BANKING / FINANCE : Anaheim Banker Assails Proposed Law on Money Laundering
Anaheim banker L. Don Sargent joined other bankers at a U.S. Senate hearing Wednesday in denouncing pending legislation that would force bankers in certain areas, including Southern California, to adhere to stricter guidelines for reporting suspected money laundering.
Sargent, president and chief executive of American Commerce National Bank, told a subcommittee of the Senate Banking Committee that current money-laundering rules strike a “crushing blow to a small bank attempting to serve its customers in an efficient manner while maintaining an acceptable level of profit.”
The Bank Secrecy Act’s money-laundering provisions, aimed at ferreting out suspected drug and organized crime figures, require banks to report to the U.S. Treasury any daily cash deposits or withdrawals of $10,000 or more by individuals.
The pending bill would require bankers in certain areas--those where federal investigators say organized crime groups concentrate operations--to report transactions of $5,000 or more and to report “suspicious” transactions of any amount.
Each report takes 18 to 26 minutes to fill out and review, Sargent said in prepared remarks. He said his bank expects to file 1,500 such reports by the end of the year, requiring a minimum of 450 hours of work, and many small banks file two or three times more reports.
Of 5,300 reports filed over the past two years by Sargent’s former employer, Mechanics Bank in Paramount, only two cases appeared particularly suspicious, he said, and federal agents “took little action,” failing even to ask for information.
“Unfortunately, our experience in the Los Angeles Basin tends to suggest that even though banks have steadily increased their efforts to comply with the Bank Secrecy Act, both their regulatory burden and the drug epidemic continue to spread at an alarming rate.”
Back in Orange County, La Habra banker Craig Collette complained that Congress is trying to make banks responsible for money-laundering activities of others. “We don’t want to be the police force,” said Collette, president of Landmark Bank.
Acquisition OKd: The old Pacific Savings Bank in Costa Mesa came a step closer Wednesday to becoming part of a super-regional consumer banking firm as shareholders of a Seattle savings and loan firm agreed to be acquired by Pacific Savings’ new owner, Royal Trustco Ltd. in Toronto.
The $212-million purchase of Pacific First Financial Corp. now needs only regulatory approval, which Royal Trust executives said they expect to receive by mid-November.
Pacific Savings, called Pacific First Bank since Royal Trust bought it on Oct. 13 from federal regulators, will then be merged into Pacific First Financial. But that’s mainly a legal procedure.
Employees and customers of the Costa Mesa institution may never know exactly when that merger will occur, said Jerry E. Pohlman, Pacific First Financial’s president and chief executive, because the Seattle firm already is managing the S&L; and is beginning to offer Southern California customers the same products that its savings associations offer in Washington and Oregon.
Royal Trust is concentrating on expanding Pacific First operations in California through internal growth and through acquisitions of other institutions and branches of other institutions, said Michael A. Cornelissen, Royal Trust’s president and chief executive.
That’s good news for regulators, who are strapped with ailing and failing institutions. Regulators have been looking past U.S. borders to find cash-rich companies interested in owning a thrift here.
“Our plans to grow to a super-regional consumer bank are there because of the fragmented nature of the (U.S.) industry today because of the crying need for capital and because we know there are a large number of smaller franchises that are for sale,” Cornelissen said.
Royal Trust, which tripled its size in about five years without acquiring other companies, wants to turn the three-state Pacific First operation into a $20-billion asset bank from its current $7-billion size in the next three or four years.
“Pacific Savings is not big enough to give us the economies of scale we need, so we’re looking for expansion in Southern California,” Pohlman said. But if a good deal comes along to complement its lone branch office in Walnut Creek, the company will expand first in Northern California.
“Our greatest opportunity is through acquisition.”
