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80–662 PDF 2013

S. HRG. 113–10 

PATTERNS OF ABUSE: ASSESSING BANK SECRECY 

ACT COMPLIANCE AND ENFORCEMENT 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

ON 

EXAMINING BANK SECRECY ACT COMPLIANCE AND ENFORCEMENT 

MARCH 7, 2013 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: http://www.fdsys.gov/ 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

TIM JOHNSON, South Dakota, Chairman 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

SHERROD BROWN, Ohio 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

KAY HAGAN, North Carolina 

JOE MANCHIN III, West Virginia 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

MIKE CRAPO, Idaho 

RICHARD C. SHELBY, Alabama 

BOB CORKER, Tennessee 

DAVID VITTER, Louisiana 

MIKE JOHANNS, Nebraska 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

JERRY MORAN, Kansas 

TOM COBURN, Oklahoma 

DEAN HELLER, Nevada 

CHARLES YI, Staff Director 

GREGG RICHARD, Republican Staff Director 

LAURA SWANSON, Deputy Staff Director 

COLIN MCGINNIS, Policy Director 

STEVE KROLL, Special Counsel 

PAT GRANT, Counsel 

DAWN RATLIFF, Chief Clerk 

RIKER VERMILYE, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)

C O N T E N T S 

THURSDAY, MARCH 7, 2013 

Page 

Opening statement of Chairman Johnson ............................................................. 1 

Opening statements, comments, or prepared statements of: 

Senator Warner ................................................................................................ 2 

WITNESSES 

David S. Cohen, Under Secretary for Terrorism and Financial Intelligence, 

Department of the Treasury ................................................................................ 3 

Prepared statement .......................................................................................... 31 

Responses to written questions of: 

Chairman Johnson .................................................................................... 61 

Senator Crapo ............................................................................................ 65 

Senator Reed .............................................................................................. 69 

Senator Warren ......................................................................................... 69 

Senator Heitkamp ..................................................................................... 72 

Thomas J. Curry, Comptroller, Office of the Comptroller of the Currency ........ 5 

Prepared statement .......................................................................................... 44 

Responses to written questions of: 

Chairman Johnson .................................................................................... 73 

Senator Crapo ............................................................................................ 77 

Senator Reed .............................................................................................. 80 

Senator Warren ......................................................................................... 81 

Senator Heitkamp ..................................................................................... 160 

Jerome H. Powell, Member, Board of Governors of the Federal Reserve 

System ................................................................................................................... 6 

Prepared statement .......................................................................................... 55 

Responses to written questions of: 

Chairman Johnson .................................................................................... 161 

Senator Crapo ............................................................................................ 166 

Senator Warren ......................................................................................... 171 

Senator Heitkamp ..................................................................................... 176 

(III)

(1) 

PATTERNS OF ABUSE: ASSESSING BANK SECRECY ACT COMPLIANCE AND ENFORCEMENT 

THURSDAY, MARCH 7, 2013 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 10:03 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Tim Johnson, Chairman of the Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN TIM JOHNSON 

Chairman JOHNSON. The Committee is called to order. 

Today we will assess large money center banks’ compliance with 

U.S. anti-money laundering rules. Our financial system is a major 

target for those who want to conceal and move illicit funds since 

the dollar is the world’s reserve currency. That is why strong AML 

compliance coupled with tough enforcement is critical. 

In recent years we have seen major enforcement actions against 

a large number of global banks that allowed billions of dollars to 

flow through the U.S. financial system in a concealed way. They include ABN AMRO, Lloyd’s, Credit Suisse, Wachovia, Barclays, 

ING, Standard Chartered, and HSBC. These banks violated the 

Bank Secrecy Act and our sanctions rules against Iran, Cuba, and 

other countries in various ways, which cost the banks over $5 billion in fines and forfeitures. In addition, Citibank and JPMorgan 

Chase have been required to overhaul their BSA compliance systems in the face of major violations. 

This pattern of violations is disturbing. Holes in banks’ antimoney laundering systems can protect funds stolen by corrupt leaders and drug cartels, help sanction violators, and enable terrorist 

financing. To address this threat, we must understand how banks’ 

safeguards malfunction and assess the way the Government enforces our AML rules. As we do that, we should consider several 

important issues: 

The Government depends on bank compliance programs to detect 

and prevent money laundering. Should senior management be required to confirm the strength of their programs regularly so that 

they do not break down, as appears to have happened at a number 

of banks? 

In the recent major penalty cases, U.S. banks failed to deal effectively with funds from non-U.S. branches or affiliates; some of the 

latter intentionally undermined rules and procedures that they 

2 

knew were required in the U.S. How can we ensure more uniform 

compliance and enforcement of U.S. and international rules? 

The time between citations by bank examiners and enforcement 

actions cannot be allowed to drag out, as was done in some of these 

cases. While I am pleased that the OCC and other regulators are 

intensifying their efforts in this area, they must let law enforcement know early on about potential problems to prevent illicit 

funds from being moved while problems are being fixed. 

Last, questions have been raised about remedies, including the 

need for prosecution. We should consider today the full range of 

remedies in cases like these, including: BSA injunctions, banning 

from the industry those individuals who violate the rules, suspending a particular kind of activity or line of business at a bank 

in response to violations, and other measures. 

We must do more to ensure that global banks, including their affiliates and branches who seek access to the U.S. system, have effective anti-money laundering systems in place. If the recent record 

of AML-related violations by U.S. banks is any indication, we clearly have a long way to go before that is accomplished. I hope today’s 

hearing can advance the discussion of how to reach this goal. 

I will need to excuse myself momentarily to attend an Energy 

Committee hearing, but I appreciate the witnesses’ testimony and 

will follow up if I have additional questions. I understand Ranking 

Member Crapo is sick and regrets not being here today. His statement will be submitted for the record. 

I will now turn it over to Senator Warner. 

STATEMENT OF SENATOR MARK R. WARNER 

Senator WARNER [presiding]. Thank you, Mr. Chairman, and I 

thank my colleagues, particularly Senator Reed. I think you have 

got to head off, too, so to make sure to the folks here, I am not 

jumping line. And I am going to assume we are going to honor the 

old Corker rule here in that nobody else wants to make a statement at this point, so I can go ahead and introduce the witnesses. 

I want to remind all my colleagues that the record will be open 

for the next 7 days for opening statements and any other materials 

you would like to submit. Now I would like to introduce our witnesses. 

The Honorable David Cohen is the Treasury Department’s Under 

Secretary for Terrorism and Financial Intelligence. Mr. Cohen formerly served as Assistant Secretary for Terrorist Financing, and 

prior to that he was in private practice at Wilmer, Cutler, Pickering, Hale & Dorr. He also served in various roles in the Treasury 

Department’s Office of General Counsel. 

The Honorable Thomas J. Curry is the Comptroller of the Currency. Prior to becoming Comptroller, Mr. Curry served as the Director at FDIC as well as the chairman of the NeighborWorks 

America Board of Directors. He previously served five Governors as 

the Commissioner of Banks for the Commonwealth of Massachusetts. 

Then, finally, the Honorable Jerome H. Powell is the Governor 

on the Board of the Federal Reserve System. Before joining the 

Board, Mr. Powell was a visiting scholar at the Bipartisan Policy 

Center, and prior to that he served as a partner at the Carlyle 

3 

Group, as Assistant Secretary and Under Secretary of the Treasury 

in the first Bush administration, and as a lawyer and investment 

banker in New York City. And I am friends with Mr. Powell and 

his Mr. Powell and his family. 

I am going to go ahead, since this is a rare opportunity for me 

to actually move up to the Chairman’s seat. I am going to take advantage of this—it may be years before I get to sit there again— 

before I call on Mr. Cohen to give his opening statement. 

If Senator Reed or Senator Johnson were still here, they would 

say, ‘‘Do not get too comfortable.’’ 

With that, Mr. Cohen, please proceed. 

STATEMENT OF DAVID S. COHEN, UNDER SECRETARY FOR 

TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT 

OF THE TREASURY 

Mr. COHEN. Thank you, Chairman Johnson, Ranking Member 

Crapo, distinguished Members of the Committee. Thank you for inviting me to testify today on a core focus of our efforts at the Department of the Treasury: promoting a safe and secure financial 

system, and effectively combating money laundering, terrorist financing, and related forms of illicit finance. I would like to commend you, Mr. Chairman, and this entire Committee for your 

strong leadership on this topic. 

The spate of recent high-profile enforcement actions against some 

of our largest and most sophisticated financial institutions raises 

troubling questions about the effectiveness of our domestic antimoney laundering and counterterrorist financing efforts. It is critically important to understand why these failures occurred and 

what we can do—whether through better legislation, regulation, examination, or enforcement—to prevent the recurrence of such failures. 

The Bank Secrecy Act and the regulations promulgated by Treasury’s Financial Crimes Enforcement Network, known as FinCEN, 

and the Federal functional regulators established the framework 

for guarding the financial system from money laundering and terrorist financing. These laws and regulations work in tandem with 

the sanctions programs implemented by Treasury’s Office of Foreign Assets Control, known as OFAC. 

These laws and rules aid financial institutions in identifying and 

managing risk, provide valuable information to law enforcement, 

and create the foundation of financial transparency required to 

deter, detect, and punish those who would abuse our financial system. 

But the laws and rules can only do so much. A truly robust AML/ 

CFT framework requires effective AML program implementation 

by financial institutions, buttressed by strong enforcement efforts. 

In light of what we have seen in recent years, it is clear that significant design, oversight, compliance, and enforcement challenges 

remain. I would like to highlight the Treasury Department’s efforts 

to strengthen the effectiveness of our AML/CFT regime. 

First, Treasury’s AML/CFT regulators, FinCEN and OFAC, are 

committed to continuing their vigorous investigation and enforcement of violations. In my written testimony, I describe a number 

of recent FinCEN and OFAC enforcement actions, including the 

4 

HSBC matter last December, in which FinCEN imposed a $500 

million civil penalty for willful violations of the BSA, and OFAC 

imposed a $375 million fine for sanctions evasion. 

Moreover, FinCEN, as part of a thorough review being conducted 

by its new Director, is redoubling its AML enforcement focus, including by ensuring that it is employing all of the tools at its disposal to hold accountable those institutions and individuals who 

allow our financial institutions to be vulnerable to illicit financial 

activity. 

Second, because aggressive enforcement is a necessary but not 

sufficient response to the problems exposed by recent investigations, we have set up two groups to examine and improve the legal, 

regulatory, compliance, and enforcement framework. 

FinCEN recently organized a group of representatives from the 

financial service industry, financial regulators, and law enforcement whose mission is to identify gaps between illicit finance risks 

and compliance efforts, and to develop recommendations to close 

those gaps. This group’s work will feed into the efforts of an interagency group that I convened last fall known as the AML Task 

Force. Other task force members include senior representatives 

from all regulators with responsibility to combat money laundering: 

FinCEN, the Fed, the OCC, the FDIC, the NCUA, the CFTC, the 

SEC, and the IRS, as well as the Justice Department’s Criminal 

Division. 

The task force is taking a step-back look at our AML/CFT framework to assess how the entire enterprise is operating. It is looking 

at illicit finance risks and compliance requirements and will evaluate information-sharing, supervision, and enforcement practices to 

determine if there are ways to better inform, assess, encourage, 

and, as necessary, compel financial institution compliance. 

Third, we are moving ahead with an initiative to enhance financial transparency, a new rule that would explicitly require financial 

institutions to conduct in-depth customer due diligence to identify 

the true beneficial owner of accounts. Current law explicitly requires enhance customer due diligence in only certain limited circumstances. This may permit illicit actors to access the financial 

system undetected and to engage in transactions that financial institutions may fail to identify as suspicious. We have gathered a 

wealth of useful information on this proposal from written submissions and in a series of public hearings. We anticipate publishing 

a proposed rule for further notice and comment soon. 

Finally, I want to note our international efforts to strengthen the 

global AML/CFT framework. Given the global nature of money 

laundering and terrorist financing and the increasing interrelatedness of the global financial system, a secure global framework is essential to the integrity of the U.S. financial system. Working with 

several intergovernmental and international organizations, most 

notably the Financial Action Task Force, we are helping lead international efforts to revise and strengthen global AML/CFT standards. 

The United States is home to one of the strongest anti-money 

laundering and counterterrorist financing regimes in the world, but 

clearly there is work to be done to make our AML/CFT regime 

5 

more efficient, effective, and to elicit better compliance from financial institutions. 

I look forward to working with this Committee on these critical 

issues and would be pleased to answer your questions. 

Senator WARNER. Thank you, Mr. Cohen. 

Mr. Curry. 

STATEMENT OF THOMAS J. CURRY, COMPTROLLER, OFFICE 

OF THE COMPTROLLER OF THE CURRENCY 

Mr. CURRY. Chairman Johnson, Ranking Member Crapo, and 

Members of the Committee, I appreciate the opportunity to appear 

before you today to discuss what the OCC is doing to ensure that 

Federal banks and thrifts have programs in place to deny money 

launderers and other criminal elements access to the banking system. 

I cannot overstate the importance of the Bank Secrecy Act and 

other anti-money laundering statutes. When it was first signed into 

law in 1970, the Bank Secrecy Act was intended to be another tool 

in the battle against illicit drugs. Today it is also an important 

weapon in combating a host of financial crimes as well as in the 

war against terrorism, and that is why the OCC continues to 

search for ways to improve our supervision in this area. 

Lately, we have observed a number of instances in which our 

largest institutions have failed to meet the requirements of the 

Bank Secrecy Act, and the OCC has taken some very significant 

enforcement actions against those banks. 

In the wake of the financial crisis, too many banks inappropriately cut staffing and spending for BSA and anti-money laundering 

compliance as austerity measures, and our examiners are now 

working to ensure that these institutions add resources they need 

to maintain solid BSA/AML programs. 

Although many of our recent enforcement actions have involved 

large banks, BSA is an issue for institutions of all sizes. In fact, 

as large banks improve their BSA/AML programs and jettison 

higher-risk lines of business, we are concerned that money 

launderers will migrate to smaller institutions. 

While we are committed to ensuring that all the institutions we 

supervise have effective BSA/AML programs in place, we recognize 

the increased burden this places on community banks and thrifts. 

We will work with these institutions to help them calibrate their 

controls to reflect the risks they face, thereby reducing unnecessary 

burden. 

BSA compliance is inherently difficult. It involves the challenge 

of sifting through large volumes of transactions to identify those 

with suspicious features, a task made especially difficult by the ingenuity criminal elements have shown. As a result, financial institutions and supervisors are devoting more resources to maintain effective programs. 

Most of the problems we find in BSA/AML programs are attributable to the following root causes: the strength of an institution’s 

compliance culture, its willingness to commit sufficient resources, 

the strength of its information technology and monitoring processes, and its risk management. 

6 

The health of a bank’s culture starts at the top, and so it is important that senior management demonstrate a commitment to 

BSA/AML compliance. Employees need to know BSA compliance is 

a management priority and that the compliance function will receive the resources it needs to succeed, including training and firstrate information technology. 

We are currently in the process of drafting detailed guidance to 

banks on sound corporate governance processes that will incorporate many of these concepts, including business line accountability for BSA/AML compliance and the independence of the compliance function. 

We are also reviewing certain statutory provisions and exploring 

whether a regulation or agency issuance interpreting these provisions would be helpful in enhancing our enforcement authority 

against insider wrongdoing in this area. Several agencies have a 

role in addressing BSA issues, and we participate in a number of 

interagency groups to address them. 

Additionally, we regularly provide information, documents, and 

expertise to law enforcement for use in criminal investigations on 

a case-specific basis. We also work closely with the Federal Reserve 

and the other banking agencies, and we are active participants on 

the interagency task force that Under Secretary Cohen formed to 

examine how this 40-year-old statutory framework can remain relevant in today’s world. 

Despite problems we have identified, many financial institutions 

have developed strong BSA compliance programs responsible for 

detecting and reporting potential criminal violations to law enforcement. To this point, more than 5.6 million SARs have been collected in the centralized data base that is maintained by FinCEN, 

and these reports provide critical information to law enforcement 

agencies. The majority of these SARs have been filed by national 

banks and Federal thrifts. These reports play a vital role in combating drug traffickers and other criminal elements, and we at the 

OCC believe Congress should act to clarify and strengthen the safe 

harbor for institutions that file SARs. 

Banks need to know that they can share information with law 

enforcement agencies without incurring liability and that they can 

file SARs without running the risk that their bank will be exposed 

to litigation for simply complying with Federal law. We would be 

happy to work with the Committee in exploring these ideas. 

While there are many challenges ahead of us, we will continue 

to work with Congress, law enforcement, other regulatory agencies, 

and the industry to develop and implement a coordinated and comprehensive response to the threat posed to our Nation’s financial 

system by terrorist and criminal organizations. 

Thank you, and I look forward to your questions. 

Senator WARNER. Thank you, Mr. Curry. 

Mr. Powell. 

STATEMENT OF JEROME H. POWELL, MEMBER, BOARD OF 

GOVERNORS OF THE FEDERAL RESERVE SYSTEM 

Mr. POWELL. Thank you, Mr. Chairman. Chairman Johnson, 

Ranking Member Crapo, and other Members of the Committee, 

thank you for inviting me to discuss the role the Federal Reserve 

7 

plays in the U.S. Government’s efforts to combat money laundering 

and terrorist financing. 

The Federal Reserve requires the institutions we supervise to 

have an effective BSA compliance program. In coordination with 

other Federal agencies, we have adopted regulations and guidance 

that explain our expectations for the features of an effective BSA 

compliance program. 

Banking organizations must also maintain a program for ensuring compliance with U.S. economic sanctions that is effective in 

identifying higher-risk areas within a bank’s operations and screening and reporting prohibited transactions. 

As part of these programs, institutions we supervise must provide law enforcement with the reports prosecutors need to investigate suspicious activity. The Federal Reserve reviews these BSA 

and OFAC compliance programs as part of our regular safety and 

soundness examination program for the approximately 1,060 State 

member banks, State chartered branches and agencies of foreign 

banking organizations, and Edge Act and other corporations we supervise. 

We also conduct targeted examinations of financial institutions 

that show signs of being vulnerable to illicit financing. To ensure 

consistency, we use procedures developed jointly in a joint manual 

with FinCEN, OFAC, and the other members of FFIEC. Importantly, the Federal Reserve takes the findings of our BSA and 

OFAC exams into account in determining the institution’s examination ratings. 

The Federal Reserve devotes substantial resources to BSA and 

OFAC compliance. In addition to its examination force, each Federal Reserve Bank, each of the 12, has a BSA/OFAC specialist and 

coordinator, and the Board’s Division of Banking Supervision and 

Regulation has long had an anti-money laundering section, overseen by a senior official, who is here with me today, to help coordinate the system efforts. 

We also coordinate with other agencies. For example, the Federal 

Reserve brings every instance of a serious anti-money laundering 

deficiency or violation to the attention of FinCEN, OFAC, the Department of Justice, State law enforcement, the Federal banking 

agencies, and State regulators, as appropriate, as part of our enforcement program. 

We also participate in a number of interagency and international 

groups that develop standards for and coordinate interagency compliance, monitoring, and enforcement efforts. 

While the majority of institutions we supervise have well-administered and effective BSA and OFAC compliance programs, some 

cases require the use of our enforcement authority. In the last 5 

years, we have issued 113 enforcement actions relating to BSA and 

OFAC compliance, including 25 public cease-and-desist orders and 

written agreements, and imposed hundreds of millions of dollars in 

civil penalties. These actions involve institutions that are large and 

small, domestic and foreign. In each case, the Federal Reserve has 

required the institution to take corrective measures to ensure that 

its programs are brought into compliance. 

Many of the recent U.S. sanctions cases the Federal Reserve has 

pursued involve foreign banks with operations that extend across 

8 

many different countries. Foreign banks that operate in countries 

without sanctions similar to those imposed by the United States 

have not always had in place mechanisms to ensure transactions 

routed through the U.S. comply with U.S. law. The Fed’s enforcement action against ABN AMRO in 2005 triggered important 

changes in cross-border payment practices. 

The Federal Reserve has played a key role in developing the 

standards that have since been adopted to improve transparency in 

cross-border payment messages, including the standards operated 

by Basel and SWIFT. These standards require the expanded disclosure of the originator and beneficiary on payment instructions sent 

as part of a cover payment. 

The Federal Reserve places great importance on ensuring that 

the institutions we supervise comply with the BSA and U.S. economic sanctions. When we find problems at a supervised institution, we demand specific corrective measures, by specific dates, and 

we take strong enforcement measures when necessary. We will continue these efforts and work cooperatively with law enforcement 

and other financial regulators to ensure a coordinated response to 

the threat posed by illicit financing to the U.S. financial system. 

Let me conclude by saying that we recognize that money laundering and illicit financing threats have become more complex and, 

in addition, the financial markets have evolved so that the BSA/ 

AML framework, which was established decades ago and based primarily on a bank-centric model, may no longer be fully effective. 

We, therefore, join with the Treasury Department, the OCC, law 

enforcement, and other banking agencies to conduct a zero-based 

review of the U.S. supervisory and enforcement regimes for BSA/ 

AML compliance. This review will provide the basis for identifying 

potential improvements to the AML framework and developing recommendations to implement those improvements. 

Thank you. 

Senator WARNER. Thank you, gentlemen. I appreciate your testimony. 

We will put 5 minutes on the clock for us, but since it may just 

be a few members, we will get a good chance to get into some depth 

and detail. 

You know, I saw I believe it was the Attorney General recently 

made a statement that I would like to get some clarification from 

all of you, that there were concerns that some banks were potentially too large to prosecute in terms of their potential effect upon 

the economy. I do not personally believe that it can be the position 

of the U.S. Government that any institution should be too large to 

prosecute. As someone who was quite involved in Title II of DoddFrank, putting in place resolution authority and the ability to get 

both at the management and shareholders of firms, mostly here focusing on prudential standards, safety and soundness, but there is 

some question as well, as we look at BSA/AML enforcement, while 

the Committee has put forward 10 cases, these are all cases that 

have been—where there has only been monetary fines. There has 

not been actually prosecution of an institution. There has not been 

prosecution of individuals. 

And I guess what I would want to start with is, as the Chairman 

mentioned earlier in his opening remarks, how do we ensure that 

9 

we have strong BSA/AML compliance standards within these institutions? How do we ensure that we make sure that during times 

of financial stress compliance is not being cut back on? And do you 

each feel we have the appropriate tools where, as necessary, to 

move beyond just the fine capacity but to actually—each of you 

have got tools to be able to bar individuals from continuing to pursue—or bar individuals from being involved in the banking system? 

And how do we make sure those tools are effectively used? And I 

would like to hear from each of you. Briefly, if possible, because I 

have got a couple more rounds. 

Mr. COHEN. Certainly. Thank you, Senator Warner. I will address this in two ways. 

I think we do have a number of tools that we have used in the 

past and that we are intending to use in appropriate cases in the 

future to ensure that when there are enforcement actions to be 

taken against institutions and individuals, that we do so and are 

vigorous in our enforcement efforts. I set out, as I said, in my testimony some of the prior enforcement actions, but I have also said 

and want to reiterate that one of the objectives of the review that 

is underway now at FinCEN is to consider ways for FinCEN’s enforcement authority to be even more effectively discharged, including looking at ways to take action against individuals—officers, directors, shareholders, partners, whoever it may be—if they are 

themselves involved in the misconduct that—— 

Senator WARNER. And is part of that looking at actually having 

these officers and directors sign off on compliance work in a stronger way than they do right now? 

Mr. COHEN. Well, it is that as well as, I think, more aggressive 

action with respect to those individuals, including the possibility of 

barring them from the industry and other injunctive action. 

So we are looking at the full range of ways to continue to enforce 

aggressively as well as to enhance our enforcement efforts, and I 

think we have the legal authority to do that. Frankly, it is our intention to ensure that we exercise that authority in—— 

Senator WARNER. I want to hear from the other gentlemen. 

Please. 

Mr. CURRY. Thank you, Senator. At the OCC our job is to make 

sure as a civil enforcement agency that the banks have effective 

and adequate BSA/AML programs on an ongoing basis within the 

institutions. We conduct annual assessments of those systems, and 

if we find deficiencies, it is our policy to demand remedial action. 

If remedial action is not taken or it is a serious issue, we will proceed to use the arsenal of both informal and formal enforcement 

powers we have administratively. 

One of the areas that I focused on since becoming Comptroller 

is really to emphasize the corporate governance aspects of BSA 

compliance. That is part of the reason why we are developing and 

will be issuing soon specific guidance on what the expectations are 

for board and management accountability. And those have also 

served as important parts of our enforcement orders that we have 

issued in the last several months. They focus in a detailed fashion 

on the roles and responsibilities of operating management, and the 

board of directors as well. 

Senator WARNER. Mr. Powell. 

10 

Mr. POWELL. Thank you, Senator. I will start by addressing your 

first question, which was the comments of the Attorney General 

yesterday, and I just want to say it is fundamental in this country 

that everyone is equal before the law, and I think his comments 

only underscore the need to end too big to fail and the need for the 

agencies to forcefully implement Title I and Title II as it relates to 

too big to fail. Just to address that part of your comment. 

In terms of enforcement, I do not have that much to add. I would 

just say that we examine for BSA compliance as part of our regular 

examinations on a 12- to 18-month schedule for all of the institutions that we examine. We have a well-worked-out, commonly 

agreed manual, and we have an accelerating series of sanctions. 

We are all very focused on assuring that those are adequate to the 

task, and we are particularly focused on enterprise-wide global 

risk—risk assessment and risk management mechanisms, compliance mechanisms that address this cross-border issue. 

Senator WARNER. Let me just say, before I turn to Senator Reed, 

just that—and I will come back to this in the second round—I also 

have an enormous concern that the length of time to prosecution 

and the amount of potentially illegal and also potentially threatening in terms of terrorist financing, Iran a case in point, I want 

to come back to see how we can intervene even before perhaps an 

enforcement action needs to be taken so that we do not have this 

long drag period. 

Senator Reed. 

