$1.9-Million Fine Levied on Texas Lender : Covers 7,000 Violations of the Bank Secrecy Act

Texas Commerce Bancshares, a large Houston bank holding company, has agreed to pay a $1.9-million civil fine in the third-largest penalty imposed in a crackdown on failures to report large currency transactions, officials said Friday.

The Treasury Department said the fine covered more than 7,000 violations of the Bank Secrecy Act, which requires banks to report any cash transactions involving more than $10,000. The law is aimed at giving law enforcement authorities a way to track money laundering activities by organized crime.

Government officials said there was no evidence that Texas Commerce had engaged in criminal activity in connection with the violations, which were uncovered during an internal review conducted in mid-1985 by the bank.

The fine was topped only by a $4.75-million penalty levied against Bank of America in San Francisco last month and a $2.25-million fine paid last year by Crocker National Bank, also of San Francisco.

Texas Commerce, which owns 70 banks, said many of the violations involved cash flows between its banks along the Mexican border and banks in Mexico.

Inadvertent Failure

“Prior to 1980, these transactions were exempt from the reporting requirements,” the bank said in a statement. “The inadvertent failures to report appeared to have resulted from the mistaken belief that these routine interbank transfers continued to be exempt.”

The bank said the remaining errors involved transactions with the bank’s domestic customers, including established businesses “that routinely engage in cash transactions.”

Failure to report currency transactions under the Bank Currency Act carries a maximum penalty of $10,000 per violation, which means Texas Commerce could have faced a maximum fine of more than $70 million.

However, Francis A. Keating II, assistant Treasury secretary for enforcement, said the government had taken into account the bank’s “commitment to full future compliance and record of past cooperation with federal law enforcement officials.”

Ben F. Love, chairman and chief executive of Texas Commerce, said the firm’s 1986 earnings will not be affected because it had established a reserve fund in the fourth quarter of 1985 to handle the $1.9-million settlement.

Treasury Department officials said the violations came to light when Texas Commerce reviewed its reporting operations after a $500,000 fine was imposed on the Bank of Boston in February, 1985, for failing to report $1.22 billion in cash transactions.

Since June, 12 other banks have been penalized from $121,000 to the $4.75-million fine imposed against Bank of America.