials that money-laundering violations were occurring. He said that he could not explain why the warnings were ignored.
"You say this is a lack of training?" Rudman ask Conover. "I say this is gross negligence. It's a sorry performance."