Senator REED. Well, thank you very much, Mr. Chairman, and 

this is an incredibly important hearing. I just came from the 

Armed Services hearing, and we are talking with General Ham 

down in Africa Command, and the reality is these terrorist, criminal narco-syndicates need money. Without it, they are a nuisance. 

With it, they are potentially devastating opponents of the United 

States. And what you do is absolutely critical to shut off their ability to operate. And if we do not, then the alternative is not only 

very difficult for us, leading up to military action, but extraordinarily expensive. So I just want to emphasize how critical your 

roles are and how important this issue is. We cannot say it enough, 

because if you do your work right, then we do not have to contemplate or implement much more dangerous and expensive options. 

But let me echo a point that the Chairman made, I think very 

well, to Secretary Cohen, which is that under Sarbanes-Oxley, for 

example, we require a chief executive to sign off on the financial 

statements, and that seems to have put a lot of vigor into the review of these issues that is lacking under the Bank Secrecy Act. 

I know you mentioned you are considering it, but I guess I would 

urge you to serious consider it. Can you comment again? 

Mr. COHEN. So, Senator Reed, I first want to say I wholeheartedly agree with your first comment and can tell you that the 

work that we do on the domestic anti-money laundering regime 

and the work that we do internationally in our various sanctions 

regimes is designed to accomplish exactly what you highlighted. 

With respect to elevating within the institution the obligation to 

sign off on the AML program, I think under current law it needs 

to be adopted by the board and reflected in the minutes of the 

11 

board, the AML program. I think one of the things that the AML 

task force that I convened and that both of my colleagues here participate in, as well as others, is looking at how to adjust the regulatory requirements to be more effective. And I think this is an 

area that we will take up, and I think it is a worthy suggestion. 

Senator REED. Thank you, and I think you have got to move expeditiously, too, because the threats out there are not—they are 

getting worse each moment. 

Mr. Curry. 

Mr. CURRY. Senator, I share your concern. We are focusing on 

the corporate governance aspects. We believe that top management 

and the board needs to be held responsible for effective BSA/AML 

compliance, and that is part of the reason why we are going to be 

issuing our corporate governance guidance. And in our orders, I 

want to point out the board of directors has to sign our orders, the 

orders that are outstanding, which specify that they are responsible for the program, and if they fail to comply with that order, 

they face personal liability in the form of civil money penalties. 

Senator REED. Yes, but just going to the long—this goes back to 

the Annunzio-Wiley anti-money laundering before. You have injunctive authority. I do not think the Comptroller has ever used it, 

et cetera. I do not think, to my knowledge, you can cite any specific 

incidence where someone has been seriously sanctioned, a director 

or—is that accurate, or am I—I want to be clear. 

Mr. CURRY. That is an issue that we are pursuing. That is part 

of the reason we are looking at interpreting provisions of Section 

8(e) of the FDIC Act. There are terms used there—I am paraphrasing—excusing inadvertent or unintentional violations. We 

want to tighten up that language so that we can have greater ease 

in bringing removal or prohibition actions under the FDIC Act. 

Senator REED. Governor Powell, you are specifically responsible 

for the branches of foreign banks in the United States. In that role, 

any comments you might have, particularly a general question 

whether any fines against these institutions are effective or they 

are simply passed on to the consumers? 

Mr. POWELL. We examine them under the same manual and in 

the same way as the OCC examines national banks, and we treat 

them from an enforcement standpoint in exactly the same way. We 

believe it is fundamentally reasonably effective. 

I think you raise good questions that are going to receive very 

serious consideration at the task force, but I believe we do treat 

them essentially as we treat American banks. 

Senator REED. Thank you very much, gentlemen, and if I can get 

back, I would love to do a second round. Thank you. 

Senator WARNER. Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman, and thank you to 

all three for being here today. 

As Senator Reed just pointed out, the U.S. Government takes 

money laundering very seriously for a very good reason, and it puts 

very strong penalties in place. In addition to monetary penalties, 

it is possible to shut down a bank that has been involved in money 

laundering. Individuals can be banned from ever participating in financial services again, and people can be sent to prison. 

12 

Now, in December, HSBC admitted to money laundering, to 

laundering $881 million that we know of, for Mexican and Colombian drug cartels and also admitted to violating our sanctions for 

Iran, Libya, Cuba, Burma, the Sudan. And they did not do it just 

one time. It was not like a mistake. They did it over and over and 

over again across a period of years. And they were caught doing it, 

warned not to do it, and kept right on doing it, and evidently making profits doing it. 

Now, HSBC paid a fine, but no one individual went to trial, no 

individual was banned from banking, and there was no hearing to 

consider shutting down HSBC’s activities here in the United 

States. 

So what I would like is—you are the experts on money laundering. I would like your opinion. What does it take? How many 

billions of dollars do you have to launder for drug lords and how 

many economic sanctions do you have to violate before someone 

will consider shutting down a financial institution like this? Mr. 

Cohen, can we start with you? 

Mr. COHEN. Certainly, Senator. No question the activity that was 

the subject of the enforcement action against HSBC was egregious, 

both in the money laundering that was going on at HSBC and the 

sanctions violations. 

For our part, we imposed on HSBC the largest penalties that we 

had ever imposed on any financial institution. We looked at the 

facts and determined that the appropriate response there was a 

very, very significant penalty against the institution. 

Senator WARREN. Let me just move you along here, though, on 

the point, Mr. Cohen. My question is: Given that this is what you 

did, what does it take to get you to move toward even a hearing, 

even considering shutting down banking operations for money 

laundering? 

Mr. COHEN. So, Senator, we at the Treasury Department under 

OFAC and FinCEN authority do not have the authority to shut 

down a financial institution. 

Senator WARREN. I understand that. I am asking, in your opinion—you are the ones who are supposed to be the experts on money 

laundering. You work with everyone else, including the Department of Justice. In your opinion, how many billions of dollars do 

you have to launder for drug lords before somebody says, ‘‘We are 

shutting you down’’? 

Mr. COHEN. Well, I think the authority to pull a license, pull the 

charter, is the authority that is committed to the supervisors, to 

the OCC, the Fed, whoever the supervisor may be. We take these 

issues extraordinarily seriously. We aggressively prosecute and impose penalties against the institutions to the full extent of our authority. And as I said earlier, one of the issues that we are looking 

at—— 

Senator WARREN. I am not hearing your—I am sorry. I do not 

mean to interrupt, and I just need to move this along. But I am 

not hearing your opinion on this. You are supposed to be, Treasury 

is supposed to be one of the—you are the leaders in how we understand and work together to stop money laundering. And I am asking: What does it take even to say, ‘‘Here is where the line is. We 

13 

are going to draw a line here, and if you cross that line, you are 

at risk for having your bank closed’’? 

Mr. COHEN. So, Senator, we are mindful of what our authorities 

are, mindful of what the supervisors’ authorities are. We will and 

have and will continue to exercise our authorities to the full extent 

of the law. The question of pulling a bank’s license is a question 

for the regulators—— 

Senator WARREN. So you have no opinion on that? You sit in 

Treasury, and you try to enforce these laws. And I have read all 

of your testimony. You tell me how vigorously you want to enforce 

these laws. But you have no opinion on when it is that a bank 

should be shut down for money laundering? Not even an opinion? 

Mr. COHEN. Of course, we have views on—— 

Senator WARREN. That is what I asked you for, your views. 

Mr. COHEN. But I am not going to get into some hypothetical 

line-drawing exercise, but I will—— 

Senator WARREN. Well, it is somewhere beyond $881 million of 

drug money. 

Mr. COHEN. Well, Senator, the actions—and I am sure the regulators can address this issue. The actions that we took in the 

HSBC case we thought were appropriate in that instance. 

Senator WARREN. Governor Powell, perhaps you could help me 

out here. 

Mr. POWELL. The authority to shut down an institution or hold 

a hearing about it I believe is triggered by a criminal conviction, 

and we do not do criminal investigations, we do not do trials or 

anything like that. We do civil enforcement, and in the case of 

HSBC, we gave essentially the statutory maximum civil money 

penalties, and we gave very stringent cease-and-desist orders, and 

we did what we have the legal authority to do. 

Senator WARREN. I appreciate that, Mr. Powell. So you are saying you had no advice to the Justice Department on whether or not 

this was an appropriate case for a criminal action? 

Mr. POWELL. The way it works is the Justice Department has 

total authority. This is the heart of what they do. 

Senator WARREN. I understand that. 

Mr. POWELL. It is the heart of their jurisdiction to decide who 

gets prosecuted and for what. It is not our jurisdiction. They do not 

do monetary policy. They do not give us advice on that. We collaborate with them, and we discuss with them—we have collaborated 

with them, and we did on HSBC. They asked us specific questions: 

How does this statute apply? What would happen if we did this? 

We answered those questions. That is what we do. 

Senator WARREN. So what you are saying to me is you are responsible for these banks, and, again, I read your testimony, and 

you talk about the importance of vigorous enforcement here. But 

you are telling me you have no view when it is appropriate to consider even a hearing to raise the question of whether or not these 

banks should have to close their operations when they engage in 

money laundering for drug cartels? 

Mr. POWELL. I will tell you exactly when it is appropriate. It is 

appropriate where there is a criminal conviction. 

Senator WARREN. And so you have no view on it until after the 

Justice Department has done that? 

14 

Mr. POWELL. Again, the Justice Department makes that decision. 

We play our role in that. We have a constant dialog with them, 

around—a broad range of violations that take place. We always 

have the Justice Department involved. But when they make these 

decisions, they make them themselves. 

Senator WARREN. I understand that I am over my time, and I 

will just say here, you know, if you are caught with an ounce of 

cocaine, the chances are good you are going to go to jail. If it happens repeatedly, you may go to jail for the rest of your life. But evidently if you launder nearly $1 billion for drug cartels and violate 

our international sanctions, your company pays a fine and you go 

home and sleep in your own bed at night, every single individual 

associated with this. I think that is fundamentally wrong. 

Senator WARNER. Senator Kirk. 

Senator KIRK. I appreciate the Senator’s driving this issue. You 

would think—I agree with most of the direction you are going in. 

You would think there would have been one hell of a penalty for 

money laundering for terrorists who are building nuclear weapons. 

You would actually think and hope that you would get a clear answer. I thank the Senator. 

Mr. Chairman, over to you. 

Senator WARNER. Senator Merkley. 

Senator MERKLEY. Well, thank you very much, Mr. Chair. 

The first political act in my life, at least as far as I can recall, 

was when I was a junior in high school, and I was reading the 

evening newspaper in Portland, and it reported that Vice President 

Spiro Agnew had been convicted of accepting bribes. This memory 

is decades old, so I may not have the numbers quite right. It was 

something like he accepted $100,000 in bribes, and his penalty for 

his criminal conviction was a $10,000 fine. And I sat down and 

wrote a letter to the newspaper, the Oregon Journal, and said, 

‘‘How can anyone believe that there is justice, that if you take 

$100,000 you only get charged 10 percent of it? How is that possibly justice?’’ 

And I find myself asking exactly the same question in this situation. On, I believe it was, the day after the announcement that 

HSBC had essentially been caught laundering billions of dollars in 

funds, there was a story about a woman who her boyfriend had 

stored I believe a suitcase or a coffee can with his drug money in 

her upstairs or her attic or something like that, and she was doing 

something like 10 years in prison for having that tangential connection to the flow of this illegal money. 

So if an individual gets 10 years in prison, can you explain, each 

of you, how you would explain to an ordinary citizen in America 

that a company which launders billions of dollars tied to criminal 

syndicates that in northern Mexico 40,000 people have died—I do 

not know about the terrorist side of this, but the drug side is pretty 

well documented. How do we explain that that is a system of justice in the United States of America? Mr. Cohen. 

Mr. COHEN. Senator Merkley, as I am sure you know, it is the 

Justice Department that determines—— 

Senator MERKLEY. I understand. I am asking you your opinion. 

How would you explain to your neighbor asking you, saying, ‘‘You 

15 

are a high official in the U.S. Government. This is the decision our 

Government made.’’ What would be your personal sense of it? 

Mr. COHEN. What I would tell my neighbor is, first of all, the 

agencies within my area of responsibility took action in this circumstance in an extraordinarily aggressive way and in a powerful 

way and beyond anything we had ever done previously. 

With respect to the Justice Department, we of course, were working on this investigation with the Justice Department, but at the 

end of the day, it is the Justice Department’s sole prerogative to 

determine who to prosecute, when to prosecute, and what to 

charge. 

Senator MERKLEY. Let me interrupt for a minute. While you are 

working with them on this, if a member of the Justice Department 

said, ‘‘David, what is your opinion? Should we prosecute?’’ Your response would be? 

Mr. COHEN. Well, Senator, I think it depends whether you are 

asking me, personally asking me as the Under Secretary. And it 

also depends on what the ‘‘it’’ is, whether we are talking about 

prosecuting an individual, prosecuting an institution, what the 

charges may be. These are all issues that—— 

Senator MERKLEY. So you say to the Justice Department, you 

say, ‘‘Well, I am working very closely with you. I want to know 

what if, should we do individuals or should we do the corporation?’’ 

And he says, ‘‘I would like your opinion on both.’’ And so then you 

say, ‘‘My opinion on the individuals is X, and my opinion on the 

corporation is Y.’’ And your opinion is? 

Mr. COHEN. Let me say my role in the Treasury Department and 

I think the Treasury Department more broadly, our role is to—— 

Senator MERKLEY. I understand that. That was not my question. 

But you are welcome to simply say, ‘‘I do not feel it is appropriate 

for me to answer your question.’’ That would be better than just 

pretending not to answer it. 

[Laughter.] 

Mr. COHEN. No, I—I was trying to answer your question. But it 

is not our role to advise the Justice Department on how to exercise 

their prosecutorial discretion. 

Senator MERKLEY. Thank you. 

Mr. Curry. 

Mr. CURRY. Perhaps it might be helpful, Senator, to explain how we arrived at the penalty that we imposed at the OCC, the $500 

million penalty. 

Senator MERKLEY. I am pretty familiar with that. That is not the 

heart of my question. 

Mr. CURRY. I think it reflects what we are trying to do from a 

civil enforcement standpoint to make sure that—— 

Senator MERKLEY. I do not want you to recite history I am already familiar with. Let me ask the question differently. Do we 

have a situation where banks have become so large that, in the 

words of Attorney General Holder, if you prosecute them, ‘‘it will 

have a negative impact on the economy and the financial system 

at large’’? And does that mean essentially we have a prosecutionfree zone for large banks in America? 

Mr. CURRY. It is my view that no bank is above the law. As Governor Powell stated earlier, if in a particular case the Justice DeVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
16 

partment met the requirements of the statute, that there was a 

criminal conviction for any money-laundering violations, I would 

start the process under the National Bank Act to consider—— 

Senator MERKLEY. Yes, and I appreciate that, and I realize that 

is where you responsibility comes in, and it comes in after the prosecution and the conviction. 

Mr. CURRY. I would not hesitate to start that process. 

Senator MERKLEY. Thank you. 

Governor Powell, does this create a fundamental concern about 

a fair system of justice across America? 

Mr. POWELL. Yes, it does. It is absolutely fundamental that we 

are all equal before the law, and that is why we are all committed 

to ending too big to fail. And in the first instance, Congress has 

passed Dodd-Frank. The agencies are vigorously implementing 

Title I and Title II and carrying out the plan that you have given 

us, led by the FDIC, but we are all involved—to eliminate too big 

to fail. And I think that has been well done. 

The question in the end is: Is it enough? And I think we will 

know the answer to that in the relatively near future. It is not a 

game plan that can be implemented overnight. But until we finish 

that, I could not look this guy in the eye. You asked me to explain 

to him how it is fair? I cannot do it. 

Senator MERKLEY. Thank you for that very direct answer. 

Thank you, Mr. Chair. 

Senator WARNER. I think before I move to Senator Heitkamp, I 

just want to—the point that we have all been raising, and I think 

that Senator Warren and Senator Merkley raised, while each of 

you kind of say, all right, let us pass the potato over to the Justice 

Department and we are only going to act there, let us remind you 

what Senator Reed has already made mention of. You have other 

remedies other than fines in terms of injunctive action and removal 

authority that has not been used, and I think we are all—and, 

again, I want to make sure I observe the rules I am trying to hold 

everybody else to. Senator Heitkamp? But I just want to make that 

point, that it is not an either/or the way you have responded to 

each of these Senators. 

Senator HEITKAMP. Changing the subject just a little bit, do you 

think there is an effective deterrent based on how you have handled these cases in the past? If you were a bank executive today 

faced with the opportunity to make millions and millions of dollars 

laundering drug money, or facing you guys, looking at, you know, 

what you are going to suffer in terms of the consequences, do you 

think there is an effective deterrent today to prevent this from happening again? I would ask Mr. Cohen first. 

Mr. COHEN. I will answer that in two parts. 

With respect to sanctions evasion, the stripping cases in particular, I think there is effective deterrence. I think we have gotten 

the attention of the international financial institutions as well as 

the U.S. financial institutions. They understand that these practices of stripping international payment messages will be found 

and will be addressed in a very serious manner. 

The money-laundering side of things, I think that is a fair question. I think that is part of the reason that we are engaged in the 

17 

processes that we are engaged in, is to understand whether we 

need to have more effective deterrence. 

Senator HEITKAMP. And, Mr. Cohen, just for my edification, you 

know, I was an Attorney General. I was somebody who did both 

civil and criminal prosecution. And I can assure you criminal prosecution in white-collar crime is much more effective than fines and 

penalties and shame that you might experience when you are walking into a courtroom. Unless you are willing to work collaboratively—and I think everybody here understands that you are 

looking at your jurisdiction, trying to explain what your agency has 

done. But my question back to you is: How could you collaborate 

in a more effective way with the Justice Department to ensure that 

we will see prosecutions that Senator Warren here has so eloquently begged for? How can we make that happen? 

Mr. COHEN. Well, I would just say this, Senator: The Justice Department is part of the exercise that we are undertaking. They are 

part of this AML task force. Part of what we are looking at is more 

effective enforcement, both the civil and the criminal side. And so 

that is an issue that we are addressing in that work. 

Senator HEITKAMP. Yes, but, Mr. Cohen, one of the disturbing 

parts of this dialog that we are having is that at every sense there 

seems to be, ‘‘It is not my job, it is not my problem,’’ that this is 

someplace else. And one of the great tragedies, I think, for the 

American people looking at Government is too much ‘‘It is not my 

job.’’ And so what we are really asking is that this be everybody’s 

job. I would move on to Mr. Curry. 

Mr. CURRY. Senator, I agree with you. In our testimony, we highlight the concerns we have over corporate governance. We believe 

at the OCC that you need to hold CEOs and the boards of directors 

accountable for BSA/AML policies and procedures and their compliance program. You need to establish that basic premise first before 

you can start assessing criminal or civil liability, and that is where 

we are going. That is why we are looking at our authority under 

Section 8 of the FDIC Act to actually remove from office or prohibit 

from banking those individuals that violate BSA programs. So we 

are looking to try to tighten up the legal duties and authorities of 

individuals at banks and then to enable us to take an appropriate 

level at the civil, administrative level, and potentially to assist the 

criminal authorities. 

Senator HEITKAMP. I understand that, and the problem is that 

the expertise is with your agencies, and you are asking the Justice 

Department or the Justice Department sees a lot of complexities in 

what you do, and there does not seem to be a real opportunity for 

a comfort level of a prosecution that needs to happen, at least 

needs to be tried, needs to be attempted. 

Mr. CURRY. We have a consistent and longstanding practice of cooperating fully with the Justice Department in criminal investigations and will continue to do that. 

Senator HEITKAMP. But I would say that in these cases that cooperation has failed to achieve a result that is acceptable to the 

American public. 

Governor. 

Mr. POWELL. There are strong incentives that we have provided 

to the banks to put in very strong compliance programs. We can 

18 

always do better. I think what you hear from us is that the area 

where we are focusing is on collaborating better and coming up 

with ways to strengthen the supervision, and my colleagues have 

talked about some of those. 

But the incentives to deal seriously with compliance are large in 

the wake of these latest events. The other side of it, though, is that 

the bad guys have huge incentives to find new ways to penetrate, 

and the issue is—we have to stay ahead of that. It is not a static 

game. They are very well funded. They have great resources, and 

you have got this global financial system with prepayment cards 

and mobile payments and that kind of thing. 

So we are in a race with them to stay ahead and I think that 

is really the risk. It is not that the banks do not take it seriously, 

although we can certainly help with that, too. 

Senator HEITKAMP. I agree, Governor. Ever more reason to use 

the very limited resources we have in enforcement in a very efficient and very collaborative way. 

Senator WARNER. I would just again, before—Senator Kirk did 

not get his full round. I want to go back to Senator Kirk. But we 

have got this continuum that goes from fines to injunctive to removal to Justice Department prosecutorial. We have only used one 

of the series of tools, and because it takes so long to prosecute, in 

the interim you have actions going on, whether it is—Senator 

Merkley mentioned drug laundering, or Senator Reed mentioned, 

you know, potentially financing of terrorists. 

Senator Kirk. 

Senator KIRK. I just wanted to take the opportunity, based on 

what we have learned today from Treasury, to ask Senator Warren 

to join me in a big bank money-laundering practice where we just 

handled drugs and terrorism. I think we can make a killing that 

way, and no danger of prosecution. 

[Laughter.] 

Senator KIRK. Nothing to fear from the Government. 

Senator WARNER. I am not sure you are—you are not citing that 

for the record, are you? 

[Laughter.] 

Senator WARNER. Senator Manchin. 

Senator MANCHIN. Thank you, Mr. Chairman. I am sorry I was 

late. I had two other Committee meetings. But I understand it has 

been a little bit spirited, and I am sorry I missed that, too. 

We all have a hard time understanding why you have not 

cracked down on banks that are using illicit funds, something that 

is just wreaking havoc, is of epidemic proportion, and drugs in 

American culture, and you have a chance to do it. And I do not 

know what else—what tools do we need to give you all as regulators to shut these people down? Is there something you are lacking in your tool box right now? Can anybody speak to that? 

Mr. CURRY. Senator, in our testimony, we have actually asked for 

the Committee to consider tightening up the safe harbor provisions 

for banks to actually file suspicious activity reports without facing 

potential civil liability for doing that. 

We have also asked for authority to expand the safe harbor to 

allow them to share the information from suspicious activity reports so that if there is a particular criminal activity or use of the 

19 

system, that institutions could share that among themselves so 

that they could not allow the migration of illegal activity to occur, 

or to help the law enforcement officials—— 

Senator MANCHIN. I think what you are hearing is those of us 

who are frustrated that what tools you do have you are not using. 

I come from the little State of West Virginia where there is a lot 

of common sense, which you do not find very common up here in 

Washington. And basically we never had bank failures, we never 

had closures, because we still had just common-sense procedures. 

You had to have a little skin in the game. You could not be buying 

something you could not afford. So on a different scale, we were basically living within our means, and we were enforcing that. And 

our banks did not collapse and fail, and we did not have a mortgage bubble burst on us. 

And what we are saying is if we give you more tools and you will 

not use the ones you have today, that is our concern. That is the 

frustration from the—this is one thing you see us probably united 

from the Democrat and Republican side, and there are very few 

things that you will find that we have had chances to agree on, but 

this one we do, and I think we are so frustrated. And if the banks 

are going to do business in this country, they should do them by 

our values. And if you do not enforce those values, you know, we 

have got to find people that will enforce those values, I think is 

what we are saying. 

We just want our country to be what we believe would help us 

in growth and get back to the values we believe in, and the drug 

cartels and all the illicit trade that goes on and the banks are being 

a harbor and putting their money because it is a safe haven is not 

something we condone as Congress, I do not believe. And that is 

what we are asking. 

Sir, if you would speak to that? 

Mr. COHEN. I could not agree with you more, Senator, and what 

I have committed to this Committee and what we are doing at the 

Treasury Department is reviewing what we have done and ensuring that the authorities that we have we exercise to the full extent 

of their capacity. 

As I noted earlier, one of the areas where we think we have not 

been sufficiently aggressive is in going after individuals and institutions who are responsible for the conduct that has resulted in 

fines and penalties against the institution itself. That is something 

that we are committed to pursuing and will pursue in the appropriate cases in the future. So I—— 

Senator MANCHIN. But the HSBC, I mean, they paid the largest 

fine in history, and nobody was prosecuted. Not a thing was done. 

But you found them guilty. 

Mr. COHEN. I cannot speak to the Justice Department’s decision 

not to prosecute in the HSBC case. It is the Justice Department’s 

decision to make. I can tell you from our standpoint, we applied 

very significant penalties against the institution there on the judgment that the conduct that we saw was institution-wide, it involved 

a pattern of behavior over a number of years that the institution 

was the appropriate entity to apply the penalties against in that 

instance. 

20 

Senator MANCHIN. Mr. Chairman, I am running out of time. I 

would just ask for the consideration of the Chair, if you would ask 

the DOJ to come and give testimony on why they have not prosecuted, why they will not enforce the laws of our land, if you would 

ask and request them to appear before this Committee? 

Senator WARNER. I will consult with the actual Chair to make 

that request, but—— 

[Laughter.] 

Senator MANCHIN. You are the actual Chair today, sir. 

Senator WARNER. At least today. I think what you are hearing 

from all of us is an enormous concern, coupled with some of the 

comments the Attorney General made, and I appreciate Mr. Powell’s directness that, you know, we have got to make sure there is 

no institution that is too large to prosecute. 

There is also a concern, starting on the second round now, that 

even short of punting all this to the Justice Department, there are 

other tools that you all have not used in terms of injunctive relief, 

removal activities, suggestions in terms of further compliance activities of senior management in terms of owning compliance, as 

well as, you know, how do we make sure on a going-forward basis 

that in moments of fiscal risk, the compliance department is not 

the first place the bank cuts? I would like an answer to that, but 

let me pose a second part to this question. 

I also have an enormous concern, when you look at not just—we 

have talked about HSBC, but there are 10 other cases that the 

Committee has cited. Each of these are cases that have taken literally years to get to the fine stage, let alone the fact that there 

has not been actual prosecution. 

