The Treasury Department announced today that Crocker National Bank of San Francisco, the nation's 11th-largest bank, has agreed to pay penalties of $2.25 million for failing to report cash transactions.
The fine is the largest ever levied against a financial institution for violations under the Bank Secrecy Act.
Assistant Treasury Secretary John M. Walker Jr. said the bank committed in excess of 7,800 violations resulting from failures to report both international and domestic currency transactions.
Under law, a bank must report all cash transactions exceeding $10,000. The law is designed to give federal authorities a tool to investigate cases involving drug deals, corruption and organized crime.
'Systemic and Pervasive'
"Although there is no evidence that the bank itself deliberately engaged in money laundering, Crocker's reporting failures were systemic and pervasive," Walker told a news conference where the penalties were announced.
Walker said that $3.43 billion of the money involved transactions with six banks in Hong Kong. He said couriers from the foreign banks would deposit large sums of cash, in some cases millions of dollars in one shipment, with Crocker.
Since the Far East is a prime supplier of heroin, Walker said, it could be assumed that some of the money involved was related to illegal drug trafficking.
He said Crocker's actions had deprived law enforcement officials of "potentially important law enforcement leads that could have been useful in drug, tax, money-laundering and other investigations."
Bank of Boston Fined
Last February, the Bank of Boston agreed to pay a $500,000 fine after pleading guilty to charges of failing to comply with the same act in connection with the transfer of $1.22 billion in cash between the United States and Europe during a four-year period.
In June, penalties ranging from $210,000 to $360,000 were imposed against four New York banks.
Walker said "the extremely serious nature of Crocker's violation warranted a substantially more severe penalty than in prior cases."
He said the "system's failures" that led to Crocker's reporting violations had originated before the installation of the bank's present management.
Walker added that the present management had cooperated with the Treasury Department in developing the scope of the bank's liability and officials had made a commitment to full compliance in the future.