The concern I have is that in that interim period, how open are 

you and what other tools—Mr. Curry, you mentioned safe harbor— 

so that we can notify or put on notice at least so that these activities do not continue until you get around to actually issuing a fine 

or taking action? Number one. And, number two, echoing what Mr. 

Powell has said, you know, this is an issue that is going to just get 

tougher and tougher as we move into these mobile banking technologies, as we think about the intersection between drug trafficking, money laundering, terrorist financing, and cyber activities, 

and are there points that, as we consider cybersecurity legislation, 

we ought to have a component that overlaps with existing BSA and 

AML legislation? But if you could take each of those, but particularly the piece about how do we make sure that in this interim period between discovery of potential money laundering, drug activity, or terrorist financing and the time when you feel like you can 

actually bring some kind of case—and we all say the cases have not 

been stringent enough. It appears to be years in that activity in 

many cases seems to have been ongoing during that period. Let us 

start with you, Mr. Cohen. 

Mr. COHEN. So, Senator Warner, I think the answer to that is 

both to ensure that we are investigating these cases as rapidly as 

possible and coordinating, and part of what you have heard today 

is that one of the things that we are looking at is how to ensure 

that we are sharing the information among the agencies that investigate these cases as efficiently as possible. 

But, second, the other point—— 

21 

Senator WARNER. Let me just interrupt you there. One of the 

things that is clear from each of your conversations is that we have 

a lot of stovepipes here. 

Mr. COHEN. Right. 

Senator WARNER. Everybody seems to be passing the hot potato. 

You are responsible for putting this interagency task force together. Would you commit today to make sure that you will brief 

Committee staff on the progress of those interagency sessions. 

Mr. COHEN. Certainly. I am happy to do that. And one of the 

things that this interagency task force is designed to do is to break 

down stovepipes to the extent that they impede the exercise of our 

authorities. 

But then the other point I would just make is, talking about injunctive authority, I think we will go back and look at whether 

there is the possibility of taking injunctive action during the course 

of an investigation as sort of a preliminary measure to ensure that 

the conduct stops before we get to the finish line. 

Senator WARNER. So you feel like using the injunctive authority, 

that would allow you to notify the institution, to at least put them 

on warning, short of maybe a Justice Department proceeding or a 

fine, that you are not just going to allow this action to continue? 

Mr. COHEN. I want to make sure that our current authority allows us to do that, but if so, then that is something that—— 

Senator WARNER. I want to make sure I get a word from Mr. 

Curry and Mr. Powell on how we—again, the question—I have got 

a series, but the question with the remaining time I have got is— 

we all want you to be more aggressive here, but in that interim period between—and this is the case, obviously, across the board on 

many criminal investigations, between launching an investigation 

and bringing a prosecution, how do we make sure that the activities—— 

Mr. CURRY. I would like to clarify something about the process. 

Senator WARNER. Please. 

Mr. CURRY. If we are on-site examining an institution and we detect unacceptable activity or behavior, we require it to stop then 

and there and the remediation to occur regardless of whether or 

not we get to the point in the future of issuing a CMP order or a 

C&D. So immediately upon detection, we require corrective action. 

You asked about injunctive authority. We have and use civil injunctive authority through our consent orders. They have affirmative covenants in them that require certain activity to be taken or 

to refrain from taking other activity. 

And with our recent orders with national banks, we have actually prohibited them from re-entering areas that have been of concern or starting into other high-risk activities. 

So we are doing things in terms of the prompt, immediate effect 

that will be followed up by CMP at a later date. 

Senator WARNER. Well, I guess I would simply ask—and I want 

to hear Mr. Powell and then move to Senator Warren. There are 

10 separate cases—we are focusing on HSBC, but there are 10 separate cases that the Committee has laid out. It would seem to me, 

in at least my reading of the materials, that there was a considerable lag time between discovery in each of these times and ultimate 

22 

action, and that there was not action taken by the prudential regulator in a timely fashion in many of those cases. 

Mr. Powell. 

Mr. POWELL. Senator, I believe that we also require immediate 

remediation when the violations are discovered. What takes a long 

time is that we require these institutions to go back and go 

through millions and millions of transactions to find all the things 

that they have done wrong. It takes a long time, and it is very 

labor intensive—a very simple but labor-intensive process. And 

then the actual enforcement action comes sometime later. But that 

does not mean that the violations have continued. At the point 

when many of these have been identified—they have turned themselves in on almost all of the sanctions cases. In many of them they 

have put a stop to this kind of thing, and then they are just working on putting together the compliance order. 

Senator WARNER. Thank you. 

Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman. 

I just want to follow up to make sure that I am just following 

what is going on here. So do you consult with the Department of 

Justice on each of these major drug-laundering cases and terrorism 

cases? Is that right, Mr. Cohen? 

Mr. COHEN. Certainly in the course of the investigation, there is, 

you know, a constant dialog among the investigators about what is 

being found, what the facts are, sharing information. 

Senator WARREN. And so when the Justice Department is making the decision about whether or not to make a criminal prosecution, do they ask you about the impact on the economy for one of 

these large banks? 

Mr. COHEN. So I cannot speak to every instance whether that occurs. That did occur in the HSBC matter. We told the Justice Department that we were not in a position to offer any meaningful 

assessment of what the impact might be of whatever criminal disposition they may take. But I would distinguish between the ongoing communication among investigators to the ultimate—— 

Senator WARREN. Wait. I want to make sure I understand what 

you just said. The Justice Department, in making its decision 

whether or not to pursue a criminal prosecution, checked with the 

Department of Treasury to determine your views on whether or not 

there would be a significant economic impact if a large bank were 

prosecuted? Is that what you just said? 

Mr. COHEN. What I said was the Justice Department contacted 

us, asked whether we could provide guidance on what the impact 

to the financial system may be of a criminal disposition in the 

HSBC case. We informed the Justice Department that, given the 

complexity of the potential dispositions, given the fact that we are 

not the prudential regulator, given the fact that we are not privy 

to the different charges that the Justice Department may bring, 

and we are not privy to the responses that the regulators may have 

to the variety of different ways that the Justice Department may 

resolved the case, that we were not in a position to offer any meaningful guidance to the Justice Department in that matter. 

Senator WARREN. So you just said to the Justice Department, 

‘‘You are on your own in figuring this out’’? 

23 

Mr. COHEN. We said that—we said exactly what I just said. 

Senator WARREN. I know you said it in a nice long way, but—— 

Mr. COHEN. That is what we—what we said to the Justice Department was exactly what I just told you, Senator. 

Senator WARREN. Mr. Powell, did the Justice Department get in 

touch with the Fed on this question before making a decision 

whether to prosecute HSBC? 

Mr. POWELL. Senator, there were conversations between Justice 

and the Fed, but I do not believe that question was asked or answered. I will make sure of that and follow up. But I believe that 

the questions we were asked were specific questions about the application of this or that statute. For example, are certain kinds of 

investors prohibited from investing in a company that has been indicted—or, sorry, not indicted but convicted or pled guilty to a felony? So that is, I believe, the role we have had, and I do not think 

it went any farther than that. 

Senator WARREN. Mr. Curry. 

Mr. CURRY. The only question that we discussed—— 

Senator WARREN. I am sorry, Mr. Curry. Could you push your 

button? There you go. 

Mr. CURRY. The only question that the Justice Department asked 

us was with the application of the charter revocation provision of 

our National Bank Act. 

Senator WARREN. And who is responsible for making a determination about whether to revoke the charter? 

Mr. CURRY. There is a statutory process. It requires notice and 

hearing, and we went through how that process would work. 

Senator WARREN. And who would initiate that? 

Mr. CURRY. That process would be initiated by the Comptroller’s 

office, but only upon a conviction for any money-laundering violations. 

Senator WARREN. So whether or not you could revoke the charter 

depended on what the Justice Department did. Did you have that 

discussion with the Justice Department to encourage them to bring 

a criminal prosecution so that you could have a hearing about 

whether to revoke the charter? 

Mr. CURRY. Our position was that it is a criminal justice determination that is left to the discretion of the Justice Department. 

We are and were prepared to follow our statutory procedure if and 

when there was a criminal conviction. 

Senator WARREN. So you did not make it clear to the Justice Department that if the Justice Department did not bring a criminal 

prosecution, that you would not be able to use one of the significant 

tools of enforcement given to you by Congress? 

Mr. CURRY. We explained to them how the—— 

Senator WARREN. You did explain it? 

Mr. CURRY. ——statute works, and that would be the consequence of not having a conviction. The statute would not be triggered. 

Senator WARREN. All right. If I can, could I just ask a little more 

of a review question about this? I am hearing four major actors, the 

three of you here and the Justice Department. Why are there four 

departments trying to figure out money laundering? I read through 

your reports. They seem to overlap significantly. We seem to have 

24 

a lot of people with the same expertise and yet not quite the same 

expertise. Why is this not consolidated into a single function? Mr. 

Powell? 

Mr. POWELL. That is a great question. This is our system. We 

have all these bank regulatory agencies, and they regulate different 

kinds of institutions. Twenty years ago, when I was in the first 

Bush administration, we proposed to merge some of them, and they 

are still not merged. But so—— 

Senator WARNER. We proposed some of that, too. 

Mr. POWELL. Yes. 

Senator WARNER. And they still were not merged. 

Mr. POWELL. I think there have been a lot of attempts over the 

years. But more to the point, this is our system, and I think the 

obligation is on us to play as a team and to collaborate. And I think 

we try very hard at that, and I would say particularly in recent 

years you see a lot of interagency collaboration such as the task 

force and the BSAAG, Delta Force, and all the things that are 

going on now. There is very regular communication among all of 

us and with Justice—and with the industry, by the way—to try to 

get better and stay ahead of these threats. But that is the system 

we have, and we have to work with it. 

Senator WARREN. Thank you. 

Thank you, Mr. Chairman. 

Senator WARNER. Senator Merkley. And then just for order, Senator Kirk and Senator Heitkamp. 

Senator MERKLEY. Thank you very much, Mr. Chair. 

I want to ask a specific question about the way that wire transfers are utilized in money laundering, and the Bank Secrecy Act 

has regulations that allow a U.S. bank to accept and process a wire 

transfer from overseas, even if the transmitter is blank—that is, 

you have no idea where it is coming from. And that might have 

been understandable 15 years ago when the regulation was written, but in the intervening period, we have learned an awful lot 

about international money laundering. And so in the light of the 

extensive history of abuse—and when I am talking about extensive 

history of abuse, I think anyone who has followed the details of 

this case realizes that this goes back a decade or more of interaction over money-laundering issues. Why are we still allowing— 

and I want specifically to ask you—Mr. Curry, I realize you were 

not there at the time that this was wrestled with, but also Mr. 

Cohen, because the Treasury Department has broad regulatory authority. Why are we still allowing this type of open-ended instrument with basically no information attached to it in light of the 

money-laundering issues? 

Mr. CURRY. That is a legitimate area that—— 

Senator MERKLEY. Can you turn on your microphone, please? 

Mr. CURRY. That is an area of legitimate concern, and we are 

looking at it, particularly in the context of foreign affiliates. That 

was a major issue with respect to HSBC, the stripping of necessary 

information to monitor here in the United States affiliate that we 

supervise, and that is one of the reasons that our cease-and-desist 

order does have limitations or requirements that affiliates—they 

have an obligation to be assured that affiliates are complying with 

our BSA and AML requirements. 

25 

Senator MERKLEY. OK. Now, as I understand it, the requirements are currently that that field does not have to be filled in. Are 

you looking at changing that requirement? 

Mr. CURRY. We will be taking a look at that, Senator. 

Senator MERKLEY. I know a lot of times when I talk about bank 

regulations, I am looking at it as a multiyear process. Is this something where there will be a formal process launched? In 6 months 

will we have an answer as to whether we should change this tool 

that is used in money laundering? 

Mr. CURRY. We will endeavor to get back to you as quickly as 

possible and come up with an answer. 

Senator MERKLEY. Thank you. 

Mr. Cohen, from Treasury’s point of view, is the evidence about 

the use of this tool problematic enough that you are all going to 

weigh in and try to see this rule changed? 

Mr. COHEN. Absolutely, and I would just add one point on this, 

which is that the stripping cases where we have taken enforcement 

actions over the last several years involve either removing or obscuring or including false information in payment messages, we 

have put in place new requirements in the SWIFT message process, something that was the MT 202 cover payment, to ensure that 

the message that comes through from foreign affiliates contains accurate originator and beneficiary information. And when institutions obscure that information, we have taken very serious enforcement actions, and the industry knows that that information needs 

to be included in the payment messages. 

Senator MERKLEY. Thank you. I want to go on to the next piece 

of this, which is we basically had a fine that was a small amount 

of the annual profits, I believe about 10 percent of the annual profits. I know it has been described as a very severe fine. But we are 

talking about action that continued over a 10-year period. In 2003, 

the bank said it was going to reform its anti-money laundering conduct. There was continuous concerns about it. So I do not know 

what the profits were over 10 years, but over 1 year they were $20 

billion. So let me just extrapolate that. Maybe it is not accurate, 

but let us say the profits over 10 years were $200 billion. So now 

we are talking about a fine that was 1 percent of the profits over 

the time that this conduct was occurring. 

Does that really send a message that this type of conduct is unacceptable? Mr. Curry. 

Mr. CURRY. The $500 million fine we assessed, the CMP we assessed against HSBC was the largest fine ever assessed against a 

national bank. Our thinking behind coming up with the $500 million—and this goes, again, to our testimony where one of the weaknesses we found in BSA/AML compliance is the lack of allocation 

of resources to compliance efforts. That $500 million represents the 

savings through the austerity programs—— 

Senator MERKLEY. Your answer is yes. 

Mr. CURRY. Yes. 

Senator MERKLEY. OK. Thank you. 

Mr. Cohen. 

Mr. COHEN. The only thing I would add is that we looked at the 

violative conduct and designed the penalty in relation to the violaVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
26 

tive conduct that we identified, both on the sanctions side and on 

the money-laundering side in that case. 

Senator MERKLEY. Your answer is yes also, that the fine was of 

a size, given the context of the profits over the 10-year period 

where this conduct was occurring, the fine sent a strong message? 

Mr. COHEN. I think so, Senator. 

Senator MERKLEY. OK. Thank you. 

My time is up, so I will close with a comment, which is simply 

this was not a new form of activity by the bank. They had been 

warned time and time again that the money laundering was inadequate. We had vital national security interests in stopping the 

money laundering of terrorist organizations. We have a neighbor to 

the south that is racked with violence from drug activities where 

money laundering is a huge issue. We worked with this bank 10 

years, admonished it apparently a number of times. They apparently promised reforms that were never done, and I do not find 

that 1 percent of their profits over the time period of this conduct 

really sends a chilling message that this is unacceptable. It sounds 

more like the price of doing a very profitable business. 

Thank you. 

Senator WARNER. Thank you, Senator Merkley. 

Senator Kirk. 

Senator KIRK. Mr. Chairman, thank you. I just wanted to turn 

my attention to David. We worked so long and hard on the Iran 

issue. I will note, according to United Against a Nuclear Iran, since 

the unanimous Senate adoption of the Menendez-Kirk sanctions on 

Iran, the Iranian currency has fallen 63 percent in its value measured against the U.S. dollar, meaning that Iran may actually have 

to miss a payment to Hezbollah, which would be welcome indeed. 

I will say that we recently have had a senatorial letter from 36 

Senators, 19 Democrats, including 14 Members of this Committee, 

asking the EU to lock Iran out of the Target2 system, and they 

have been largely locked out of the FEDwire system—Target2 and 

FEDwire being the electronic settlement system for the United 

States. 

Over time, we are making good progress in making the Iranian 

currency fairly unusable, which is an extremely good thing, and the 

mullahs have been complaining about their economic woes, being 

unable to finance what they want to finance, like subjugating the 

people of Lebanon through Hezbollah. 

The letter to the EU is particularly well aimed because of an attack by Hezbollah against Bulgaria on July 18th in which 17 people were killed on a bus, and I would hope that the EU would give 

the political direction to the ECB on this and that you could follow 

up on that. We have a number of segregated accounts where the 

Iranians have money around the world, in several places in Europe, where a strong political signal by the EU to the ECB would 

significantly impact the Iranians. I would ask that you could follow 

up on the spirit of a letter, which I gave to your new boss, when 

he came by my office. I heavily praised you and your work on this 

segregation around the world, which has really given us a target 

to attack, and significantly impacts the Iranians. 

Mr. COHEN. Well, Senator, it is good to see you, and also good 

to see the impact that we have had on the Iranian currency and 

27 

other economic impacts on Iran, which I know you are familiar 

with. Let me just quickly address the two issues you raised. 

One, the designation of Hezbollah, following the determination 

by the Bulgarians that Hezbollah was responsible for that attack 

in Burgas, we are pressing the EU, pressing member States of the 

EU to get that done. I am not going to predict what the EU will 

do, but you can be sure that we are pressing them very hard to get 

that accomplished. 

On the clearing and settlement through Target2 of EU transactions, we have been working hard on this issue since the regulations that the EU adopted last December, as we read them, already 

address this issue. It requires the ECB to essentially issue guidance that confirms that. There is a meeting today at the ECB of 

a number of member States addressing this issue. We have fed into 

that process, and we will continue to press the ECB to take what 

we think is the right step here, which is to cutoff euro clearing for 

the—or apply to euro clearing the same set of restrictive measures 

that the EU has on any Iranian business. 

Senator KIRK. I would say knocking Iran out of Target2 is particularly appropriate after this attack, which, you know, since 

Hezbollah is a wholly owned subsidiary of the MOIS, the Iranian 

intelligence service, and we would lock up a lot of money from the 

Iranians by doing that. And let us hope they make the right decision at this meeting. 

Mr. COHEN. And if they do not, we are going to continue pressing 

on this issue. 

Senator KIRK. Thank you. 

Senator WARNER. Senator Heitkamp. 

Senator HEITKAMP. I came prepared to ask a whole series of 

questions, which I will submit in writing, because I want to follow 

up with one last point. 

Mr. Cohen, and please feel free to correct me if I have paraphrased you or misquoted you, but in your earlier discussion with 

Senator Warren, you said it is not your role to encourage or recommend prosecution. Is that what you said? 

Mr. COHEN. I do not recall precisely what I said. What we view 

in the Treasury Department’s role is not to seek to influence or direct the Justice Department in any particular prosecutorial decision. 

That being said, we are fully supportive of aggressive exercise of 

all authorities, criminal and civil. 

Senator HEITKAMP. And I completely understand what you are 

saying. But if we leave here without a commitment from all of you 

that you will vigorously encourage and suggest and recommend 

that the Justice Department prosecute cases that must be prosecuted in order to ensure equal justice under the law in this country, then we have failed today. And so I would like a commitment 

from all of you individually that you will, in fact, encourage, recommend, and strongly suggest, when you see cases like this, that 

they be prosecuted, and if there is a declination, if there is an 

agreement not to prosecute, that somewhere along the line there is 

some kind of process to appeal, because any of us who have ever 

done any kind of civil regulation which could, in fact, go criminal, 

know that it is frequently the civil regulators who have the ability 

28 

and the knowledge and can encourage and can be the pain in the 

room when that decision gets made. And if you are not willing to 

play that role, then we have failed today. 

Mr. COHEN. Senator, we play that role. We share and communicate with the Justice Department in these cases on an ongoing 

basis. The one—and I think this is important because I think it is 

essential in our system of justice. We want the Justice Department 

to exercise its authority, exercise it aggressively. The decision to 

prosecute in any particular case is a decision for the Justice Department to make. We will feed into that process and have fed into 

that process and will continue to feed into that process information, 

our assessment of the information, our assessment of the violations, and you have our commitment that we will continue to do 

that. 

Senator HEITKAMP. I hope I have your commitment that you will 

not let them off the hook, that you—you know, I understand, and 

I understand that you cannot dictate to the Department of Justice 

that they prosecute cases. But you can be a very strong voice. You 

can either play the role of saying, ‘‘Here is the case, good luck,’’ or 

‘‘Here is the case, we will help, we strongly urge you and encourage 

you. And if you decline it, we are going to ask serious questions of 

you as to why you declined to prosecute this case,’’ because the inequities that it creates and the appearance of inequity in the justice system that it creates cannot be tolerated by the Congress, and 

it cannot be tolerated by the Department of Justice. 

Thank you, Mr. Chairman. 

Senator WARNER. Thank you. 

Let me just follow up on Senator Heitkamp, and I will just ask 

one question. We will not go through a full other round if you have 

just got one more question for these folks. One of the things—and 

you did clarify the fact that as you discover possible actions prior 

to taking any of the steps along this continuum from injunctive action, removal, fine, or the ultimately sanction in terms of Justice 

Department prosecution. I guess the question I have is: What is or 

should be the threshold where you find something that—the prudential regulator finds something that appears to be amiss, at what 

point do you turn that over to the Justice Department? What is the 

threshold for turning over information to the Justice Department? 

That is probably more for Mr. Curry and Mr. Powell, but I will 

take any of you. 

Mr. CURRY. I think our posture is to be as—to share as much information as possible and as soon as possible. If we uncover significant program weaknesses, which is what we are assessing, we will 

make our counterparts through the many different channels we 

have—the working groups—aware of what we are seeing. 

The point I would want to make, though, is the real key to the 

BSA/AML process is the SARs filings and the currency transaction 

reporting, which we monitor, and that is really where law enforcement gets its primary information to pursue illegal activity. And as 

a result, that really is the focus of our on-site examination activity 

as well. 

Senator WARNER. Mr. Powell, do you have anything to add to 

that? 

29 

Mr. POWELL. I would just agree that the idea is not that we are 

waiting to see something, such as a pot to boil, and then we get 

in touch with Justice. It is not like that at all. Suspicious activity 

reports go into the data base that FinCEN keeps. Law enforcement 

officials have ongoing access to that. So we are overinclusive, if 

anything, in providing information, because they may see patterns 

and it may be that we are seeing one little thing, so we want all 

the information that might lead someone in law enforcement to see 

a broader patterns. We want them to have access. And they generally have it, I think early. 

Mr. COHEN. And I would just add one point on that. As my colleagues notes, FinCEN is the repository for all of these suspicious 

activity reports and other filings the banks make. We on an ongoing basis review that information, look for, as Governor Powell 

said, patterns, look for instances of potential violations. The threshold is very low for making a criminal referral, and it happens on 

a daily basis from FinCEN, and from OFAC as well. We are, as I 

say, in constant communication with the regulators and with the 

criminal authorities and referring matters for their investigation. 

Senator WARNER. Senator Warren. 

Senator WARREN. I am good. 

Senator WARNER. Just before we close, I want to thank all of my 

colleagues, Senator Warren for hanging in until the bitter end on 

this one, and I think, you know, you have heard a really very common theme, obviously, that not only are we concerned that you are 

not fully using your BSA/AML powers along this continuum, since 

most of the actions so far have only resulted in fines and not resulted—and, Mr. Curry, you did point out there have been some injunctive activities, but there are things, short of simply punting 

this to the Justice Department, actions that you could take, number one. 

Number two, we clearly believe there should be no institution not 

only too big to fail or not any institution too big to prosecute. 

And, number three, that because there are all these stovepipes— 

and, Under Secretary Cohen, you are kind of the hub of that wheel, 

and, you know, you have got to make sure that we have got strong 

collaboration, information sharing. 

And I would simply close with a comment that Mr. Powell made 

as well. This is only going to get harder. This is only going to get 

harder as we see some of the larger institutions perhaps migrate 

these activities into smaller financial institutions that, again, may 

even have less compliance components. It is going to get harder as 

the overlap between money laundering and cyber activities, and 

that area is an area that, again, if you have got suggestions as we 

try to put together bipartisan cyber legislation. 

And then as somebody who grew up in the wireless business, as 

we think about the ability to do mobile transactions, a brand-new 

space, trying to put some framework on that—we have had hearings in this Committee before on this issue, but trying to put some 

parameters around that space before it is way down the path and 

fully developed is an enormous, enormous challenge, because the 

activities of money laundering in that area have enormous, enormous potential for bad action. 

30 

So I thank all the witnesses for their testimony and for their responses to questions. There are a couple of things, including continuing giving the Banking Committee updates on the activities of 

your interagency proceedings. Thank you all for a very spirited 

hearing. 

Senator WARREN. The record will remain open? 

Senator WARNER. The record will remain open for 7 days. The 

hearing is adjourned. 

[Whereupon, at 11:41 a.m., the hearing was adjourned.] 

[Prepared statements and responses to written questions supplied for the record follow:] 

31 

PREPARED STATEMENT OF DAVID S. COHEN 

UNDER SECRETARY FOR TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT OF

THE TREASURY

MARCH 7, 2013 

Introduction 

Chairman Johnson, Ranking Member Crapo, distinguished Members of the Committee, thank you for inviting me to testify today on a core focus of our efforts at 

the Department of the Treasury: promoting a safe and secure financial system, and 

effectively combating money laundering, terrorist financing, and related forms of illicit finance. I would like to commend you, Mr. Chairman, and this entire Committee for your strong leadership on this topic, including by focusing today’s discussion on these critically important issues. The spate of recent high-profile enforcement actions against some of our largest, most sophisticated, and best resourced financial institutions raises troubling questions about the effectiveness of our domestic anti-money laundering and counterterrorist financing (AML/CFT) regulatory, 

compliance, and enforcement efforts. It is critically important to understand why 

these failures occurred and, even more importantly, what we can do—whether 

through better legislation, regulation, examination or enforcement, or through some 

combination of steps—to prevent the recurrence of such failures in the future. 

Background 

My remarks today will focus on Treasury’s long-standing efforts to promote and 

enforce compliance with the Bank Secrecy Act (BSA) and our counterterrorist financing sanctions programs, including new efforts under way to improve our AML/ 

CFT regime. We share the view that there is a pressing need to improve compliance, 

and we are working hard at it. 

To begin, I believe it is worth noting that our AML/CFT legal and regulatory regime is one of the strongest and most effective in the world. Conceived more than 

40 years ago with the enactment of the Bank Secrecy Act and updated repeatedly 

over the past four decades through new legislation, regulations, and guidance, our 

AML/CFT framework has evolved to better address new and different illicit finance 

threats. 

Our AML/CFT framework has evolved, moreover, while our financial sector has 

maintained its place as the largest, most sophisticated, complex, and efficient financial system in the world. The enormous size, scope, and sophistication of our financial markets facilitate economic growth, both in the U.S. and around the world. 

But that size, scope and sophistication also attracts criminals who wish to access 

our financial system to launder the proceeds of crime and move funds for illicit purposes. This includes money launderers, terrorists, proliferators, drug lords, and organized crime figures, all of whom rely to some extent on the financial system to 

conduct their operations. 

The BSA, and the regulations promulgated by Treasury’s Financial Crimes Enforcement Network (FinCEN) and the Federal functional regulators implementing 

the BSA and related statutes, establishes the framework for guarding the financial 

system from money laundering and terrorist financing. These laws and regulations 

work in tandem with the sanctions programs implemented by Treasury’s Office of 

Foreign Assets Control (OFAC), particularly those that are focused on preventing 

financial facilitation for terrorist organizations and rogue regimes, such as Iran. 

These rules aid financial institutions in identifying and managing risk, provide 

valuable information to law enforcement, and create the foundation of financial 

transparency required to deter, detect, and punish those who would abuse our financial system. It is, of course, critical that we design our laws and rules, as well as 

our oversight and examination efforts, to address the spectrum of risks that we face. 

But the laws, rules, and compliance manuals can only do so much. A truly robust 

AML/CFT framework—one that hardens our financial system against the unrelenting efforts of money launderers, financial criminals, sanctions evaders, and other illicit actors—requires effective AML/CFT program implementation by financial institutions, buttressed by strong enforcement efforts when those efforts fall short of the 

mark. When AML/CFT safeguards are not effectively implemented and compliance 

lags, money launderers, terrorist financiers, and other illicit actors freely abuse our 

financial system. We have seen this happen too often, at too many financial institutions, including some of our largest banks, over the past several years. 

So it is clear to us that despite the strength of our AML/CFT framework, significant design, oversight, compliance, and enforcement challenges remain. I would like 

to turn now to the efforts the Treasury Department is taking, in collaboration with 

32 

our regulatory and law enforcement partners, the financial industry, and our foreign 

counterparts, to strengthen the effectiveness of our AML/CFT regime. 

Treasury’s Ongoing Efforts To Promote an Effective AML/CFT Framework 

As this Committee is well aware, a number of Federal departments and agencies, 

as well as State and local agencies, play important roles in combating money laundering, terrorist financing, and other illicit financial activity in U.S. financial institutions. The Treasury Department, through FinCEN, administers the BSA, and 

through OFAC, administers our sanctions programs. This includes issuing rules and 

guidance implementing the BSA and the executive orders that establish sanctions 

programs; conducting investigations into potential violations; and enforcing the relevant rules through civil proceedings. In all of these efforts, FinCEN and OFAC 

work closely with counterparts across the Federal Government and at the State and 

local level, including the other Federal financial regulators, as well as law enforcement agencies. 

I would like to update the Committee on Treasury’s ongoing efforts to implement 

and enforce the BSA and our sanctions programs, as well as new work under way 

to improve our AML/CFT regime, including renewed focus at FinCEN on BSA enforcement; the creation of an interagency AML Task Force; our strategy to enhance 

financial institutions’ customer due diligence efforts; and the continued development 

of strong international standards on combating money laundering and the financing 

of terrorism and the proliferation of weapons of mass destruction (WMD). Each of 

these efforts is aimed at improving financial transparency through better regulations, better oversight, better compliance, and better enforcement. 

FinCEN and OFAC Enforcement Efforts 

Turning first to FinCEN’s and OFAC’s ongoing enforcement efforts: 

As I noted, in administering the BSA, FinCEN investigates and pursues enforcement actions against financial institutions for violations of the BSA and its implementing regulations. Most recently, in December 2012, FinCEN assessed a $500 

million civil monetary penalty against HSBC Bank USA N.A. for willful violations 

of the BSA. Among other things, FinCEN determined that HSBC lacked an effective 

AML program and systematically failed to detect and report suspicious activity. 

FinCEN joined OFAC, the Office of the Comptroller of the Currency, the Federal 

Reserve and the Department of Justice in what amounted to the largest combined 

bank settlement in U.S. history, totaling more than $1.9 billion in penalties and forfeitures for HSBC’s conduct that exposed the U.S. financial system to severe abuse. 

Also, in November 2012, FinCEN joined the FDIC and the Department of Justice 

to assess concurrent civil money penalties of $15 million against First Bank of Delaware for violations of the BSA and its AML requirements. 

These and other recent FinCEN enforcement actions highlight many of the key 

vulnerabilities in our financial system that the BSA was designed to address, including misuse of correspondent banking relationships, private banking accounts, financial activity undertaken by nonbank financial institutions, and the use of nontransparent legal entities to move funds. While these enforcement actions reaffirm 

the importance of imposing additional due diligence requirements on higher-risk activities, they also underscore that existing requirements and controls may not be 

sufficiently robust. 

For its part, OFAC administers and enforces financial, economic and trade sanctions to advance key foreign policy and national security goals, including sanctions 

against targeted foreign countries and regimes, terrorists, international narcotics 

traffickers, and those engaged in activities related to WMD proliferation. OFAC aggressively pursues investigations and enforcement actions against both U.S. and foreign financial institutions that violate U.S. economic sanctions laws and regulations. 

Between June and December 2012 alone, OFAC reached settlements with four 

separate foreign financial institutions for a combined total of more than $1.1 billion 

related to almost 24,000 apparent violations of our sanctions programs involving 

Burma, Cuba, Iran, Sudan, and Libya. Total related sanctions and AML enforcement actions involved those institutions, including OFAC’s settlements, amounted 

to $2.76 billion. They followed several other record-breaking enforcement actions related to the ‘‘stripping’’ of sanctions-related information from international payment 

messages that resulted in almost one billion dollars in OFAC settlements as part 

of almost $1.7 billion in fines and forfeitures involving financial institutions. (Appendix I to this testimony contains a compendium of recent OFAC and FinCEN enforcement actions.) 

It is important to note that the conduct at issue in these ‘‘stripping’’ investigations 

primarily occurred prior to 2009—that is, before most of OFAC’s ‘‘stripping’’ settlements were concluded and published—and that these rigorous enforcement actions 

33 

appear to have had a significant compliance and deterrent effect on global financial 

institutions. Of course, Treasury will continue to penalize banks for conduct that 

violates our sanctions programs, whenever it occurs, and will be particularly aggressive with regard to any institutions found to be engaging in the type of conduct that 

has been the subject of these well-publicized enforcement cases. 

In their civil enforcement investigations, both OFAC and FinCEN often work 

closely with criminal agencies, including the Department of Justice and State and 

local criminal prosecutors. Neither OFAC nor FinCEN, however, possesses the authority to bring criminal charges, nor does Treasury see it as our role to influence 

or seek to direct the decision whether to prosecute in any given case. The decision 

whether to bring criminal charges is the exclusive prerogative of criminal prosecutors. Nonetheless, Treasury strongly supports vigorous law enforcement across the 

board—by our counterpart Federal regulators, by Federal criminal law enforcement, 

and by the relevant State and local authorities. 

FinCEN’s Renewed Focus on Enforcement 

FinCEN, as the administrator of the BSA, plays a critical role in our fight against 

money laundering and terrorist financing in the United States and around the 

world, and over its 20-plus year history, it has been at the heart of our Nation’s 

efforts to combat illicit finance. I would like to highlight two FinCEN initiatives that 

will position the agency to be even more effective in enforcing the BSA in the years 

to come. 

First, FinCEN has recently completed a multiyear IT Modernization Program, 

which is on-time and on-budget. This project will enhance FinCEN’s ability to analyze illicit financial activity and conduct enforcement investigations. It will also better serve the various agencies that work with FinCEN and rely—sometimes heavily—upon BSA data in conducting their own money laundering and terrorism cases. 

For example, last year the Federal Bureau of Investigation reported that 37 percent 

of its pending counterterrorism cases had associated BSA records. A key component 

of FinCEN’s modernization project is a powerful new search tool to access BSA data, 

called FinCEN Query. Since it was activated last September it has been used 

920,000 times by 6,400 users. This is a strong start and we expect the utility of this 

tool to grow as more of our law enforcement and intelligence partners who rely on 

BSA data adopt and gain facility with the new search tool. 

Second, FinCEN’s new Director, Jennifer Shasky Calvery, is in the midst of a 

thorough review of FinCEN’s operations as she and her new management team at 

FinCEN consider how FinCEN can better organize itself to execute its mission even 

more effectively, including enhancing its compliance and enforcement functions. 

Since taking up her post, Director Calvery has met with virtually every employee 

of FinCEN, as well as with FinCEN’s law enforcement and regulatory partners, industry stakeholders and Congressional staff, as she explores the appropriate steps 

to take. 

Director Calvery is particularly focused on ensuring that FinCEN fulfills its key 

role in the enforcement of our AML/CFT regime, including by employing all the 

tools at the agency’s disposal to hold accountable those institutions and individuals 

who allow our financial institutions to be vulnerable to terrorist financing, money 

laundering, proliferation finance, and other illicit financial activity. Some of these 

tools have been used in the past—such as imposing special measures under Section 

311 of the USA PATRIOT Act against entities determined to be primary money 

laundering concerns—and we intend to continue the aggressive use of these tools 

in the future. 

We also intend to make use of additional tools at FinCEN’s disposal to ensure 

that those who violate the BSA are held accountable. For example, the BSA provides FinCEN with the broad authority to obtain injunctions against persons it believes have violated, are violating, or will violate, the BSA. Likewise, the BSA allows 

FinCEN to impose civil penalties not only against domestic financial institutions 

and nonfinancial trades or businesses that willfully violate the BSA, but also 

against partners, directors, officers and employees of such entities who themselves 

actively participate in misconduct. Although FinCEN has employed these tools only 

occasionally in the past, in the future FinCEN will look for more opportunities to 

impose these types of remedies in appropriate cases. 

New Initiatives To Improve the AML/CFT Framework 

Let me now turn to the several initiatives we are pursuing to look at our AML/ 

CFT framework and consider where improvements can be made. At the heart of this 

task is a goal of ensuring that our AML/CFT obligations and actions are directing 

financial institutions to address the real, prevailing illicit financing risks that they 

face. 

34 

FinCEN’s ‘‘Delta Team’’ 

FinCEN recently organized a group dubbed the ‘‘Delta Team’’ under the auspices 

of the Bank Secrecy Act Advisory Group (BSAAG). The Delta Team includes representatives from the financial services industry, financial regulators, and law enforcement with the common mission of examining any gaps between illicit finance 

risks and compliance efforts. Their objective is to develop recommendations to close 

any gaps in order to enhance the effectiveness of our AML/CFT regulatory regime. 

The Delta Team had its first meeting last month, and I understand the discussions 

produced a number of interesting ideas that will be explored further in the ongoing 

dialogue. 

The AML Task Force 

Treasury also has recently convened a broad interagency group, known as the 

AML Task Force, to look in depth at the entire AML/CFT framework. Along with 

Treasury, the AML Task Force is comprised of senior representatives from each of 

the regulators with responsibility to combat money laundering—that is, FinCEN, 

the Board of Governors of the Federal Reserve System, the Office of the Comptroller 

of the Currency, the Federal Deposit Insurance Corporation, the National Credit 

Union Administration, the Commodity Futures Trading Commission, the Securities 

and Exchange Commission and the Internal Revenue Service—as well from the Justice Department’s Criminal Division. 

The Task Force’s objective is to take a step-back look at our AML/CFT framework—from the legal and regulatory foundation, to the compliance and examination 

function, to the enforcement efforts—to take stock of which components of our regime are working well, which are not, how the different parts are working together, 

and to assess how the entire enterprise is operating. The Task Force will look at 

the mechanisms by which illicit finance risks are identified, and how statutory and 

regulatory requirements are adapted to address these risks. It will evaluate information sharing, supervision, and enforcement practices and processes to determine 

if there are ways to better inform, assess, encourage and, as necessary, compel financial institution compliance. 

In all of its work, the Task Force will be informed by the specific deficiencies identified in the recent bank enforcement cases. The goal is to develop recommendations, 

and find solutions, to address any gaps, redundancies or inefficiencies in our AML/ 

CFT framework, and to ensure that truly effective AML/CFT compliance is made 

a priority within financial institutions. 

Enhancing Customer Due Diligence 

Financial transparency depends, at the most basic level, on effective customer due 

diligence—that is, the steps taken by financial institutions to know their customers. 

Poor or weak customer due diligence may permit illicit actors to access the financial 

system undetected, and to engage in transactions that financial institutions may fail 

to identify as suspicious. 

Current law, however, explicitly requires financial institutions to conduct in-depth 

customer due diligence—in which the true beneficial owner of an account is identified—in only certain limited circumstances. Because we believe that a broader obligation for financial institutions to conduct in-depth customer due diligence may be 

warranted, Treasury has embarked on a rule-making process to consider whether 

to impose an explicit, enhanced customer due diligence requirement. 

We believe that a rule that clarifies and strengthens customer due diligence requirements for U.S. financial institutions, including an obligation to identify beneficial owners, would advance the purposes of the BSA by assisting law enforcement 

in their financial investigations. Moreover, such a requirement would assist financial institutions in their assessment and mitigation of risk, as well as facilitate their 

compliance with existing BSA requirements and U.S. sanctions programs. And it 

would assist in reporting and investigations in support of tax compliance. 

Due to the importance of this issue, as well as its implication for all corners of 

our financial system, we took the unusual step of issuing an Advance Notice of Proposed Rulemaking (ANPRM), and then embarked on an unprecedented industry outreach program to discuss the proposed rule in series of public forums with a broad 

range of stakeholders, including Congress; law enforcement; community, regional, 

national, and international banks; money service businesses; broker-dealers; futures 

commission merchants; and other interested parties. These engagements highlighted 

the challenges associated with achieving clear and harmonized customer due diligence expectations while also leveraging best practices to minimize burden. 

All the information gathered, through written comments as well as public engagements, has informed the development of a proposed customer due diligence rule, 

which we anticipate publishing for further notice and comment in the near future. 

35 

International Efforts To Strengthen the Global AML/CFT Framework 

Our domestic work to strengthen the integrity and transparency of our financial 

system, and refine and improve our AML/CFT framework, is bolstered and extended 

by our efforts to work with international partners to strengthen AML/CFT regimes 

abroad. Given the global nature of money laundering and terrorist financing, and 

the increasing interrelatedness of the global financial system, a secure global framework is essential to the integrity of the U.S. financial system. 

Treasury, along with others in the Federal Government, works closely with international counterparts to strengthen the global AML/CFT framework and promote 

implementation and enforcement of effective AML/CFT measures worldwide. To this 

end, we engage several intergovernmental and international organizations, such as 

the Financial Action Task Force (FATF), the IMF, the World Bank, the United Nations, and various FATF-style regional bodies, to develop, assess, and facilitate implementation of effective AML/CFT laws around the world. 

In recent years, within the FATF, we have helped lead efforts to revise and 

strengthen the global AML/CFT standards, including by incorporating measures to 

combat proliferation financing, tax evasion, and sanctions evasion. We have also led 

efforts to focus the next round of jurisdictional assessments on effectiveness and implementation, in addition to technical compliance with the global standards. Most 

recently, we have secured the FATF’s commitment to examine challenges of global 

compliance as a priority matter for all jurisdictions, within a broader agenda focusing on enhancing the effectiveness of AML/CFT regimes in combating the threats 

we face. 

Through these efforts, we have established both a necessary foundation and a 

common set of expectations that will enable us to focus ongoing and future global 

AML/CFT efforts on the primary challenges we face in combating illicit finance and 

enhancing financial integrity. These challenges include the substantive areas of concern highlighted in recent bank enforcement actions, such as sanctions compliance 

(including by intermediary financial institutions), customer due diligence, AML programs, and correspondent controls. They also include cross-cutting AML/CFT issues 

such as enhancing information sharing to facilitate enterprise-wide risk management within global financial institutions, and aligning investigative, supervisory 

and compliance resources to focus on priority illicit financing risks and 

vulnerabilities. Thus, as we examine these issues with a view towards improving 

the effectiveness of our own AML/CFT regime, we are also working internationally 

to inform and strengthen similar efforts in other financial centers. 

Conclusion 

The United States is home to one of the strongest anti-money laundering and 

counterterrorist financing regimes in the world. But clearly, there is work to be done 

to make our AML/CFT regime more effective and to elicit better compliance from 

financial institutions. We all have an interest in enhancing the effectiveness of our 

framework and better protecting our financial system from abuse. I look forward to 

working with this Committee on these critical issues, and would be pleased to answer any questions you may have. 

36 


Appendix 1: Recent OFACand FinCEN Enforcement Actions 

OF AC Penalties 

OFAC Agencies Bank Date Actioo I Description 

Fine lm'olved 

HSBC engaged in payment practices 

such as the use of SWIFT pa)1nent 

messages in a manner that obscured 

references implicating U.S. sanctions; 

removed infonnation from SWIFT 

OFAC, messages; and fonvarded payment 

HSBC DOl, messages to U.S. banks that falsely 

I Holdings 1211 112012 $37; DANY, referenced an HSBC affiliate as the 

million FRB, ordering institution rather than pic OCC, individuals or entities subject to U.S. 

FinCEN sanctions. ~{ anagement, including 

senior management, was aware of the 

conduct that took place. HSBC's 

conduct resulted apparent violations 

totaling more than 2,300 transactions 

valued at approximately $430 million. 

From 2001 to 2007, SCB's London 

head office and its Dubai branch 

engaged in payment practices that 

interfered with the implementation of 

U.S. economic sanctions by financial 

institutions in the United States, 

including SeB's New York branch. In 

London, those practices included 

omitting or removing material 

OFAC, references to U.S.-sanctioned 

locations or entities from payment Standard SI32 DOl, messages sent to U.S. financial 2 Chartered 1211 012012 DANY, 

Bank million FRB, institutions. SCB accomplished this by 

NYDFS replacing the nanles of ordering 

customers on payment messages with 

special characters, effectively 

obscuring the true originator and 

sanctioned party in the transaction; 

and forwarding payment messages to 

U. S. financial institutions that falsely 

referenced SeB as the ordering 

institution. In Dubai, the practices 

included sending payment messages to 

or through the United States without 
37 


OFAC Agencies Bank Date Action I Des<:ripiion 

Fine Involved 

references to locations or entities 

implicating U.S. sanctions. As a result, 

millions of dollars of payments were 

routed through U.S. banks for or on 

behalf of sanctioned parties in 

apparent violation orv.s. sanctions. 

ING Bank NV purposefully used 

cover payments and removed 

references 10 OFAC-sanc1ioned 

persons on any payment messages to 

avoid payments being stopped in the 

OFAC, United States. ING also routed 

ING Bank $619 payments through non-sanctioned 3 NY. 6112/2012 million 001*, entities to obscure the involvement of DANY sanctioned parties, and provided 

sanctioned financ ial institutions with 

false endorsement stamps to obscure 

the involvement of a sanctioned 

Cuban interest in ING payments 

routed through the United States. 

Barclays purposefully used cover 

OFAC, payments in a manner intended to 

$176 DOl, obscure the identities ofOFAC· 

4 Barclays 811812010 million DANY, sanctioned countries and persons, and 

FRS, removed infonnation from any 

NYSBD payment messages that indicated a 

sanctioned interest in payments. 

Credit Suisse had standard procedures 

for using cover payments to avoid 

referencing parties subject to U.S. 

sanctions and omitting infonnation, 

removing infonnation, or providing 

incorrect infonnation in payment 

OFAC, messages in order to conceal the 

5 Credit 1211 6/2009 $536 001*, identities oru.s. sanctions targetsSuisse million DANY, most notably Iran, Sudan, and Libya 

FRB - in electronic funds transfer 

instructions executed through the 

United States on behalf of its bank and 

nOll-bank customers, and in securities 

transactions executed in the United 

States for a then-designated Libyan 

state-owned investment company and 
38 


OFAC Agencies Bank Date Action I Des<:ripiion 

Fine Involved 

a bank located in Sudan. 

OFAC, Lloyds intentionally manipulated and 

Lloyds TSB $217 DOJ, deleted infonnation about U.S. 

6 1212212009 DANY, sanctions parties in wire transfer BankPLC million FRB, instmctions routed through third-party 

NYSBD banks located in the United States. 

OFAC, ABN intentionally manipulated and FRB, deleted infonnation about u.s. 7 ABN 121191200; $80milliotl NYSDB, sanctions parties in wire transfer AMRO IL FDPF, 

DOJ, instmctions and letters of credit routed 

FinCEN through the United Stales. 

[ONLY DOJIDANYIOF AC 

sanctions-related settlements, and the 

Fed's civil monetary penalty against 

SeB, are included in this figure. The 

Fed's civil monetary penalty against 

* It is HSBC, other USG agencies penalties 

presumed against HSBC for BSNAML, and the 

the DOJ DFS action against SeB are not 

settlements inclnded) [ONLY DOJIDANYIOFAC 

involve sanctionHelated settlements, and the 

forfeitures Fed's civil monetary penalty against 

SC8, are included in this figure. The 

Fed's civil monetary penalty against 

HSBC, other USG agencies penalties 

against HSBC for BSNAML, and the 

DFS action against SCB are not 

inclnded] 

FinCEN Penalties 

FinCEN AJ!:fficies Bank Date Action { Description 

Fine 100'01\'ed 

5500 million civil money penalty 

$500 (CMP) assessed by FinCEN, 

Million concurrent with a SSOO million CMP 

1 HSBC Bank 1211112012 Civil FinCEN, by the Office of the Comptroller of the 

USA NA Money OCC Currency (OCC). 

Contemporaneously, more than 51.4 Penalty billion fines and asset forfeitures 

versus the Bank by other govenunent 
39 


FinCEN Agencies Bank Date Action I Description 

Fine Involved 

agencies, including the U.S. 

Department of lustice (DOl), the 

Office ofForeign Assets Control 

(OFAC), the Board of Governors of 

the Federal Reserve System (FRB), 

and the District Anomey of New 

York. 

S15 million CMP assessed by 

SI5 FinCEN, concurrent with SIS million 

Million CMP by the Federal Deposit Insurance 

2 First Bank 1111912012 Civil FinCEN, Corporation (FDIC). 

ofDdaware J\'foney FDIC, DOl Contemporaneously, the Bank settled 

a civil fraud action with DOl. All Penalty satisfied by SIS million paid to the 

U.S. Treasury. 

825,000 $15,000 CMP assessed by FinCEN for 

3 Frank E. 12/15/2011 Civil FinCEN disclosure of a suspicious activity 

Mendoza Money report in cOIUlection with a bribery 

Penalty scheme. 

S12,500 S12,5OO CMP assessed by FinCEN for 

Civil failure to comply with registration and 

4 Sarith Meas 12/&/2011 Money FinCEN anti-money laundering program 

Penalty requirements for money services 

businesses 

FinCEN assessed a CMP in the 

Mohamed 825,000 amount of S25,000 against Mohanled 

5 lvlohamed- 9/23/2011 Civil FinCEN Mohamed·Abas Sheikh for violating 

Abas Sheikh Money Bank Secrecy Act registration 

Penalty requirements and the Bank Secrecy 

Act prohibition against structuring. 

S5,000 FinCEN assessed a $5,000 CMP 

Civil against Altima, Inc. for allowing its 

6 Altima Inc. 91712011 Money FinCEN registration with FinCEN as a money 

Penalty 

transminer to lapse for a period of 

several years. 

FinCEN, S10.9 million CMPs assessed by 

SlO9 FDIC, FinCEN, the FDIC, the State of 

Florida Office of Financial Million State of Regulation, and an SII million 7 Ocean Bank &122/2011 Civil Florida 

Money Office of forfeiture to DOl under a deferred 

prosecution agreement. All satisfied Penalty Financial by one $10.98 million payment to the Regulation U.S. Govenunent. 
40 


FinCEN Agencies Bank Date Action I Description 

Fine Involved 

Lower FinCEN assessed a $250,000 CMP 

Sioux against the Lower Sioux Indian 

Indian $250,000 Community, doing business as Jackpot 

8 Community 412112011 Civil FinCEN Junction Casino Hotel for violations of 

DBA Money the anti-money laundering program, 

Jackpot Penalty currency transaction reporting, and 

Junction recordkeeping requirements of the 

Casino hotel Bank Secrecy Act. 

FinCEN assessed a CMP in the 

amount of $7 million concurrent with 

Pacific $7 Million the OCC versus Pacific National Bank 

9 National 3/2412011 Civil FinCEN, for violations of the requirement to 

Bank J\'ioney OCC implement an effective anti-money 

Penalty laundering program, and violations of 

the requirement to report suspicious 

transactions. 

FinCEN assessed a $25,000 CMP 

against Victor Kaganov, for violating 

Bank Secrecy Act requirements for 

$25,000 money transmitters. FinCEN 

Victor Civil determined that Kaganov violated 

10 Kaganov 3/1112011 Money FinCEN Bank Secrecy Act registration, antiPenalty money laundering program, and 

suspicious activity reporting 

requirements while conducting an 

independent money transmitter 

business from his residence. 

FinCEN assessed CMPs totaling 

Omar S40,OOO against brothers Omar 

II Abukar Sufi 3/2/2011 $40,000 FinCEN Abukar Sufi and lvlohanled Abukar 

DBA Halal Sufi, for non-compliance with Bank 

Depot Secrecy Act money transmitter 

registration requirements. 

FinCEN assessed CMPs totaling 

l\,fohanled S40,OOO against brothers Omar 

12 Abukar Sufi 3/212011 $40,000 FinCEN Abukar Sufi and J'iiohamed Abukar 

DBA Halal Sufi, for non-compliance with Bank 

Depot Secrecy Act money transmitter 

registration requirements. 

Zions First S8Million FinCEN assessed a CMP in the 

13 National 2/1112011 Civil FinCEN amount of $8 million for violations of 

Bank Money the requirement to implement an 

Penalty effective anti-money laundering 
41 


FinCEN Agencies Bank Date Action I Description 

Fine Involved 

pragram and vialations afthe 

requirement to. report suspicious 

transactions. 

FinCEN assessed a CMP in the 

Baltic 112,000 amount ofS12,000 against Baltic 

14 Financial 1211612010 Civil FinCEN 

Financial Services, Inc. far nanServices Maney compliance with Bank Secrecy Act 

Inc. Penalty registration requirements applicable to 

maney transmitters. 

FinCEN assessed a CMP in the 

amount af S50,000 versus Pinnacle 

Capital Markets far failure to establish 

and implement an effective antiPinnacle $iO,OOO maney laundering program, and 

Ii Capital 9/1/2010 Civil FinCEN, failure to timely detect and report 

Markets Money SEC suspicious activity. This penalty was 

Penalty issued concurrently with an 

assessment by Securities and 

Exchange Commission (SEC) far 

vialations of the Securities Exchange 

Act of 1934. 

FinCEN assessed a o..'IP in the 

amaunt ofSI million versus Pamrapo 

Savings Bank for failure to. establish 

and implement an effective antimaney laundering program, including 

a lack of due diligence procedures 

$1 Million required to identify high risk accounts, 

Pamrapo Civil FinCEN, lack of adequate Bank Secrecy Act 

16 Savings 6/3/2010 Maney DO!, OI S conlpliance personnel and deficient 

Bank Penalty independent testing, necessary to file 

suspiciaus acti,rity reparts and 

currency transactian reparts in a 

timely manner. This investigation was 

part of a coordinated effort with DOJ 

and the Office of Thrift Supervision, 

both af wham levied penalties in 

March, 2010. 

$2i,000 FinCEN and the FDIC assessed 

Eurobank, concurrent CMPs in the amount of 

17 San Juan, 5/4/2010 Civil FinCEN, $25,000 for failure to implement an 

Puerto Rico Money FDIC effective anti-money laundering Penalty program reasonably designed to 
42 


FinCEN Agencies Bank Date Action I Description 

Fine Involved 

monitor accoWlts for suspicious 

activity. 

SilO SilO million CMP assessed by 

Million FinCEN was satisfied by the SIlO 

18 Wachovia 311712010 Civil FinCEN million forfeiture pursuant to the 

Bank NA Money OOJ's deferred prosecution 

agreement. The OCC assessed a Penalty separate $50 million CMP. 

S5 million CMP assessed concurrently 

by FinCEN and the OCC. FinCEN 

detemlined that the Bank failed to 

implement an adequate system of 

internal controls to ensure compliance 

with the Bank Secrecy Act and 

$5 Million manage the risk of money laundering 

Doha Bank, Civil FinCEN, or other suspicious activity, or to 

19 New York, 4/20/2009 Money OCC conduct independent testing to allow 

New York Penalty for the timely identification and 

correction of Bank Secrecy Act 

compliance deficiencies. The absence 

of effective internal controls and 

independent testing at the Bank 

resulted in nmnerous \~olations of the 

requirement to timely report 

suspicious transactions. 

SIS million CMP assessed by 

FinCEN, concurrent with a SIS 

$15 million CMP by the OCc. FinCEN 

NY Branch Million detemlined that the Bank failed to 

20 United Bank 4/2812008 Civil FinCEN, implement an effective anti· money 

for Africa A'foney 

OCC laundering program reasonably 

designed to identify and report Penalty transactions that exhibited indicia of 

money laundering or other suspicious 

activity. 

S12,000 CMP assessed by EnCEN 

$12,000 versus the Money Services Business 

21 EI Noa Noa 4/14/2008 Civil EnCEN for failure to implement an effective 

Corporation Money anti-money laundering program, and 

Penalty file complete and timely currency 

transaction reports. 

22 Sigue 112812008 $12 FinCEN, S12 million CMP assessed by EnCEN 

Corporation Million DOl versus the Money Services Business. 
43 


FinCEN Agencies Bank Date Action I Description 

Fine Involved 

and Sigue Civil Satisfied by $15 million forfeiture to 

LLC t..Ioney 001 under a deferred prosecution 

Penalty agreement FinCEN determined that 

the Money Services Business failed to 

establish and implement an anti· 

money laundering program reasonably 

designed to ensure compliance with 

the Bank Secrecy Act, which led, in 

tum, to a failure by management at the 

Money Services Business to 

implement measures to respond to 

continued pattenlS of suspicious 

activity, with repeated common 

characteristics, at certain agent 

locatiollS. 
44 

* Statement required by 12 U.S.C. 250: The views expressed herein are those of the Office 

of the Comptroller of the Currency and do not necessarily represent the views of the President. 

PREPARED STATEMENT OF THOMAS J. CURRY 

COMPTROLLER, OFFICE OF THE COMPTROLLER OF THE CURRENCY

MARCH 7, 2013 

I. Introduction 

Chairman Johnson, Ranking Member Crapo, and Members of the Committee, I 

appreciate the opportunity to appear before you today to discuss the importance of 

effective Bank Secrecy Act and Anti-Money Laundering (BSA/AML) compliance programs at U.S. financial institutions and the role the OCC plays in examining financial institutions for compliance in this area.* 

The OCC is committed to ensuring that the institutions under its supervision 

have effective controls in place to safeguard them from being used as vehicles to 

launder money for drug traffickers and transnational and other criminal organizations, or to facilitate the financing of terrorist acts. Together with the other Federal 

banking agencies and the law enforcement community, the OCC’s goal is to deter 

money laundering, terrorist financing, and other criminal acts and prevent the misuse of our Nation’s financial institutions. 

National banks and Federal savings associations (hereafter referred to as ‘‘banks’’ 

or ‘‘bank’’) have been required to have a BSA compliance program since 1987, and 

to monitor, detect, and report suspicious activity since the 1970s. However, regulatory requirements and supervisory expectations under the BSA have increased significantly since that time, and most institutions have had to make substantial improvements in their compliance programs. In response, many of the largest institutions have implemented highly sophisticated programs and systems that screen 

transactions to identify and report suspicious activity to law enforcement, and to ensure that such transactions do not involve entities subject to Office of Foreign Assets 

Control (OFAC) sanctions. The suspicious activity reports (SARs) that are filed have 

provided law enforcement with access to critical information needed to initiate and 

conduct successful investigations and prosecutions. There are now more than 5.6 

million SARs in the centralized database that is maintained by the Financial 

Crimes Enforcement Network (FinCEN). The majority of these SARs have been filed 

by national banks and Federal thrifts. 

BSA compliance is inherently difficult, combining the challenges of sifting through 

large volumes of transactions to identify features that are suspicious, with the presence of criminal and possibly terrorist elements dedicated to, and expert in, concealing the true nature of the transactions they undertake. As financial institutions’ 

BSA compliance programs have evolved and changed over time, so have the sophistication and determination of money launderers, terrorist financiers, and other 

criminals in finding other ways to gain access to our institutions. The technology, 

products, and services offered by institutions to give customers better and quicker 

access to financial services can also be used by criminals to instantaneously and 

anonymously move money throughout the world, sometimes through the simple 

click of a keypad or the use of a cell phone app. Risks are constantly mutating, as 

criminal elements alter their tactics to avoid detection. They move quickly from one 

base of operations to another, finding sanctuary in places where law enforcement, 

or sympathy for U.S. policy objectives, is weakest. Furthermore, money-laundering 

schemes are becoming more complex, involving entities and individuals located in 

numerous jurisdictions worldwide. Consequently, banks, thrifts, and other financial 

institutions have had to devote increasingly larger amounts of resources to maintain 

effective programs, and the OCC has likewise significantly increased its attention 

in this area. 

My testimony today will cover our assessment of industry trends and concerns; 

the OCC’s supervisory approach to BSA/AML; our process for taking supervisory 

and enforcement actions and a description of some of our recent actions; improvements the OCC has made or is in the process of making to our supervisory and enforcement practices; and our recommendations for regulatory and legislative improvements. 

Specifically, in response to the Committee’s questions in its letter of invitation, 

the OCC believes that corporate governance weaknesses, combined with the effects 

of austerity programs banks instituted during the financial crisis, are among the 

biggest reasons for recent BSA/AML compliance breakdowns. In response, the OCC 

has implemented a number of changes to our policies and internal review processes 

to strengthen our supervision in this critical area, and we are considering additional 

changes to our policy guidance, regulations, and enforcement documents to clarify 

45 

regulatory expectations and improve bank compliance in this area. For example, 

while we believe that our cease and desist (C&D) authority is as effective and more 

efficient than the use of civil injunctions, we are exploring the possibility of regulatory changes that would enhance our ability to take removal and prohibition actions against bank officers, directors, and employees that engage in violations of the 

BSA. Finally, we have inserted language in some of our recent enforcement documents that is designed to improve enterprise-wide compliance with AML requirements when banks engage in transactions with their overseas affiliates. All of these 

points are further addressed in the testimony. 

II. Industry Trends and Concerns 

Many of the practical problems we have seen in recent years with respect to BSA 

compliance can be attributed to four root causes: (i) culture of compliance within the 

organization, (ii) commitment of sufficient and expert resources, (iii) strength of information technology and monitoring processes, and (iv) sound risk management. 

These root causes have led to breakdowns in the fundamentals and mechanics of 

sound management of operational risks. For example, our examination and enforcement activities have identified a number of trends and concerns in the BSA/AML 

area that warrant continued attention by supervisors and banks: 

• Corporate Governance—Some recent cases have involved the lack of strong corporate governance principles necessary to create a ‘‘culture of compliance’’ within the organization. These cases reflected an imbalance in both the independence of the compliance function and organizational incentives that emphasized 

revenues and growth over balanced risk management. Proper incentives across 

both BSA/AML compliance and the line of business ensure that there is accountability throughout the organization and employees are motivated to do the 

right thing through compensation structures, performance standards, promotions, and a strong compliance culture. 

• Compliance Resources—Recent cases have identified a lack of sufficient staffing, 

high turnover rates, and cutbacks in the compliance area as common factors 

that have impeded the effectiveness of banks’ BSA/AML programs. In some 

cases, banks have inappropriately reduced staffing and resources in the BSA 

area due to austerity programs initiated during the financial crisis. In other 

cases, banks’ compliance department staff and expertise have failed to keep 

pace with the growth of the institution. 

• International Focus or Component—Foreign correspondent banking, cross border funds transfers, bulk cash repatriation, remote deposit capture, and embassy banking have all been high-risk areas that some banks have not managed 

effectively. 

• Bulk Cash and Structured Deposits—Bulk cash transactions continue to present 

significant BSA/AML challenges for banks in determining legitimate from illegitimate sources. In addition, as a result of the changes to the Mexican currency 

laws, we have seen an increase in suspicious activity along the southwest border flowing from funnel accounts associated with drug cartels, increased use of 

nonbank financial institutions, and increased structuring of cash deposits. 

• Migration to Smaller Banks—As some large or midsize banks have attempted 

to lower their risk profiles, higher risk products and customers have migrated 

to community banks. These institutions must be mindful of the resources and 

personnel necessary to successfully manage higher risk activities. 

• New Technologies and Evolving Payments Activities—When banks introduce 

new technologies and products, they must appreciate or understand the compliance risks. Prepaid access, mobile phone banking, smart ATM machines and kiosks, mobile wallets, and Internet cloud-based payment processes are all technologies that are developing rapidly, and senior bank compliance personnel 

need to be engaged in the product development processes. OFAC monitoring is 

especially important and challenging in this area. In addition, products that 

have evolved through technology need to be periodically re-evaluated (e.g., prepaid access money transfers, and payroll cards). 

• Third-Party Relationships and Payment Processors—The OCC and the other 

banking agencies have been reviewing closely third-party and payment processor relationships and a number of enforcement actions have been taken in recent years. Banks need to be especially aware of the risks presented by payment processors and the extent of their franchising relationships (routing transit numbers (RTNs), bank identification numbers (BINs), and ATM machines). 

The OCC will continue to identify significant trends, communicate them to the industry, and ensure that BSA/AML supervision stays current. 

46 

1 12 U.S.C. §1818(s). 2 Uniting and Strengthening America by Providing Appropriate Tools Required To Intercept 

and Obstruct Terrorism, P.L. 107-56, 115 Stat. 272 (2001) (USA PATRIOT Act). 3The FFIEC is a formal interagency body empowered to prescribe uniform principles and 

standards for the Federal examination of financial institutions by the OCC, the Board of Governors of the Federal Reserve (Federal Reserve), the Federal Deposit Insurance Corporation 

(FDIC), the National Credit Union Administration, and the Consumer Financial Protection Bureau. The FFIEC’s primary goal is to promote uniformity in the supervision of financial institutions. 

III. OCC BSA/AML Supervisory Policies and Practice 

Legal Framework and the OCC’s Risk-based Supervisory Approach 

The Money Laundering Control Act of 1986 provides the framework for BSA/AML 

supervision and enforcement. It requires the Federal banking agencies to: (i) prescribe regulations to require banks to establish and maintain procedures that are 

reasonably designed to assure and monitor compliance with the BSA; (ii) review 

those procedures at every examination; (iii) report problems with the procedures to 

the bank; and (iv) issue a C&D order if the financial institution fails to establish 

and maintain the procedures or fails to correct a problem that was previously reported to it. 1 On January 27, 1987, the OCC and the other Federal banking agencies issued virtually identical regulations to implement this requirement. The OCC’s 

regulation, codified at 12 CFR §21.21 for national banks and at 12 CFR §163.177 

for Federal savings associations, requires every bank to have a written program, approved by the board of directors, and reflected in the minutes of the bank. The program must, at a minimum: (1) provide for a system of internal controls to assure 

ongoing compliance; (2) provide for independent testing for compliance; (3) designate 

an individual responsible for coordinating and monitoring day-to-day compliance; 

and (4) provide training for appropriate personnel. In addition, the implementing 

regulation for section 326 of the USA PATRIOT Act 2 requires that every bank adopt 

a customer identification program as part of its BSA compliance program. 

The OCC has worked with the other Federal Financial Institutions Examination 

Council (FFIEC) agencies, 3 FinCEN, and OFAC to review and develop BSA examination and enforcement policies and procedures for use at every examination. The 

publication of the Interagency BSA/AML Examination Manual (Manual) in 2005 effectively standardized examination procedures for the Federal banking agencies. 

The Manual reinforces the agencies’ position that sound BSA/AML risk management enables a banking organization to identify BSA/AML risks and better direct 

its resources, with the ultimate goal of helping safeguard its operations from money 

laundering, terrorist financing, and other illicit activities. The Manual has been revised three times since its initial publication so that it remains current with the latest technological and payment system innovations and emerging threats and 

vulnerabilities. 

The OCC monitors compliance with the BSA and its implementing regulations by 

applying the examination procedures set forth in the Manual during a bank’s examination. Community banks are examined either on a 12- or 18-month cycle, and 

large banks and midsize banks are examined on an annual cycle. These procedures 

are risk-based and direct examiners to focus examination resources on high-risk 

areas within banks. Examiners use the procedures to assess the implementation 

and effectiveness of the bank’s policies, procedures, systems, and controls. Every 

BSA/AML examination includes, at a minimum, a review of the bank’s risk assessment and its BSA/AML compliance program (focusing on internal controls, training 

programs, independent testing, and BSA officer independence and qualifications). 

We also assess the effectiveness of the bank’s OFAC compliance program. 

OCC examiners perform ongoing supervision and conduct targeted testing in 

areas that may present higher money laundering and terrorist financing risks. The 

Manual includes supplemental procedures that cover specific BSA requirements 

(e.g., currency transaction reporting, suspicious activity reporting, foreign correspondent bank, private banking, and funds transfer record keeping) and specific 

examination procedures covering risks from products and services and persons and 

entities (e.g., correspondent banking, private banking, trade finance, electronic 

banking, third-party payment processors, bulk shipments of currency, pouch activities, politically exposed persons, and business entities). 

The OCC routinely analyzes BSA data, currency transaction reports and SARs to 

identify unique risks and augment our examinations. This information permits examiners to scope and plan examinations to ensure that the bank’s higher risk activities are evaluated. Such activities may be reflected in accounts associated with repetitive SAR filings, significant cash activity, or activity that is inconsistent with 

the type of business of the customer, and are examples of the types of accounts that 

47 

4The BSAAG is chaired by FinCEN and is composed of policy, legal, and operations representatives from the major Federal and State law enforcement and regulatory agencies involved in the fight against money laundering, as well as industry representatives. 5The BSAAG Delta Team is cochaired by FinCEN and an industry representative. The purpose of the BSAAG Delta Team is for industry, regulators, and law enforcement to come together and examine the variance between compliance risks and illicit financing risks. The goal 

is to reduce the variance between the two and build a smarter, more effective, and more cost 

efficient regulatory framework. 6The FFIEC BSA Working Group, similar to the FFIEC itself, has a rotating chair and is 

composed of representatives of Federal and State regulatory agencies. 7The National Interagency Bank Fraud Working Group is chaired by the Department of Justice, and composed of representatives of the Federal law enforcement and regulatory agencies 

(the OCC has been an active member of this group since its founding in 1984). 

would be selected for transaction testing and further examiner review. In cases 

where examiners identify areas of concern, deficiencies, or violations, they typically 

expand the examination scope and perform transaction testing in targeted areas to 

ensure they identify and evaluate all pertinent issues. 

In community banks, the OCC uses a risk identification and analytical tool called 

the Money Laundering Risk (MLR) System, which enables the OCC to identify potentially high-risk banks and activities that warrant increased scrutiny and supervisory resources. This combination of our ongoing supervision and targeted examinations allows us to determine the adequacy of a bank’s BSA/AML compliance program at every exam. 

Training and Internal Communications 

The OCC provides comprehensive BSA training to our examiners and organizes 

a BSA compliance conference every 3 years to inform our examiners of emerging 

money laundering and terrorist financing threats and vulnerabilities. A critical component of examiner training is also provided on an interagency basis by the FFIEC 

and the OCC works with the FFIEC and other Federal Government agencies to develop advanced AML courses for examiners, as well as periodic internal and external seminars, conferences, and teleconferences. Representatives of the law enforcement community are regular participants in these conferences and training sessions, 

establishing an ongoing dialogue with our examiners concerning criminal typologies, 

schemes and arrangements. Such forums allow our examiners to be continually 

aware of the risks facing the banks, to scope examinations accordingly, and to provide timely guidance to the industry in addressing those risks. OCC examiners also 

attend other FFIEC training courses, external courses and industry conferences to 

remain abreast of the latest trends in the areas of money laundering, payments systems, fraud, and cybercrime. 

The OCC Compliance Policy Department leads our National Anti-Money Laundering Group (NAMLG), which is an internal forum that serves as the focal point 

for BSA/AML issues within the agency. The NAMLG facilitates intra-agency communication; promotes cooperation and information sharing with national and district office AML groups; identifies emerging risks, best practices, and possible 

changes in anti-money laundering policies and procedures; discusses legislative proposals; and serves as a clearinghouse for ideas developed throughout the OCC. The 

NAMLG’s resource sharing program initiative provides BSA policy expert resources 

to complex banks, higher risk banks, or examinations in need of specialized expertise. The resource-sharing program promotes BSA/AML knowledge transfer and examiner development, and improves the allocation of BSA resources. 

Interagency Cooperation 

The OCC cooperates and coordinates on an interagency basis to address BSA/AML 

issues. For example, we are participating in the interagency Task Force on the U.S. 

AML Framework, led by Under Secretary of the Treasury David Cohen, which will 

take a close look at the BSA and its requirements to ensure that this 40-year old 

statutory framework remains relevant in today’s world. The OCC also participates 

in several interagency groups, including the Bank Secrecy Act Advisory Group 

(BSAAG); 4 the newly formed BSAAG Delta Team; 5 the FFIEC BSA Working 

Group; 6 and the National Interagency Bank Fraud Working Group. 7

The OCC works closely with the U.S. Treasury’s Office of Terrorism and Financial 

Intelligence (TFI), FinCEN, and OFAC to promote the implementation of sound 

international anti-money laundering and counterterrorist financing (AML/CFT) 

standards. In addition, the OCC annually hosts two AML schools to train our foreign counterparts, and we are active participants in the U.S. delegation to the Financial Action Task Force (FATF) that is led by TFI. We have participated in various State and Treasury Department missions to assist foreign Governments in 

their anti-money laundering efforts. 

48 

The OCC has a long history of cooperation with law enforcement and we work 

closely with law enforcement agencies when there are ongoing parallel investigations involving a national bank or thrift by providing documents, information, and 

expertise that is relevant to a potential criminal violation. As described in the Appendices to this testimony, OCC examination findings have been instrumental in developing some of the most significant BSA/AML cases, and have resulted in criminal 

charges and convictions of bank officials. 

IV. OCC’s BSA/AML Supervisory and Enforcement Process 

Effective bank supervision requires clear communications between the OCC and 

the bank’s senior management and board of directors. In most cases, problems in 

the BSA/AML area, as well as in other areas, are corrected by bringing the problem 

to the attention of bank management and obtaining management’s commitment to 

take corrective action. A Report of Examination, or Supervisory Letter (used for 

large or midsize banks), documents the OCC’s findings and conclusions with respect 

to our supervisory review. Once problems or weaknesses are identified and communicated to the bank, the bank’s senior management and board of directors are expected to promptly correct them. The actions that a bank takes, or agrees to take, 

to correct deficiencies are important factors in determining whether more forceful 

action is needed. 

Enforcement Remedies and Process 

OCC enforcement actions fall into two broad categories: informal and formal. In 

general, informal actions are used when the identified problems are of limited scope 

and magnitude and bank management is regarded as committed to and capable of 

correcting them. Informal actions include safety and soundness plans, commitment 

letters, memoranda of understanding and matters requiring board attention in examination reports. These generally are not public actions. 

The OCC also uses a variety of formal enforcement actions to support its supervisory objectives. Unlike most informal actions, formal enforcement actions are authorized by statute, are generally more severe, and are disclosed to the public. Formal actions against a bank include C&D orders, formal written agreements, safety 

and soundness orders, and civil money penalties (CMPs). C&D orders and formal 

agreements may be entered into consensually by the OCC and the bank and require 

the bank to take certain actions to correct identified deficiencies. The OCC also may 

take formal action against officers, directors, and other individuals associated with 

an institution (institution-affiliated parties or IAPs). Possible actions against institution-affiliated parties include removal and prohibition from the banking industry, 

CMPs, and personal C&D orders. 

As previously mentioned, when deficiencies in the BSA/AML area rise to the level 

of a BSA compliance program violation (12 CFR §§21.21 or 163.177), or when a bank 

fails to correct problems with the program that had been previously reported to the 

bank, we are required under 12 U.S.C. §1818(s) to use our C&D authority to correct 

the problem. The OCC worked with the other Federal banking agencies to develop 

and issue an interagency policy on citing BSA compliance program violations and 

taking enforcement actions, and our enforcement decisions are framed by that policy. The Interagency Statement on Enforcement of BSA/AML Requirements (Interagency Statement) was issued in 2007 and it sets forth the agencies’ policy on the 

circumstances in which an agency will issue a C&D order to address noncompliance 

with certain BSA/AML requirements, particularly in light of the statutory mandate 

in Section 1818(s). The Interagency Statement provides that a compliance program 

violation occurs where either of the following conditions exists: 

The bank fails to adopt or implement a written BSA compliance program 

that adequately covers the required program elements: (1) internal controls 

(including customer due diligence, procedures for monitoring suspicious activity or appropriate risk assessment); (2) independent testing; (3) designated compliance personnel; and (4) training; or 

The bank has defects in its BSA compliance program in one or more program elements indicating that either the written program or its implementation is not effective. For example, program deficiencies indicate ineffectiveness where the deficiencies are coupled with other aggravating factors 

such as evidence of: (i) highly suspicious activity creating a significant potential for unreported money laundering or terrorist financing; (ii) patterns 

of structuring to evade reporting requirements; (iii) significant insider complicity; or (iv) systemic failures to file currency transaction reports, suspicious activity reports, or other required BSA reports. 

49 

8The MMSRC was established by the Comptroller late last year to further strengthen and 

enhance the review process for significant enforcement cases, including large bank BSA/AML 

cases, to include the most senior staff within the OCC. The MMSRC is chaired by the OCC’s 

Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank Examiner, and 

includes the Chief of Staff, the Senior Deputy Comptrollers for Midsize and Community Bank 

and Large Bank Supervision, as well as the Chief Counsel. The MMSRC reviews all large bank 

enforcement actions that include articles addressing BSA, all BSA CMPs involving large banks 

and all prohibitions/removals against individuals for violations of the BSA. The Washington Supervision Review Committee (WSRC) continues to review BSA enforcement actions proposed by 

the OCC to be taken against midsize and community banks. 

A program violation may occur where customer due diligence, monitoring of suspicious activity, risk assessment, or other internal controls fail with respect to a 

‘‘high risk area,’’ or to ‘‘multiple lines of business that significantly impact the 

bank’s overall BSA compliance.’’ The agency will also consider the application of the 

bank’s program across its business lines and activities. In the case of banks with 

multiple lines of business, deficiencies affecting only some lines of business or activities would need to be evaluated to determine if the deficiencies are so severe or significant in scope as to result in a conclusion that the bank has not implemented 

an effective overall program. 

The Interagency Statement also specifically addresses repeat problems for purposes of the statutory mandate for a C&D order in 12 U.S.C. §1818(s). It provides 

that in order to be considered a ‘‘problem’’ within the meaning of section 1818(s), 

the deficiency reported to the institution would ordinarily involve a serious defect 

in one or more of the required components of the institution’s BSA compliance program or implementation thereof. In addition, it sometimes takes a considerable period of time to correct BSA/AML deficiencies especially when large institutions 

merge system platforms and information technology changes are required. As a result, with regard to repeat problems, the Interagency Statement provides that a 

C&D is not required if the agency determines that the institution has made ‘‘acceptable substantial progress’’ toward correcting the problem at the time of the examination immediately following the examination where the problem was first identified 

and reported to the institution. 

To ensure that the OCC’s process for taking administrative enforcement actions 

based on BSA violations is measured, fair, and fully informed, in 2005, the OCC 

adopted a process for taking administrative enforcement actions against banks 

based on BSA violations, including situations where a bank fails to correct a problem that was previously brought to its attention. This process includes the following 

stages: 

1. Preliminary assessment of the facts and discussion with bank management. 

2. Additional reviews by cross-functional review groups, including the OCC’s 

Large Bank Review Team. 

3. Written findings provided to the bank and an opportunity for the bank to respond. 

4. Major Matters Supervision Review Committee or Washington Supervision Review Committee review. 8

5. Final decision by the MMSRC or an appropriate Senior Deputy Comptroller. 

Recent Enforcement Actions 

Since September 11, 2001, the OCC has issued over 195 public formal enforcement actions based in whole, or in part, on BSA/AML violations (including formal 

agreements, C&D orders, and CMP actions). Some of the more significant recent 

cases were actions against Wachovia Bank, N.A., HSBC Bank USA, N.A., Citibank, 

N.A., and JPMorgan Chase, N.A. A brief description of these actions is set forth in 

Appendix A to this testimony. Each of these cases have been discussed extensively 

at public forums and they underscore the OCC’s commitment to ensuring that all 

national banks and Federal savings associations have a strong BSA/AML function 

that keeps pace with changing technologies and threats. 

The OCC has also brought enforcement actions against responsible individuals for 

BSA/AML violations, and OCC examination findings have been instrumental in 

bringing successful criminal actions against bank insiders, including a Vice-President of Riggs Bank and the Chairman of the Board of Directors of Broadway National Bank. Some of the more significant BSA/AML cases involving bank insiders 

are discussed in Appendix B to this testimony. In addition, the OCC’s Enforcement 

and Compliance Division has also brought countless actions against bank insiders 

for insider fraud and abuse over the years. While establishing the culpability of individuals in cases of institutional failures such as BSA compliance program breakVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00053 Fmt 6621 Sfmt 6621 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
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9The OCC recently requested Office of Management and Budget (OMB) approval and invited 

public comment for this additional MLR data collection. See Office of the Comptroller of the Currency; Agency Information Collection Activities; Submission for OMB Review; Comment Request; Bank Secrecy Act/Money Laundering Risk Assessment, 77 FR 70544 (Nov. 26, 2012). An 

additional 30-day request for OMB approval and comment letter will be published in the Federal 

Register that will provide a summary of the comments received. 10See, e.g., In the Matter of JPMorgan Chase Bank, N.A., Columbus, Ohio, OCC 2013-002 

AA-EC-13-04, Art. IV, p. 8 (Jan. 14, 2013); In the Matter of Citibank, N.A., Sioux Falls, South 

Dakota, OCC 2012-52 AA-EC-12-18, Art. IV, p. 7. (April 4, 2012)); In the Matter of HSBC Bank 

USA, N.A., Mclean, VA, OCC 2010-199 AA-EC-10-98, Art. VI, p. 10 (Sept. 24, 2010); In the Matdowns can be challenging, the OCC is committed to taking such actions where they 

can be supported. To this end, the OCC conducts a review of individual misconduct 

as part of all significant investigations into BSA noncompliance. As further described below, the OCC is exploring possible regulatory changes that would enhance 

its ability to take removal and prohibition actions in appropriate cases. 

V. Actions Undertaken To Improve BSA/AML Supervision and Enforcement 

The OCC is committed to rigorous supervision, strong enforcement, and continuous improvement to our supervisory approach to BSA/AML compliance. While the 

OCC has made substantial progress in improving its supervision in the BSA/AML 

area, we recognize that there remains work to be done, and that BSA/AML supervision can never be static. We are committed to ongoing evaluation of our approaches to BSA/AML compliance and to appropriate revisions to our approach in 

light of technological developments, and the increasing sophistication of money 

launderers and terrorist financiers, as well as to address aspects of the process 

where shortcomings were evidenced. To this point, we have recently made, or are 

in the process of making a number of enhancements to our supervisory processes 

which are described below: 

• We have established a MMSRC comprised of the most senior level staff within 

the OCC to review high profile and complex BSA/AML enforcement matters; 

• We no longer reflect BSA/AML findings in the FFIEC consumer compliance rating, rather, we fully consider BSA/AML findings in a safety and soundness context as part of the management or ‘‘M’’ component of a bank’s CAMELS rating; 

• We are clarifying the operation of our BSA Large Bank Review Team to ensure 

we bring different perspectives to bear and react more quickly when a bank has 

multiple matters requiring attention (MRAs), or apparent violations of its BSA/ 

AML program; 

• We have provided more flexibility for citing BSA/AML violations for individual 

‘‘pillar’’ violations (i.e., internal controls, BSA officer, testing, and training) and 

will be issuing additional guidance to the examination staff shortly; 

• We are in the process of identifying steps we can take in our examinations to 

obtain a holistic view of a bank’s BSA/AML compliance more promptly; 

• We have implemented an internal bank supervision appeals program that supports the open discussion of concerns, reinforces our expectations that examiners and other supervisory staff should identify potential problems they see at 

the banks and thrifts we regulate, and provides the opportunity to escalate 

those issues when necessary; 

• We are reviewing the manner in which MRAs are reported to ensure that banks 

with high numbers of MRAs in one particular CAMELS/ITCC area are receiving 

additional supervisory attention and, in the case of BSA/AML, consideration of 

formal enforcement action; and 

• We are annually updating the OCC’s community bank MLR System and considering whether similar tools should be implemented in our large bank and 

midsize bank portfolios. 9

The OCC has also made, or is considering making, the following changes in the 

areas of corporate governance, enterprise-wide compliance, and removal and prohibition authority. In addition, there is one possible regulatory change that we believe 

should be considered, and the OCC supports two legislative changes in the BSA/ 

AML area. Each is discussed below: 

Corporate Governance 

A number of recent BSA/AML enforcement actions involving large complex banking organizations have highlighted the need for strong internal controls and corporate governance. 10 To address this, recent OCC enforcement actions have included the following requirements: 

51 

ter of Wachovia Bank, National Association, Charlotte, NC, OCC 2010-37 AA-EC-10-17, Art. II, 

p. 5. (Mar. 12, 2010). 11See, e.g., In the Matter of JPMorgan Chase Bank, N.A., Columbus, Ohio, OCC 2013-002 

AA-EC-13-04, Art. XI, p. 22 (Jan. 14, 2013); In the Matter of Citibank, N.A., Sioux Falls, South 

Dakota, OCC 2012-52 AA-EC-12-18, Art. VIII and XI, pp. 15, 21 (April 4, 2012); In the Matter 

of HSBC Bank USA, N.A., Mclean, VA, OCC 2010-199 AA-EC-10-98, Art. XII, p. 17 (Sept. 24, 

2010); In the Matter of Wachovia Bank, National Association, Charlotte, NC, OCC 2010-37 AAEC-10-17, Art. IX, p. 13. (Mar. 12, 2010); In the Matter of Arab Bank, PLC, New York, NY, 

OCC 2005-14 AA-EC-05-12, Art. III and IV, pp. 4, 9 (Feb. 24, 2005). 

1. A designated BSA Officer with sufficient knowledge, funding, authority, independence, compensation, and supporting staff to perform his or her assigned 

responsibilities and maintain effective compliance with the BSA and its implementing regulations; 

2. An effective governance structure to allow the BSA Officer and the compliance 

function to administer the program independently by reporting directly to the 

board of directors, or a committee thereof, with clear lines of responsibility beginning with senior management and including each line of business that is 

required to comply with the BSA; 

3. Clearly defined channels for informing the board of directors, or a committee 

thereof, and senior management, of compliance initiatives, compliance risks, 

new product development, identified compliance deficiencies, and corrective actions undertaken; 

4. Compliance staff with the appropriate level of authority and independence to 

implement the BSA/AML compliance program and, as needed, question account 

relationships, new products and services and business plans; 

5. Policies and procedures that clearly outline the BSA/AML responsibilities of 

senior management and relevant business line employees, and that hold senior 

management and line of business management accountable for effectively implementing bank policies and procedures, and fulfilling BSA/AML obligations; 

6. A well-defined succession plan for ensuring the program’s continuity despite 

changes in management, staffing, or structure, and policies and procedures to 

ensure that problems with excessive turnover of compliance staff or the BSA 

Officer function are identified, investigated, and appropriately addressed by the 

board; 

7. Policies and procedures to ensure that the bank’s risk profile is periodically updated to reflect higher risk banking operations (products, services, customers, 

entities, and geographic locations) and new products and services; 

8. An enterprise-wide management information system that provides reports and 

feedback that enables management to more effectively identify, monitor, and 

manage the organization’s BSA risk on a timely basis; and 

9. A strong BSA/AML audit function that ensures that identified deficiencies are 

promptly addressed and corrected. 

The OCC is in the process of drafting detailed guidance to banks on sound corporate governance processes that will incorporate many of these concepts, including 

business line accountability for BSA/AML compliance and the independence of the 

compliance function. 

Enterprise-wide Compliance and Limitations on Activities 

Recent OCC enforcement actions have contained articles that address enterprisewide compliance to ensure that the banking company’s global AML program is commensurate with the risks and that all relevant affiliated institutions are included 

in the global risk assessment. Although current BSA/AML automated monitoring 

systems do not have the capability to ensure enterprise-wide monitoring on a real 

time global basis, the OCC expects banks to have strong customer due diligence 

processes and understand the extent that a particular customer may have accounts 

or transactions flowing through other segments of the organization. The OCC also 

expects that the extent and scope of this activity should be periodically reviewed on 

a risk basis by the bank’s compliance staff and included within the audit. 

Recent enforcement actions have also contained provisions that limited or restricted a bank’s products and services due to inadequate BSA/AML controls with 

respect to those products and services. 11 In some cases, banks ceased engaging in 

a particular line of business as a result of the OCC examination (e.g., correspondent 

banking or bulk cash repatriation) and the OCC article required OCC approval 

should the bank decide to restart that particular line of business or service. In other 

cases, the OCC affirmatively took action to restrict certain high-risk lines of busiVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00055 Fmt 6621 Sfmt 6621 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
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12 In the Matter of Arab Bank, PLC, New York, NY, OCC 2005-14 AA-EC-05-12, Art. VII, p. 

15 (Feb. 24, 2005)(Federal branch conversion to an agency). 

ness or reduce the risk profile of the institution. 12 This authority is similar to civil 

injunctive relief to limit bank activities for a period. The OCC will continue to use 

this C&D authority when warranted. 

Removal and Prohibition Authority 

As previously noted, the OCC has the statutory authority to issue an order of removal and prohibition from office against an IAP of a bank whenever the OCC determines that the IAP has committed a violation of the BSA and such violation was 

not inadvertent or unintentional, or the insider has knowledge that an IAP has violated any provision of the BSA. 12 U.S.C. §1818(e)(2)(A)(ii). In addition, the OCC 

may remove an officer or director of a bank who has knowledge that an IAP of the 

bank has violated any provision of the BSA, taking into account whether the officer 

or director took appropriate action to stop, or to prevent the recurrence of the violation. 12 U.S.C. §1818(e)(2)(A)(ii) and (B). The OCC is currently reviewing these provisions and exploring whether a regulation or other agency issuance interpreting 

these sections of the statute would be helpful in bringing such actions and providing 

notice to the industry regarding the type of conduct or wrongdoing that is subject 

to a removal or prohibition action. 

Enhanced Information Sharing 

Financial intelligence, criminal typologies, and information sharing between Government agencies, regulators, and financial institutions is essential to the prevention and deterrence of money laundering and other financial crimes. In particular, 

financial institutions can benefit from improved and consistent access to information 

concerning money laundering and terrorist financing schemes and typologies, 

vulnerabilities, and red flags to ensure that they can appropriately manage their 

risks. Such information is also valuable to examiners in preparing for and performing examinations. In addition, active knowledge sharing processes will discourage situations described as a possible ‘‘commodification’’ of BSA reporting by banks 

that focuses on the quantity, rather than the quality or actual risk associated with 

a transaction, including with respect to SAR filings. 

To this end, the OCC supports efforts to enhance information sharing, including 

the provision of information from the Government to financial institutions. The OCC 

is interested in exploring all possible methods and means of accomplishing this, including changes in the way that communication channels established to implement 

section 314(a) of the USA PATRIOT Act are presently used. 

Possible Legislative Changes—Expansion and Clarification of Safe Harbors 

The OCC recognizes the importance of ensuring that the agencies’ enforcement 

authorities remain current and relevant in this area. We think there are opportunities to modify existing BSA safe harbors to encourage institutions to share information without incurring liability, and to file SARs without running the risk that the 

bank will be exposed to litigation for simply complying with Federal law. The OCC 

would support legislation to expand the information sharing safe harbors in Section 

314(b) of the USA PATRIOT Act beyond money laundering and terrorist financing, 

and to eliminate or modify the notice requirement to FinCEN, which may be limiting the ability of financial institutions to share information. The OCC would also 

strongly support legislation that clarifies that the safe harbor from liability for filing 

SARs is absolute and there is no good faith requirement. 

VI. Conclusion 

The OCC is committed to rigorous BSA/AML and OFAC supervision, strong enforcement, and continuing improvement in our supervision in this important area. 

While there are many challenges in this area, we will continue to work with Congress, the other financial institutions regulatory agencies, law enforcement agencies, 

and the banking industry to develop and implement a coordinated and comprehensive response to the threat posed to the Nation’s financial system by money 

launderers, terrorist financiers, and criminal organizations. 

Appendix A 

Notable OCC BSA/AML Enforcement Actions Against Banks 

Wachovia Bank, N.A., Charlotte, North Carolina (Wachovia)—In March 2010, the 

OCC assessed a $50 million penalty and issued a C&D order against this bank for 

violations of the BSA as part of a coordinated action with the Department of Justice 

(DOJ), FinCEN, and other Federal agencies. Wachovia also entered into a deferred 

53 

13Some of the critical deficiencies in the Bank’s BSA/AML compliance program cited in the 

OCC’s order included the following: (i) lack of effective monitoring of wire activity; (ii) failure 

to perform any BSA/AML monitoring for banknote (or ‘‘bulk cash’’) transactions with Group Entities (affiliates) or maintain customer due diligence information on Group Entities; and (iii) serious weaknesses in Bank’s systems and controls constituting violations of 12 CFR 21.21 (program), 21.11 (SAR), and 31 CFR 103.176 (correspondent banking). 

prosecution agreement with the U.S. Attorney’s Office in the Southern District of 

Florida and the DOJ Asset Forfeiture and Money Laundering Section (AFMLS) and 

agreed to a $110 million forfeiture to the U.S. Government. Additionally, FinCEN 

assessed a $110 million civil money penalty that was deemed satisfied by the forfeiture. The OCC’s enforcement action focused attention on the bulk cash repatriation money-laundering scheme. The OCC played a lead role in this case and linked 

remote cash letter instrument processing to the bulk cash scheme. Because of the 

Wachovia investigation and findings, the OCC took the lead in integrating bulk cash 

processing and the RDC implications into the Manual and commenced horizontal reviews of bulk cash activity and RDC at all national banks in the OCC’s Large Bank 

supervision program, including HSBC’s banknote activity. There were also significant corporate governance issues identified at Wachovia that prompted the OCC to 

include several corporate governance provisions in the C&D order. 

Shortly after the Wachovia case, the Government of Mexico implemented significant restrictions on U.S. dollar transactions at Mexican financial institutions and 

made significant changes to its AML laws and regulatory processes. In response, the 

drug cartels have adjusted their money-laundering schemes and techniques to adapt 

to this change, and the OCC continues to work with law enforcement to identify new 

areas of vulnerability. 

HSBC Bank USA, N.A., Mclean, VA (HSBC)—In October 2010, the OCC issued 

a C&D order against HSBC for compliance program and BSA violations. This was 

followed in December 2012 with a $500 million penalty against the bank—the largest penalty the OCC, or any other Federal banking agency, has ever assessed. In 

addition, the DOJ entered into a deferred prosecution agreement with the bank, 

which admitted to criminal violations of the BSA. The DOJ imposed a $1.256 billion 

forfeiture action against the bank and HSBC Holdings plc (London) (HSBC Group); 

and the Federal Reserve assessed a $160 million penalty against the bank’s parent 

company, HSBC North American Holdings Inc. (HNAH), and HSBC Group. The assessed penalties and forfeiture amounts totaled $1.92 billion. FinCEN, the New 

York County District Attorney’s Office, and OFAC also assessed penalties that were 

satisfied by the monetary sanctions levied by the OCC and DOJ. Additionally, the 

Financial Services Authority in the United Kingdom entered into an agreement with 

HSBC Group to enhance its BSA/AML compliance and will assist the DOJ and the 

Federal Reserve in monitoring HSBC Group’s compliance with the deferred prosecution agreement and the Federal Reserve’s order. 

In mid-2009, because of the bulk cash findings in the Wachovia investigation, the 

OCC launched horizontal examinations of banknote operations in other large national banks supervised by the OCC that included HSBC and its transactions with 

HSBC Mexico. After meeting with law enforcement and obtaining additional information on this activity, the OCC developed a detailed action plan to expand the 

scope of the ongoing examination of banknote customers. As a part of the examination, the OCC notified the bank in March 2010 that it had violated OCC regulations 

due to a significant backlog of unprocessed alerts. The bank’s compliance program 

and its implementation were found to be ineffective and the OCC issued a C&D 

order against the bank in October 2010. 13 Concurrent with the OCC’s enforcement 

action, the Federal Reserve issued a C&D order upon consent with HNAH to ensure 

the adequacy of the parent company’s firm-wide compliance risk management program. The OCC and the Federal Reserve coordinated closely in drafting the respective orders. The OCC’s C&D order required the bank to submit a comprehensive 

BSA/AML action plan to achieve full compliance, ensure that the bank has sufficient 

processes, personnel, and control systems to implement and adhere to the order. The 

order also contains restrictions on growth, new products, and high-risk lines of business, and it requires OCC approval to reenter the bulk cash repatriation business. 

Citibank, N.A., Sioux Falls, South Dakota (Citibank)—In April 2012, the OCC entered into a C&D order with Citibank, N.A., to address BSA deficiencies involving 

internal controls, customer due diligence, audit, monitoring of its RDC and international cash letter instrument processing in connection with foreign correspondent 

banking, and suspicious activity reporting relating to that monitoring. These findings resulted in violations by the bank of statutory and regulatory requirements to 

maintain an adequate BSA compliance program, file SARs, and conduct appropriate 

due diligence on foreign correspondent accounts. Among its requirements, the order 

54 

directs the bank to: (i) ensure the independence of the bank’s compliance staff; (ii) 

require new products and services be subject to high level compliance review; (iii) 

ensure that all customer due diligence processes are automated and accessible; and 

(iv) conduct a look back review of the RDC cash letter activity. 

JPMC Bank, N.A., Columbus, Ohio (JPMC)—In January 2013, the OCC entered 

into a C&D order with JPMC Bank, N.A., and two of its affiliates, to address deficiencies involving internal controls, independent testing, customer due diligence, 

risk assessment, and SAR processes (monitoring, investigating and decision making). The bank also did not have enterprise-wide policies and procedures to ensure 

that foreign branch suspicious activity involving customers of other bank branches 

is effectively communicated to other affected branch locations and applicable antimoney laundering operations staff. Additionally, the bank did not have enterprisewide policies and procedures to ensure that, on a risk basis, customer transactions 

at foreign branch locations can be assessed, aggregated, and monitored. OFAC deficiencies were also identified. These findings resulted in violations by the bank of 

statutory and regulatory requirements to maintain an adequate BSA compliance 

program, file SARs, and conduct appropriate due diligence on foreign correspondent 

accounts. Among its requirements, the consent order directs the bank to: (i) ensure 

the independence of the bank’s compliance staff; (ii) ensure that there are clear lines 

of authority and responsibility for BSA/AML and OFAC compliance with respect to 

lines of business and corporate functions; (iii) require new products and services be 

subject to high level compliance review; (iii) ensure that all customer due diligence 

processes are automated and accessible; and (iv) conduct a look back review of certain account/transaction activity and SAR filings. 

Appendix B 

Notable OCC BSA/AML Enforcement Actions Against IAPs 

Jefferson National Bank, Watertown, New York (Jefferson)—During the examination of this bank, the OCC learned from the Federal Reserve Bank of New York that 

the bank was engaging in cash transactions that were not commensurate with its 

size. OCC examiners subsequently discovered that several bank customers were depositing large amounts of cash that did not appear to be supported by the purported 

underlying business, with the funds being wired offshore. The OCC filed reports 

with law enforcement pertaining to this cash activity and insider abuse and fraud 

at the bank. The OCC also briefed several domestic and Canadian law enforcement 

agencies alerting them to the significant sums of money flowing through these accounts at the bank. Additionally, the OCC brought a removal action against a director and issued a personal C&D order against the President. Based upon this information, law enforcement commenced an investigation of these large deposits. The 

investigation resulted in one of the most successful money-laundering prosecutions 

in U.S. Government history. The significant sums of money flowing through the 

bank were derived from cigarette and liquor smuggling through the Akwesasne Indian Reservation in northern New York. The ring smuggled $687 million worth of 

tobacco and alcohol into Canada between 1991 and 1997. The case resulted in 21 

indictments that also sought the recovery of assets totaling $557 million. It also resulted in the December 1999 guilty plea by a subsidiary of R.J. Reynolds Tobacco 

Company and the payment of a $15 million criminal fine. Seven bank officers and 

directors were ultimately convicted of crimes. 

Broadway National Bank, New York, New York (Broadway)—The OCC received 

a tip from law enforcement that this bank may be involved in money laundering. 

The OCC immediately opened an examination that identified a number of accounts 

at the bank that were either being used to structure transactions, or were receiving 

large amounts of cash with wire transfers to countries known as money laundering 

and drug havens. Shortly thereafter, the OCC issued a C&D order that shut down 

the money laundering and required the bank to adopt stringent controls. The OCC 

also initiated prohibition and CMP cases against bank insiders. In referring the 

matter to law enforcement, we provided relevant information including the timing 

of deposits that enabled law enforcement to seize approximately $4 million and arrest a dozen individuals involved in this scheme, and the former Chairman of the 

Board of the bank pled guilty to structuring transactions through the bank using 

an import/export company that he owned. The subsequent OCC investigation resulted in the filing of additional SARs, the seizure of approximately $2.6 million in 

additional funds, more arrests by law enforcement, and a referral by the OCC to 

FinCEN. In November 2002, the bank pled guilty to a three-count felony information that charged it with failing to maintain an AML program, failing to report approximately $123 million in suspicious bulk cash and structured cash deposits, and 

aiding and assisting customers to structure approximately $76 million in transactions to avoid the CTR requirements. The bank was required to pay a $4 million 

55 

criminal fine. In 2003, the OCC assessed civil money penalties against the former 

President and the former Chief Executive Officer. 

Riggs Bank, N.A., Washington, DC (Riggs)—In April 2002, the OCC conducted a 

review of Riggs’ International Private Banking Department and discovered that the 

bank had established personal and private investment company accounts for deposed Chilean dictator Augusto Pinochet. The OCC review and subsequent investigation revealed that, among other things, the Pinochets and their private investment companies received approximately $1.9 million in funds. Shortly after these 

issues were discovered, the OCC brought the Pinochet accounts to the attention of 

the DOJ and the Department of the Treasury, conducted additional examination 

work and issued a C&D order against the Bank in July 2003. The OCC also discovered that the bank’s vice president and relationship manager for these accounts had 

signature authority over two accounts within the relationship, failed to follow bank 

SAR processes concerning suspicious transactions on a timely basis, and did not 

properly monitor the accounts as high-risk accounts. The OCC reported these findings to law enforcement and the relationship manager and his wife were ultimately 

convicted of bank fraud and money laundering. As a result of the conviction, the 

OCC issued a notice to the relationship manager advising him that he was prohibited from banking under 12 U.S.C. §1829. The OCC also assessed a $25 million 

CMP against the bank, as did FinCEN (FinCEN’s penalty was satisfied by a single 

$25 million payment to the Department of the Treasury). The bank also pled guilty 

to one felony count of failure to file suspicious activity reports and agreed to pay 

a $16 million criminal penalty. 

Pacific Bank, N.A., Miami, Florida (Pacific)—In March 2011, the OCC and 

FinCEN assessed $7 million civil money penalties against Pacific National Bank, 

Miami, Florida, for violations of the BSA as part of a coordinated action. The OCC 

conducted two examinations of the Bank in 2009 and 2010 and determined that the 

Bank: (i) continued to be in noncompliance with an OCC C&D Order that was 

issued in December 2005 and which contained specific articles requiring enhancement to the bank’s BSA compliance program, and (ii) continued to violate the requirements of the BSA and OCC regulations. The OCC shared its examination findings with FinCEN and issued a revised C&D Order against the Bank on December 

15, 2010. In March 2011, the OCC issued civil money penalties against four Pacific 

National Bank board members and the bank’s former CEO. The penalties were assessed for the failure of these responsible directors and officers to take the necessary 

actions to ensure the bank’s compliance with the C&D order issued by the OCC in 

2005. 

Security Bank, N.A., North Lauderdale, Florida (Security)—In August 2010 the 

OCC initiated an investigation into the affairs of this bank after issuing a C&D 

order against the bank in May 2010. The Order related to safety and soundness concerns as well as BSA deficiencies, including a violation of the compliance program 

regulation and the SAR regulation. The investigation revealed that, among other 

things, former officers and directors of the bank failed to ensure that the bank complied with BSA/AML requirements and failed to comply with the C&D order issued 

by the OCC. In addition, the former Chief Executive Officer played a significant role 

in bringing high-risk business to the bank starting in 2007 even though he knew 

or should have known that the bank was ill equipped to monitor and control such 

accounts. In January 2013, the OCC assessed civil money penalties and personal 

C&D orders against five former directors and officers of the bank, including the 

former CEO. The personal C&D orders addressed, among other things, the Bank’s 

BSA deficiencies, and required each respondent to: (i) fully comply with all laws, 

regulations and policies applicable to any insured depository institution which employs him; (ii) exercise safe and sound banking practices; (iii) observe fiduciary duties of loyalty and care; (iv) adhere to written policies and procedures of any insured 

depository institution to which he may become affiliated; (v) obtain appropriate 

BSA/AML training; and (vi) provide appropriate BSA/AML training for bank officers 

and directors within his supervision and control. 

PREPARED STATEMENT OF JEROME H. POWELL 

MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

MARCH 7, 2013 

Chairman Johnson, Ranking Member Crapo, and other Members of the Committee, thank you for inviting me to discuss the important role the Federal Reserve 

plays in the U.S. Government’s effort to combat money laundering and terrorist financing. I will begin by describing our efforts to ensure banking industry compliVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00059 Fmt 6621 Sfmt 6621 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
56 

1The FFIEC member agencies include the Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), 

and the Consumer Financial Protection Bureau (CFPB), as well as the Board of Governors of 

the Federal Reserve System. 

ance with the requirements of the Bank Secrecy Act (BSA) and the economic sanctions authorized by the President and Congress. I will also highlight some of the 

important actions we have taken to enforce the law and to promote safe and sound 

practices in this area. 

Background 

Congress enacted the BSA in 1970 to help safeguard the U.S. financial system 

and our financial institutions from the abuses of financial crime, and has revised 

and strengthened the act many times since. The Federal Reserve has issued regulations to implement the BSA, including regulations that require the institutions we 

supervise to establish a BSA compliance program, and has integrated BSA examinations into our supervisory program. The Federal Reserve also works closely with 

Treasury’s Financial Crimes Enforcement Network (FinCEN) to ensure that the institutions we supervise provide law enforcement with the reports prosecutors need 

to investigate suspicious activity. 

The particular steps a banking organization must take to develop a BSA compliance program have been documented extensively. The foundation for such a program begins with a well-developed and documented risk assessment that identifies 

and limits the risk exposures of the banking organization’s products, services, customers, and geographic locations. Monitoring systems should be in place to identify 

and report suspicious activity, in particular any account or transaction activity that 

is not consistent with the bank’s expectations. These systems should be accompanied by a strong training program to ensure that personnel, including those in 

offshore offices, are familiar with U.S. regulatory requirements and bank policies. 

The BSA compliance program should be reviewed by management, subjected to periodic independent tests that measure whether the program is functioning properly, 

and improved as needed. Finally, a qualified bank officer should be given sufficient 

authority to ensure that regulatory requirements and bank policies are being followed on a day-to-day basis. 

Banking organizations are also expected to maintain a program for ensuring compliance with U.S. economic sanctions administered by the Treasury’s Office of Foreign Assets Control (OFAC). The OFAC program should identify higher-risk areas 

within a bank’s operations, and implement appropriate internal controls for screening and reporting prohibited transactions. Banks are expected to perform independent testing for compliance, designate a bank employee or employees that are 

specifically responsible for OFAC compliance, and create training programs for appropriate personnel in all relevant areas of the bank. A bank’s OFAC compliance 

program should be commensurate with its activities and its risk profile. 

The Supervisory Process 

The Federal Reserve conducts a BSA and OFAC compliance program review as 

part of its regular safety-and-soundness examination program for the approximately 

1,060 State-member banks; State chartered branches and agencies of foreign banking organizations; and Edge Act and agreement corporations we supervise. The frequency of the on-site examination is normally every 12 to 18 months, depending 

upon the banking organization’s condition, asset size, and rating. On average, we 

conduct approximately 960 BSA and OFAC reviews each year. 

The Federal Reserve’s BSA and OFAC reviews are risk-focused. In other words, 

supervisors have the flexibility to apply the appropriate level of scrutiny to higherrisk business lines. To ensure consistency in the design and execution of our BSA 

and OFAC examinations, we use procedures developed jointly with the member 

agencies of the Federal Financial Institutions Examination Council (FFIEC), 1

FinCEN, and OFAC. The findings of our BSA and OFAC reviews are taken into account in determining the institution’s examination ratings, either as part of the 

management component rating for domestic institutions, or as part of the risk management and compliance component ratings used to evaluate the U.S. operations of 

foreign bank branches and agencies we supervise. 

The Federal Reserve reinforces its supervisory program by conducting targeted examinations of financial institutions that show signs of being vulnerable to illicit financing. Banks are selected for such examinations based on, among other things, 

our analysis of the institution’s payments activity, suspicious activity reports, currency transaction reports, and law enforcement leads. 

57 

The Federal Reserve devotes substantial resources to BSA compliance. Each Federal Reserve Bank has a BSA specialist and coordinator on staff, and, since the late 

1980s, the Board’s Division of Banking Supervision and Regulation has included an 

anti-money laundering section, overseen by a senior official, to help coordinate these 

efforts. 

Coordination Efforts 

Effective implementation and enforcement of the BSA and U.S. economic sanctions requires the participation of, and coordination among, several agencies and 

international groups. Let me be specific about the steps we are taking to coordinate. 

First, to ensure that the banking industry has clear understanding of regulatory 

expectations, the Federal Reserve has actively participated in supervisory forums, 

such as the FFIEC, which has an expansive BSA working group that promotes high 

standards for bank examinations and compliance. In addition, we participate in the 

Bank Secrecy Act Advisory Group, a public-private partnership established for the 

purpose of soliciting advice on the administration of the BSA. The Federal Reserve 

also joined the U.S. Treasury’s Interagency Task Force on Strengthening and Clarifying the BSA/AML Framework (Task Force), which includes representatives from 

the Department of Justice, OFAC, FinCEN, the Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. 

The primary focus of the Task Force is to review the BSA, its implementation, and 

its enforcement with respect to U.S. financial institutions that are subject to these 

requirements, and to develop recommendations for ensuring the continued effectiveness of the BSA and efficiency in agency efforts to monitor compliance. 

Second, to make the supervision of internationally active banking organizations 

more effective, we are engaged as a member of the U.S. delegation to the Financial 

Action Task Force, an international policymaking and standard-setting body dedicated to combating money laundering and terrorist financing globally. Further, as 

a member of the Basel Committee on Banking Supervision (BCBS), we have been 

involved in various efforts to prevent criminal use of the international banking system. For example, in 2009, as a complement to BCBS efforts to promote transparency in cross-border payments, the Federal Reserve issued guidance with other 

Federal banking agencies that clarifies U.S. regulatory expectations for U.S. banks 

engaged in correspondent banking activities. 

Finally, we are working cooperatively with other Federal banking agencies, State 

regulators, the Department of Justice, the Department of Treasury, and foreign regulators to ensure comprehensive enforcement of the law. We have participated in 

many of the largest, most complex enforcement cases in the BSA and U.S. sanctions 

area. Collectively, these cases have focused attention on potential misuse of the financial system for financial crimes, strengthened compliance programs at banking 

organizations (both in the U.S. and abroad), and generated billions of dollars in 

fines paid to the U.S. Treasury. 

Our coordination efforts begin at an early stage in the supervisory process. For 

example, the Federal Reserve brings every instance of an anti-money laundering deficiency or violation to the attention of FinCEN so that FinCEN may consider assessing a penalty for violations of the BSA. We also notify OFAC of any apparent, 

unreported sanctions violations discovered in the course of an examination, and direct the banking organization we supervise to provide information directly to OFAC 

as required by regulation. In addition, we share information and coordinate with the 

Department of Justice, State law enforcement, the Federal banking agencies, and 

State regulators, as appropriate, as part of our enforcement program. 

The Enforcement Process 

It has been our experience that the majority of institutions supervised by the Federal Reserve have well-administered and effective BSA and OFAC compliance programs. Nevertheless, there have been instances where concerns have been raised by 

our examiners. Importantly, the Federal Reserve does not have authority from Congress to conduct criminal investigations or to prosecute criminal cases. The decision 

to prosecute a financial institution for money-laundering offenses and criminal violations of the BSA and U.S. sanctions laws is made by the Department of Justice. 

Most of these problems are resolved promptly after they are brought to the attention of a bank’s management and directors. In some instances, problems are of more 

serious concern and use of the Federal Reserve’s enforcement authority is deemed 

appropriate. In these cases, an informal supervisory action may be taken, such as 

requiring an institution’s board of directors to adopt an appropriate resolution or 

executing a memorandum of understanding between an institution and a Reserve 

Bank. 

58 

2 Board of Governors of the Federal Reserve System (2004), ‘‘Written Agreement With ABN 

AMRO Bank’’, press release, July 26, www.federalreserve.gov/boarddocs/press/enforcement/ 

2004/20040726/default.htm. 

In the most serious cases, the Federal Reserve may take a formal enforcement action against an institution. These actions may include a written agreement, a cease 

and desist order, or a civil money penalty. Congress has also given the Federal Reserve the authority to terminate the operations of certain entities operating in the 

U.S. upon the conviction of a money-laundering offense by the Department of Justice, and to prohibit insiders who intentionally commit such offenses from participating in the banking industry. The type of enforcement action pursued by the Federal Reserve against an institution is directly related to the severity of the offense, 

the type of failure that led to the offense, and management’s willingness and ability 

to implement corrective action. 

In the last 5 years, the Federal Reserve has issued 113 enforcement actions relating to BSA and OFAC compliance, including 25 public cease and desist orders and 

written agreements. Together with these recent actions, the Federal Reserve has assessed hundreds of millions of dollars in penalties. The institutions that have been 

subject to these actions are large and small, domestic and foreign. In each case, the 

Federal Reserve has required the institution to take corrective measures to ensure 

their programs are brought into compliance. 

Enforcement of U.S. Economic Sanctions 

Many of the recent U.S. sanctions cases the Federal Reserve has pursued involve 

foreign banks with operations that extend across many different countries around 

the world. These cases have attracted significant attention and involve a particular 

type of activity worthy of special attention. 

The misconduct in these cases relates primarily to the manner in which these 

firms handle cross-border payments. Cross-border payments can be broadly defined 

as transactions between banking entities that are located in different countries, but 

there are many different permutations of cross-border payments. For example, 

cross-border payments can be carried out as a wire transfer where the originator 

and beneficiary are located in different countries; a wire transfer where the originator and beneficiary are in the same country, but where one or more correspondents in a second country are used; or as a chain of wire transfers that has at least 

one international element. Cross-border payments typically occur when the originator and beneficiary, or their banks, are located in different countries or where the 

currency used for the payments is not the currency of the country where the transaction originates. For example, U.S. dollars may be used to make a payment between parties each located in a different foreign country. 

Structurally, there are usually two components to these cross-border payments: 

(1) the instructions, which contain information about the originator and beneficiary 

of the funds, and (2) the actual funds transfer. The payment instructions for crossborder payments typically are sent to an intermediary bank using industry financial 

telecommunications systems, such as the Society for Worldwide Interbank Financial 

Telecommunication (SWIFT). The actual funds transfer occurs separately, typically 

through the domestic funds transfer system of the originator, via a book transfer 

of an intermediary with a presence on both sides of the border, and through the domestic funds transfer system of the beneficiary. 

Foreign banks often operate in jurisdictions that do not impose the same economic 

sanctions on foreign customers as the United States. Transactions involving these 

sanctioned customers are nonetheless subject to U.S. law if the transaction is routed 

through the U.S., as is typical for transactions conducted in U.S. dollars. Foreign 

banks that operate in countries without sanctions similar to those imposed by the 

United States have not always had in place the mechanisms to ensure transactions 

routed through the U.S. comply with U.S. law. Many of the Federal Reserve’s enforcement activities are directed at remedying these situations. 

One of the Federal Reserve’s most important sanctions enforcement cases involved 

ABN AMRO. In response to corrective measures the Federal Reserve imposed on the 

firm’s New York branch in 2004, 2 which required the bank to review certain historical transactions, ABN AMRO discovered numerous payment messages that were 

sent through its U.S. branch or a U.S. correspondent in a manner designed to circumvent the filters used by the U.S. institution to detect transactions involving 

sanctioned parties. In particular, the information that identified a U.S. sanctioned 

party was omitted from the SWIFT payment sent through the U.S., while a complementary payment instruction with sanctioned party information was deliberately 

routed outside the United States. The Federal Reserve responded by escalating our 

enforcement action to a cease and desist order and imposing a substantial penalty 

59 

3 Board of Governors of the Federal Reserve System (2005), ‘‘Agencies Release Bank Supervisory and Penalty Actions Against ABN AMRO Bank, N.V.’’, press release, December 19, 

www.federalreserve.gov/boarddocs/press/enforcement/2005/20051219/default.htm. 4 Board of Governors of the Federal Reserve System (2009), ‘‘Consent Order To Cease and Desist Against Credit Suisse’’, press release, December 16, www.federalreserve.gov/newsevents/ 

press/enforcement/20091216a.htm; Board of Governors of the Federal Reserve System (2010), 

‘‘Cease and Desist Order Against Barclays Bank and Barclays Bank New York Branch’’, press 

release, August 18, www.federalreserve.gov/newsevents/press/enforcement/20100818b.htm; 

Board of Governors of the Federal Reserve System (2012), ‘‘Federal Reserve Board Issues Consent Cease and Desist Order, and Assesses Civil Money Penalty Against Standard Chartered’’, 

press release, December 10, www.federalreserve.gov/newsevents/press/enforcement/ 

20121210a.htm; and Board of Governors of the Federal Reserve System (2012), ‘‘Federal Reserve 

Board Issues Consent Cease and Desist Order, and Assesses Civil Money Penalty Against HSBC 

Holdings PLC and HSBC North America Holdings, Inc.’’, press release, December 11, 

www.federalreserve.gov/newsevents/press/enforcement/20121211b.htm. 5 Board of Governors of the Federal Reserve System (2010), ‘‘Cease and Desist Order Against 

HSBC North America Holdings’’, press release, October 7, www.federalreserve.gov/newsevents/ 

press/enforcement/20101007a.htm. 6 Board of Governors of the Federal Reserve System (2012), ‘‘Federal Reserve Board Issues 

Consent Cease and Desist Order, and Assesses Civil Money Penalty Against HSBC Holdings 

PLC and HSBC North America Holdings, Inc.’’, press release, December 11, 

www.federalreserve.gov/newsevents/press/enforcement/20121211b.htm. 7 Board of Governors of the Federal Reserve System (2013), ‘‘Federal Reserve Board Issues 

Two Consent Cease and Desist Orders Against JPMorgan Chase & Co.’’, press release, January 

14, www.federalreserve.gov/newsevents/press/enforcement/20130114a.htm. 

8 Board of Governors of the Federal Reserve System (2012), ‘‘Federal Reserve Board Issues 

Enforcement Actions With Calvert Financial Corporation and Mainstreet Bank, Commerzbank 

AG, First Security Bank of Malta, Grant Park Bancshares, Inc., and Robertson Holding ComContinued 

on ABN AMRO. 3 The Federal Reserve’s order required ABN AMRO to implement 

a global compliance program and take specific steps to prevent circumvention of the 

required U.S. sanctions filters. We coordinated this action with other U.S. and foreign regulators, including the home country supervisor for ABN AMRO. 

The Federal Reserve’s enforcement action against ABN AMRO triggered important changes in cross-border payment practices. The Federal Reserve played a key 

role in this debate and in developing the standards that have since been adopted 

to improve transparency in cross-border payment messages—including the standards adopted by the Basel Committee on Banking Supervision and SWIFT. These 

standards require the expanded disclosure of the originator and beneficiary on payment instructions sent as part of cover payments. 

In the years since the ABN AMRO case, the Federal Reserve and other U.S. authorities have taken action against international banks that had been engaged in 

similar evasive misconduct. Most recently, the Federal Reserve has imposed cease 

and desist orders on Credit Suisse, Barclays, Standard Chartered, and HSBC. 4 In 

each case, the bank’s home country supervisor has agreed to help monitor compliance with the Federal Reserve’s order. These enforcement cases reflect our continued view that international banks have an obligation to ensure that they do not 

interfere with the ability of U.S. financial institutions to comply with the sanctions 

laws. 

Enforcement of the Bank Secrecy Act 

The Federal Reserve has also taken a number of recent enforcement actions to 

require depository institutions to improve their BSA programs and comply with 

other anti-money laundering obligations, including the reporting requirements that 

exist under the BSA. While bank holding companies are not statutorily mandated 

to have the same program requirements as depository institutions, we have also 

taken action against bank holding companies to require them to improve their oversight of the subsidiary bank’s BSA programs and compliance. For example, in 2010, 

we issued a cease and desist order against HSBC requiring the U.S. holding company to improve its oversight of the compliance program at HSBC’s national bank 

subsidiary. 5 HSBC’s failure to address our concerns in a timely manner was part 

of the reason for imposing a substantial penalty on HSBC and its U.S. holding company last year. 6

The Federal Reserve takes seriously its responsibility to pursue formal, public action in cases of BSA noncompliance. For example, in January, the Federal Reserve 

issued a cease and desist order requiring JPMorgan Chase to take corrective action 

to enhance its program for compliance with the BSA and other anti-money laundering requirements at the firm’s various subsidiaries. 7 In June 2012, we issued a 

public enforcement action against Commerzbank AG and its U.S. branch for its failure to comply with certain BSA reporting obligations. 8

60 

pany, L.P.’’, press release, June 14, www.federalreserve.gov/newsevents/press/enforcement/ 

20120614a.htm. 

Conclusion 

The Federal Reserve places great importance on ensuring that the institutions we 

supervise comply with the BSA and U.S. economic sanctions. When we find problems at a supervised institution, we demand specific corrective measures, by specific 

dates, and we take strong enforcement actions when necessary. We will continue 

these efforts and work cooperatively with law enforcement and other financial regulators to ensure a coordinated response to the threat posed by illicit financing to the 

U.S. financial system. 

Thank you very much for your attention. I would be pleased to answer any questions you may have. 

61 

RESPONSES TO WRITTEN QUESTIONS OF 

CHAIRMAN JOHNSON FROM DAVID S. COHEN 

Q.1. The major AML–BSA cases discussed at the hearing all illustrate various forms of breakdown in the bank compliance systems 

on which the BSA/AML and economic sanctions rules depend. 

Would you favor a requirement that the CEOs of large banks certify the effectiveness of their BSA/AML/sanctions compliance systems annually? If not, why not? 

A.1. Recent enforcement actions taken against some of the largest 

and most sophisticated financial institutions in the world demonstrate the need for us to take additional steps to ensure that financial institutions are able to effectively implement anti-money 

laundering and countering the financing of terrorism requirements. 

Understanding the circumstances of the failures and preventing 

their recurrence is a top priority for me and for Treasury. As such, 

I recently convened an interagency group, the AML Task Force, 

which is comprised of senior representatives from all the Federal 

regulatory agencies with responsibility for combating money laundering, as well as the Department of Justice. The Task Force is 

conducting a comprehensive review of our anti-money laundering 

(AML)/countering the financing of terrorism (CFT) framework to 

assess its effectiveness with the goal of finding solutions to address 

any gaps, redundancies, or inefficiencies, and to ensure that effective AML/CFT is made a priority within financial institutions. The 

Task Force is committed to reviewing all practical options to improve the effectiveness of our regime, including a potential annual 

BSA/AML attestation requirement for the CEOs of financial institutions, which would be in addition to the existing Title 12 requirements for boards of directors to approve AML programs under 

banking agency rules. 

Q.2. I understand that you are not prosecutors, but you are responsible for oversight of the Nation’s largest financial institutions. Are 

there reasons that it is especially difficult to adequately discipline 

individuals with civil fines, industry removals, use of injunctions, 

limits on certain categories of bank activities, or other sanctions, 

in connection with seemingly significant BSA/AML violations? 

A.2. Treasury is committed to protecting our financial system from 

money laundering, promoting effective compliance with the law, 

and minimizing unnecessary burdens on industry. For every case, 

we scrupulously review the facts and circumstances of the violation 

and determine the appropriate response. I personally am fully committed to enhancing our enforcement posture to the full extent of 

our authorities, including more aggressive injunctive action with 

respect to individuals that may involve barring them from the industry for BSA/AML violations. Although recent sanctions enforcement cases involving financial institutions have typically concluded 

with civil penalties at the corporate level, individuals can and do 

face liability under the International Emergency Economic Powers 

Act when they are personally responsible for sanctions violations. 

Q.3. How does the seriousness with which foreign Governments 

take compliance in this area affect U.S. regulatory efforts and bank 

compliance? Why didn’t foreign regulators, especially in the EU, 

pick up on the correspondent banking and cross-border problems, 

62 

and the wire stripping activity, sooner? Are there other particular 

areas of concern that you think must be addressed in your current 

discussions with foreign regulators? 

A.3. Treasury, along with others in the Federal Government, works 

closely with international counterparts through a combination of 

direct bilateral engagements and international organizations, such 

as the Financial Action Task Force, to strengthen the global AML/ 

CFT framework and promote implementation and enforcement of 

effective AML/CFT measures in all jurisdictions around the world. 

In every engagement, we stress with our partners the importance 

of regulatory enforcement to our shared security. While it is true 

that Europe’s diffuse legal and regulatory systems present a challenge for us and our European partners in building a unified system for combating global threats, we have made important 

progress in highlighting specific weaknesses. In one example of our 

specific engagement, we contribute to the Basel Committee on 

Banking Supervision’s AML/CFT Experts Group that discusses supervisory issues with respect to AML/CFT, and communicates publicly about the role of supervisors with respect to these issues. We 

remain concerned that international regulators and legal systems 

have difficulty addressing challenges posed by cross border cash 

movements, clearing transactions and nonbank financial institutions such as exchange houses and hawaladars. 

Q.4. In the last decade, major new innovative technologies and 

products have come onto the market, including prepaid access 

cards, mobile phone banking, smart ATM machines and kiosks, mobile wallets, Internet cloud-based payment processes, and others— 

and they are evolving rapidly. While they provide huge benefits to 

consumers, they can also pose major AML risks, including by making it easier to move large amounts of money on stored value cards. 

What are you doing to mitigate those risks now, and what should 

banks be doing to mitigate those risks on their own, even as they 

develop these products? 

A.4.We have been closely following the rapidly evolving technological landscape over the past several years to ensure that our 

AML/CFT regulatory system keeps pace with new risks brought 

about by new technologies. For example, when we developed rules 

for prepaid access products, the objective was to allow the regulation to evolve in concert with, and anticipate, technological advancements so that we do not have to return to Congress to request 

additional authorities every time a new technology-driven product 

enters the prepaid access marketplace. We also work collectively 

with our regulatory counterparts on the Federal Financial Institutions Examination Council (FFIEC) to ensure evolving technologies 

are constantly reviewed and addressed as needed through updates 

to the FFIEC Bank Secrecy Act (BSA) exam manual, which is used 

by bank examiners and made available as a reference guide to industry. Moreover, we provide guidance to banks to ensure that they 

are appropriately informed of these developments in order to be 

vigilant in their compliance obligations. The most recent example 

of this is March 2013 guidance issued by the Financial Crimes Enforcement Network (FinCEN) on the application of regulations on 

Virtual Currencies. My office is also helping to lead work in the FiVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00066 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
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nancial Action Task Force on developing and implementing an 

international standard that requires both countries and financial 

institutions to identify and address money laundering and terrorist 

financing risks associated with new payment methods before the 

products are launched. 

Q.5. A few months ago, you announced that the Government would 

be carrying out a multi-agency review of AML policies, procedures 

and enforcement, and you described it in detail in your testimony. 

Can you outline for the Committee who is leading this review, your 

objectives, and the expected work product? What is the timetable 

for this work? What’s been accomplished so far? How do you think 

another review, which to some might sound much like prior similar 

Government-industry reviews, will assist you in tightening enforcement and improving industry compliance? 

A.5. Treasury convened the AML Task Force last fall to take an 

in-depth look at the entire anti-money laundering (AML)/counterterrorist financing (CFT) framework. Along with Treasury, the 

AML Task Force is comprised of senior representatives from each 

of the regulators with responsibility for combating money laundering—that is, FinCEN, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the 

Federal Deposit Insurance Corporation, the National Credit Union 

Administration, the Commodity Futures Trading Commission, the 

Securities and Exchange Commission, and the Internal Revenue 

Service, along with the Justice Department’s Criminal Division. 

Collectively, we are taking stock of those components of the framework that are working well and those that require improvement. 

The goal is to find solutions to address any gaps, redundancies, or 

inefficiencies, and to ensure that effective AML/CFT compliance is 

made a priority within financial institutions. The AML Task Force 

is an ongoing priority for my office, and we would be happy to brief 

your staff as appropriate as our work progresses. 

Q.6. Over the last several years there has been increasing cooperation in enforcing and tightening sanctions against Iran within the 

financial community here and in Europe. However, as we have 

seen, some banks have resisted that effort. What are you doing to 

ensure that we continue to have the support of the European financial sector in enforcing financial sanctions against Iran and that 

the sorts of sanctions evasion these cases involve doesn’t recur? 

A.6. Treasury has been highly successful in enlisting the support 

of the financial sector worldwide, including in Europe, to promote 

compliance with and enforce our sanctions against Iran. We regularly work with banks to strengthen controls and investigate persons who are attempting to evade our sanctions. We also publish 

special alerts and advisories for the financial community, reach out 

to industries both domestically and abroad that could be impacted 

by Iran’s manipulation and subterfuges, and elicit cooperation in 

our investigations. The degree of international collaboration on 

these issues, both with our overseas partners and the private sector, has been very strong. These efforts are vital to our ability to 

enforce our sanctions, and they play a central role in realizing our 

total commitment to identifying and taking effective action against 

sanctions evasion. 

64 

Q.7. And, what are you doing to ensure that banks in other areas 

of the world—including in Asia—do not become safe havens for illicit Iranian transactions? And that clearing and settlement processes are fully covered by our multilateral sanctions regime on 

Iran? 

A.7. Treasury regularly engages with authorities and banks worldwide to inform them of the exposure to U.S. sanctions they face if 

they conduct certain transactions with Iran. And when necessary, 

we have taken action against them. For instance, in July 2012, we 

sanctioned two banks, including the Bank of Kunlun in China, for 

facilitating significant transactions for Iranian banks designated in 

connection with Iran’s support for international terrorism and proliferation of weapons of mass destruction. As a result, the great 

majority of the world’s banks, in Asia and elsewhere, refrain from 

business activities with Iran. Under the U.S. sanctions regime, foreign financial institutions that engage in certain clearing and settlement activities for U.S.-designated Iranian persons could be cut 

off from the U.S. financial system. We have undertaken extensive 

engagement to see that other jurisdictions also extend their financial restrictions on Iran to clearing and settlement activities. 

Q.8. The BSA regulations about wire transfers (at 31 CFR 

1010(f)(2)) allow a U.S. bank to accept and process a wire transfer 

from overseas even if the ‘‘transmitter’’ field is blank. That may 

have been understandable 15 years ago when the regulations were 

written. But why has the rule not been changed, in light of the 

sanctions abuses illustrated by these cases and the possibility of 

other attempts to avoid our sanctions rules in the future? The 

changes in the SWIFT regulations to require completion of all 

fields, which you mentioned in your testimony, do not appear to 

have the force of law. In a world in which banking institutions operate globally, effective money laundering control is extremely difficult without uniform and uniformly enforced cross-border standards within banks and under applicable law. 

A.8. Treasury’s aggressive pursuit of some of the world’s largest financial institutions for the systematic removal of references or 

names of U.S.-sanctioned entities, banks, or other parties in violation of U.S. sanctions has led to changes in SWIFT messaging formats and advancements in financial institutions’ filters to ensure 

compliance with the sanctions programs administered by the Office 

of Foreign Assets Control (OFAC). U.S. banks, particularly the 

clearinghouse banks that handle the majority of dollar clearing, do 

not want to risk processing international wires without originator 

information due to concerns about violating U.S. sanctions laws. 

For purposes of the Bank Secrecy Act (BSA), 31 CFR 1010.410(f)(2) 

requires a receiving financial institution that acts as an intermediary financial institution to include the name and account number of the transmitter (as well as other information) in a corresponding transmittal order if that information is received from 

the sender. As such, it may not be a technical violation of the BSA 

to process international wires with missing originator information 

in many circumstances. Nevertheless, an institution should take 

the lack of transparency, and potential motivation for not including 

the information, into account as part of its risk-based approach to 

65 

compliance. We are currently exploring whether and how evolution 

of communications in payment systems may support more stringent information and record keeping requirements in this context 

to best prevent U.S. financial institutions from serving as conduits 

for laundered funds transfers, assist law enforcement, and conform 

with international standards. 

Q.9. Various international activities of these major banks, especially foreign correspondent banking and other means for cross-border funds transfer, have been recognized by Congress as special 

risk areas since at least 2001. What further steps should be taken 

to prevent the movement of illicit funds into and out of the U.S. 

through banks’ non-U.S. branches in violation of U.S. law? What 

are your agencies doing specifically to address the myriad problems 

that have arisen in these areas, including by strengthening cooperation with foreign regulators who may be in a position to flag 

problem banks earlier for U.S. regulators? 

A.9. To address the illicit finance risks associated with correspondent banking and transactions with non-U.S. financial institutions, the Bank Secrecy Act appropriately requires specific AML 

safeguards for financial institutions that engage in these activities. 

Moreover, FinCEN in September 2010 issued a Notice of Proposed 

Rulemaking proposing that certain U.S. banks and money transmitters would be required to report cross border electronic fund 

transfers to FinCEN. Implementation of the proposed rule would 

facilitate the reporting of cross-border electronic funds transfer information, which could greatly assist law enforcement. In addition, 

we are working to strengthen international information sharing arrangements, including directly with foreign regulators and through 

ongoing discussions at the Financial Action Task Force. With respect to specific cross-border risk associated with drug trafficking 

and money movements across the Mexican border, we have 

partnered with the Government of Mexico to form the Bilateral Illicit Finance Working Group, which has created a mechanism for 

information exchange, joint training, and cooperation against 

money laundering organizations. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO 

FROM DAVID S. COHEN 

Q.1. Coordination: At what point in time is the Director of the Financial Crimes Enforcement Network (FinCEN), as the Administrator of the Bank Secrecy Act, informed of BSA violations and 

what does FinCEN do with that information? 

A.1. FinCEN has Memoranda of Understanding (MOUs) with the 

Federal banking agencies, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Internal 

Revenue Service, as well as 63 State regulatory agencies (as of 

April 5, 2013), that provide for exchange of information regarding 

BSA compliance. These MOUs require regulatory agencies to notify 

FinCEN in writing as soon as practicable, but no later than 30 

days after the agency cites a financial institution, for a significant 

BSA violation or deficiency. FinCEN reviews the provided information regarding significant BSA violations or deficiencies by assessVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00069 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
66 

ing noncompliance, and considers use of enforcement authorities as 

appropriate. As warranted, FinCEN will conduct further investigation of potential violations as part of its enforcement review. 

Q.2. In large bank examinations, is any office there collecting and 

collating program and other deficiency information? 

A.2. Yes, as part of the MOUs, FinCEN receives aggregate quarterly data on BSA examinations, violations, and enforcement actions by regulatory agencies. This information is not restricted to 

large banks, but is in aggregate form and does not identify specific 

institutions. FinCEN shares consolidated quarterly data with the 

Federal banking agencies. 

Q.3. Is that office also in position to connect all the dots to determine that an institution is actually in the midst of an enterprisewide failure, as opposed to just a series of seemingly disconnected 

matters requiring attention? 

A.3. While Federal financial regulatory agencies are in a better position to determine that an institution is in the midst of an enterprise-wide failure, FinCEN works very closely with these agencies 

to ensure BSA compliance. FinCEN administers the BSA data and 

receives information on BSA violations or deficiencies from Federal 

banking agencies. 

Q.4. What can your offices contribute, possibly through FinCEN as 

the Administrator of the Bank Secrecy Act, and compiler of antimoney laundering trend data, to assist each of the Federal banking 

regulators with the exam process, to promptly recognize the high 

risk nature of a bank’s enterprise-wide business activities? 

A.4. On a quarterly basis FinCEN compiles and shares with the 

Federal banking regulators a consolidated trend report of the aggregate compliance data that FinCEN receives from each agency. 

In addition, FinCEN provides regulatory agencies with information 

concerning potential BSA violations, either as identified by 

proactive FinCEN internal analysis (such as identifying deficiencies in an institution’s reporting to FinCEN) or where such potential violations are brought to FinCEN’s attention by law enforcement agencies. Moreover, FinCEN also issues, in partnership with 

law enforcement, numerous advisories to financial institutions on 

current threats and red flag indicators to the financial system. 

Q.5. Bulk Cash Smuggling: As a result of recent enforcement actions, and maybe for other reasons, several banks have exited the 

lucrative bulk cash business. 

What types of firms are stepping into the market to handle this 

business, now and do they have better compliance systems and 

records than the banks? 

A.5. While some banks have exited the bulk cash business following recent enforcement actions, repatriation of U.S. dollars from 

abroad continues to occur through U.S. banks and nonbank financial institutions. Effective guidance to, and supervision of, these financial institutions is essential to ensuring that they comply with 

their obligations under the Bank Secrecy Act when receiving cash. 

Treasury has also been working with law enforcement, regulatory, 

and international partners to facilitate greater implementation of 

67 

relevant controls to guard against the risks associated with the 

bulk cash business. 

Q.6. Are you seeing bulk cash connections to Hezbollah and drug 

trafficking in any particular Nations or regions? 

A.6. Treasury has exposed linkages between Hizballah and those 

connected with drug trafficking and has taken strong action to target this activity using all available authorities. Treasury designated a key Colombia-based Hizballah facilitator (Ali Mohamad 

Saleh) under our counterterrorism authority (Executive Order 

13224) in June 2012 for acting for or on behalf of and providing financial, material, or technological support to Hizballah, including 

raising funds in Maicao, Colombia. Saleh was previously designated under the Foreign Narcotics Kingpin Designation Act 

(Kingpin Act) on December 29, 2011, for his role as a Maicao, Colombia-based money launderer for the Cheaitelly/El Khansa criminal organization. This organization is linked to the Ayman Joumaa 

network, which Treasury also designated under the Kingpin Act in 

January of 2011. Ayman Joumaa has coordinated the transportation, distribution, and sale of multiton shipments of cocaine from 

South America and has laundered the proceeds from the sale of cocaine in Europe and the Middle East, according to investigations 

led by the Drug Enforcement Administration. Operating in Lebanon, West Africa, Panama, and Colombia, Joumaa and his organization launder proceeds from their illicit activities—as much as 

$200 million per month—through various channels, including bulk 

cash smuggling operations and Lebanese exchange houses. Treasury has also taken action under Section 311 of the USA PATRIOT 

Act identifying Lebanese Canadian Bank (2011), and Rmeiti Exchange and Halawi Exchange (April 2013) as foreign financial institutions of primary money laundering concern for their role in facilitating the money laundering operations of the Joumaa network 

from which Hizballah derived financial benefit. Regulatory action 

can be taken under Section 311 to protect the U.S. financial system 

from the risks posed by global narcotics money laundering networks and terrorist financiers. Treasury will continue to take action when we have information of this type of activity. 

Q.7. International Coordination: The dangers of illicit global money 

must receive adequate and effective attention at the G20, IMF, 

World Bank, and foreign national levels. 

Do each of you, together with the Comptroller, at your particular 

levels of office, ever meet together to discuss and review BSA programs and policies, both domestically and abroad? 

A.7. In addition to the close coordination taking place within the 

recently established AML Task Force discussed in my written and 

oral statements, FinCEN, along with its Federal financial regulatory counterparts, meet regularly through the Federal Financial 

Institutions Examination Council to discuss current and future 

BSA policies, prescribe principles for promoting uniformity in the 

BSA oversight of financial institutions, and ensure that our examination procedures are carefully adapting to the changes in marketplace threats and vulnerabilities both domestically and internationally. 

68 

Q.8. How effective is the international compliance structure and 

how exposed are our financial system and individual institutions to 

cross border enforcement challenges? 

A.8. The U.S. financial system and individual institutions are exposed to cross-border enforcement challenges because of the preeminence of the U.S. financial system and because of the dominant 

role of the U.S. dollar in cross-border trade and investment. To address this exposure, Treasury and our interagency partners have 

developed a global AML/CFT framework through the Financial Action Task Force (FATF). The FATF (i) maintains a universally accepted list of AML and CFT criteria, or Recommendations, for the 

public and private sectors, (ii) coordinates a global peer review 

process to assess compliance with those Recommendations, and (iii) 

achieves success in encouraging remedial action by drawing public 

attention to country-specific AML/CFT deficiencies. Treasury is 

working within this framework to address cross-border enforcement 

challenges, while also pursuing unilateral action under domestic 

authorities when appropriate. 

Q.9. It appears that BSA regulations permit wire transfers to enter 

the U.S. with an incomplete originator field. Since that situation 

can potentially harm a U.S. bank—what should be done to address 

this issue? 

A.9. Treasury’s aggressive pursuit of some of the world’s largest financial institutions for the systematic removal of references or 

names of U.S.-sanctioned entities, banks, or other parties in violation of U.S. sanctions has led to changes in SWIFT messaging formats and advancements in financial institutions’ filters to ensure 

compliance with the sanctions programs administered by the 

Treasury’s Office of Foreign Assets Control (OFAC). U.S. banks, 

particularly the clearinghouse banks that handle the majority of 

dollar clearing, do not want to risk processing international wires 

without originator information due to concerns about violating U.S. 

sanctions laws. For purposes of the Bank Secrecy Act (BSA), 31 

CFR 1010.410(f)(2) requires a receiving financial institution that 

acts as an intermediary financial institution to include the name 

and account number of the transmitter (as well as other information) in a corresponding transmittal order if that information is received from the sender. As such, it may not be a technical violation 

of the BSA to process international wires with missing originator 

information in many circumstances. Nevertheless, an institution 

should take the lack of transparency, and potential motivation for 

not including the information, into account as part of its risk-based 

approach to compliance. We are currently exploring whether and 

how evolution of communications in payment systems may support 

more stringent information and record keeping requirements in 

this context to best prevent U.S. financial institutions from serving 

as conduits for laundered funds transfers, assist law enforcement, 

and conform with international standards. 

69 

1See, e.g., Annunzio-Wylie Anti-Money Laundering Act of 1992, §§1501–1507, Pub. L. 102- 

550, 106 Stat. 3680 (1992). 2 12 U.S.C. 1818(e) and (g). 

3Dept. of Justice, Press Release, Dec. 11, 2012, available at: http://www.justice.gov/opa/pr/ 

2012/December/12-crm-1478.html. 4Senate Permanent Subcommittee on Investigations, ‘‘U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History’’, July 16, 2012, available at: 

http://www.levin.senate.gov/download/?id=90fe8998-dfc4-4a8c-90ed-704bcce990d4. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED 

FROM DAVID S. COHEN 

Q.1. Studies have demonstrated an increase in money laundering 

and terrorist financing being done through securities transactions. 

What are the steps you have recently taken to support efforts at 

preventing money laundering and terrorist financing through the 

conduit of securities transactions? How are you working with regulators domestically and abroad to ensure that financial market 

intermediaries are appropriately applying existing rules and being 

made aware of new trends in the industry that are indicative of 

money laundering via securities transactions? Are there specific 

recommendations of the Financial Action Task Force that you are 

hoping to implement domestically in this area? Please explain. 

A.1. My office organized a working group with interagency colleagues, including staff at the Securities and Exchange Commission 

and the Commodity Futures Trading Commission, to focus specifically on understanding and mitigating the money laundering and 

terrorist financing risks in the securities and futures markets. The 

work of the group includes a systemic analysis by FinCEN staff of 

suspicious activity reports related to these industries to determine 

trends and typologies that can be useful in identifying and addressing risks. FinCEN is also working on a proposal to impose AML 

program and suspicious activity reporting requirements on investment advisors, which will further protect our securities markets 

from abuse and address a regulatory deficiency that was identified 

by the Financial Action Task Force. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN 

FROM DAVID S. COHEN 

Q.1. The United States Government takes money laundering very 

seriously. A bank that launders drug money or terrorists’ money 

can be shut down, 1 and individuals in the bank can be banned 

from banking. 2 In December, HSBC admitted to laundering at 

least $881 million for Colombian and Mexican drug cartels, and 

violating U.S. sanctions against Iran, Cuba, Libya, Sudan, and 

Burma. 3 These were not one-time actions. The bank was warned 

over and over and told to fix the problem, and it didn’t. It just kept 

making money by laundering money for drug dealers. 4

In the hearing, you noted that the threshold determination for 

revoking a bank’s charter is dependent on prosecution and conviction, and you testified that the Justice Department makes determinations about when it is appropriate to prosecute. However, 

there are other tools available to hold accountable banks and bankers who engage in illegal activity, such as banning individuals from 

the banking industry. Could you please describe: 

70 

Whether your agency has any regulation, guidance, policies, formal or informal, that guide when individuals should be banned 

from banking under 12 U.S.C. §§1818(e) and (g). If so, please provide those documents. 

A.1. The procedures established in 12 U.S.C. §§1818(e) and (g) for 

removing an ‘‘institution-affiliated party’’ from office at a depository 

institution, or prohibiting such person from further participation in 

the conduct of such institution’s affairs, are powers that may be exercised by the Office of the Comptroller of the Currency (OCC), the 

Board of Governors of the Federal Reserve System, or the Federal 

Deposit Insurance Corporation, depending on the type of depository 

institution involved. The Treasury Department has no authority to 

exercise removal or prohibition powers under these provisions. The 

Financial Crimes Enforcement Network (FinCEN), however, has 

authority under 31 U.S.C. §5320 to bring an action in district court 

against a person it believes has violated, is violating, or will violate 

the Bank Secrecy Act (BSA) or its regulations, to enjoin the violation or to enforce compliance with the requirement. (The OCC is 

a bureau of Treasury, but it operates independently of Treasury in 

its role as a financial regulator.) 

Q.2. Under what circumstances your agency has used 12 U.S.C. 

§§1818(e) and (g) in the past, including any actions taken against 

bankers in the largest financial institutions. 

A.2. As described in response to [Question 1] above, Treasury has 

no authority to utilize these provisions. 

Q.3. The process your agency does or would follow to use its authority under 12 U.S.C. §§1818(e) and (g). 

A.3. As described in response to [Question 1] above, Treasury has 

no authority to utilize these provisions. 

Q.4. Attorney General Holder testified before the Judiciary Committee that he is ‘‘concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when, . . . if you do bring a criminal charge, it will 

have a negative impact on the national economy, perhaps even the 

world economy.’’ 

Can you explain how your efforts to ensure compliance with 

money laundering laws are affected when so many people—even 

the Attorney General of the United States—think it is ‘‘difficult to 

prosecute’’ the biggest banks? 

A.4. The Treasury Department supports vigorous enforcement of 

the law and believes that no individual or institution is above the 

law regardless of size or any other characteristic. Attorney General 

Holder has testified recently that the Justice Department shares 

this view. Although Treasury does not have statutory authority to 

impose criminal penalties—that authority rests exclusively with 

the Department of Justice—Treasury does have authority to investigate potential violations of U.S. economic sanctions, as well as 

certain anti-money laundering laws and regulations, and to impose 

civil penalties. Treasury has a clear record of aggressively pursuing 

investigations and enforcement actions against both U.S. and foreign financial institutions that violate those laws and regulations. 

71 

Q.5. Are you worried that the size and interconnectedness of our 

Nation’s largest financial institutions negatively affects your ability 

to enforce the law and reduces your leverage? 

A.5. No. Treasury has a clear record of aggressively pursuing investigations and enforcement actions against both U.S. and foreign 

financial institutions that violate the laws and regulations administered by Treasury, regardless of the size of the financial institutions involved. 

Q.6. At the hearing, Under Secretary Cohen and Governor Powell 

both testified that the Justice Department was in contact with 

their institutions regarding the HSBC case. Without reference to 

any particular case, can you describe the general or usual process 

for cooperation between your institution and the Justice Department regarding money laundering and Bank Secrecy Act issues? In 

particular: 

Which office or offices in the Justice Department contact your institution? 

A.6. The Treasury Department bureau responsible for enforcing the 

money laundering regulations promulgated under the Bank Secrecy 

Act—the Financial Crimes Enforcement Network (FinCEN)—typically cooperates with the Justice Department on anti-money laundering investigations. Although the offices in the Department of 

Justice vary from case to case, these matters are typically coordinated with the Criminal Division (particularly the Asset Forfeiture 

and Money Laundering Section) and the National Security Division 

(particularly the Counterespionage Section) and relevant U.S. Attorneys offices. 

Q.7. Which office or offices in your institution are contacted? 

A.7. On matters involving anti-money laundering and U.S. economic sanctions laws and regulations, the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), respectively, serve as the primary points of contact 

within Treasury. 

Q.8. At what points in the enforcement process is your institution 

contacted? 

A.8. Although the facts vary from matter to matter, initial contact 

is typically made early in the investigative stages after one agency 

has assessed that there is a potential violation of law and that another agency is likely to have an interest in the conduct underlying 

the case. 

Q.9. What information is usually requested? 

A.9. Treasury and the Department of Justice share information 

that would facilitate the development of a common understanding 

of the facts underlying the potential violations. 

Q.10. Are there are any formal or informal guidelines that are used 

for interagency cooperation on Bank Secrecy Act or Anti-Money 

Laundering issues? 

A.10. Treasury has established a number of formal and informal 

mechanisms to facilitate such interagency cooperation. Consistent 

with its responsibilities under the Bank Secrecy Act (BSA), 

FinCEN maintains a Government-wide BSA data service, and proVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00075 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
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vides access to this data and related analytic products to Federal, 

State, and local law enforcement and regulatory agencies, in accordance with applicable legal requirements. Frequently, this datasharing takes place pursuant to memoranda of understanding that 

provide for the exchange of information (including advance notification by FinCEN that enforcement action may be warranted by another regulator). OFAC has executed memoranda of understanding 

regarding the sharing of information with every functional Federal 

financial regulator. OFAC’s Economic Sanctions Enforcement 

Guidelines, which are published in Treasury’s regulations at 31 

CFR part 501, App. A, provide additional information about the circumstances under which potential sanctions violations are referred 

for criminal investigation. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR HEITKAMP 

FROM DAVID S. COHEN 

Q.1. As all of you mentioned, the sophistication and determination 

of money launderers, terrorist financiers, and other criminals has 

evolved and changed as they find ways to gain access to our institutions. How can we support smaller institutions that cannot afford 

to put the same programs in place as the large banks? In your examinations, have you noticed vulnerabilities on a large scale? 

A.1.Given the wide array of institutions that comprise the financial 

system, many anti-money laundering (AML) obligations imposed 

under the Bank Secrecy Act are predicated on the risk-based approach. In general, financial institutions with lower risk customer 

bases or product lines may not require the same AML procedures 

as institutions that engage in higher risk activity. Moreover, as 

highlighted in my testimony, a primary focus of recent initiatives 

to improve the AML/counterterrorist financing (CFT) framework, is 

to ensure that compliance efforts at financial institutions are commensurate with actual illicit finance risk. FinCEN recently organized a group dubbed the ‘‘Delta Team’’ under the auspices of the 

Bank Secrecy Act Advisory Group (BSAAG). This group includes 

representatives from the financial services industry, financial regulators, and law enforcement, with the mission of examining any 

gaps between illicit finance risks and compliance efforts. Treasury 

also recently convened a broad interagency group known as the 

AML Task Force, to look in depth at the existing anti-money laundering and counterterrorist-financing framework—from the legal 

and regulatory foundation, to the compliance and examination 

function, to the enforcement efforts. These initiatives provide greater clarity on implementing the risk-based approach will benefit all 

financial institutions, including smaller ones that engage in lower 

risk activities. 

Q.2. Some smaller financial institutions are concerned about the 

cost of adopting a customer due diligence program (to verify the 

identity of members when opening accounts, understand the purpose and intended nature of the account, etc.). Are the objectives 

of this program already being reached through compliance with existing FinCEN guidelines, including the agency’s BSA/AML exam 

manual? 

73 

A.2. Treasury has embarked on a rule-making process to consider 

whether to impose an explicit customer due diligence rule that includes a broad requirement to identify beneficial owners. Such a 

rule would put financial institutions in a better position to assess 

risks and protect themselves from illicit finance. Moreover, a broad 

beneficial ownership requirement would support law enforcement, 

intelligence, and tax authorities in their efforts to combat financial 

crime and advance national security interests. Explicitly imposing 

clear customer due diligence requirements would also address 

Treasury’s concern that there is a lack of uniformity and consistency in the way financial institutions currently conduct diligence 

under existing requirements. In furthering the rule-making process 

to advance these objectives, we will continue to work towards 

achieving clear and harmonized customer due diligence expectations, leveraging best practices to minimize burden and maintaining a risk-based approach. 

RESPONSES TO WRITTEN QUESTIONS OF 

CHAIRMAN JOHNSON FROM THOMAS J. CURRY 

Q.1. The major AML–BSA cases discussed at the hearing all illustrate various forms of breakdown in the bank compliance systems 

on which the BSA/AML and economic sanctions rules depend. 

Would you favor a requirement that the CEOs of large banks certify the effectiveness of their BSA/AML/sanctions compliance systems annually? If not, why not? 

A.1. The OCC is currently considering issuing a regulation or guidance on corporate governance accountability with respect to banks’ 

BSA/AML programs and activities. As part of that effort, we will 

consider whether it would be appropriate to include a certification 

requirement by some or all banks as to the effectiveness of the 

bank’s BSA/AML controls. 

Q.2. I understand that you are not prosecutors, but you are responsible for oversight of the Nation’s largest financial institutions. Are 

there reasons that it is especially difficult to adequately discipline 

individuals with civil fines, industry removals, use of injunctions, 

limits on certain categories of bank activities, or other sanctions, 

in connection with seemingly significant BSA/AML violations? 

A.2. Establishing the culpability of specific individuals in cases of 

institutional failures such as BSA/AML compliance program breakdowns can be challenging, especially in larger institutions, because 

responsibility for the program is widely shared within the organization, and often results from a poor compliance culture. Contributing 

causes of BSA/AML compliance program breakdowns include deficiencies in corporate governance, business strategy, use of technology, payment system monitoring, staffing resources, communication breakdowns, gaps in technology, and delays in the evolution of 

standard industry practices. These are all institutional problems 

that can be addressed through the use of a remedial document such 

as a cease-and-desist order. But these types of cases do not lend 

themselves readily to actions against specific individuals because of 

the stringent legal standards we must meet to bring such actions, 

74 

and because of the multitude of factors that typically cause the 

compliance program breakdowns. 

Notwithstanding that, the OCC has successfully brought enforcement actions against individuals responsible for BSA/AML violations, and OCC examination findings have been instrumental in 

successful criminal prosecutions against bank insiders. These include Simon Kareri, a Vice President of Riggs Bank, and Wen Chu 

Huang, a Director and former Chairman of the Board of Directors 

of Broadway National Bank. These cases were brought because the 

OCC or the prosecuting agency was able to establish that the individuals were directly involved in money laundering or fraud being 

conducted through a bank, as opposed to compliance breakdowns. 

The OCC is committed to taking actions whenever they are legally supportable. To this end, the OCC conducts a review of individual misconduct as part of all significant investigations into BSA/ 

AML noncompliance. We are also exploring ways to enhance our 

ability to take removal and prohibition actions in appropriate 

cases. For example, we are including articles in our enforcement 

actions against institutions that require the institution to establish 

responsibility and accountability for BSA compliance at senior 

management levels of the institution, including in the institution’s 

business lines. We are also developing industry-wide standards in 

this area that can be issued in the form of a regulation or guidance. 

And we are reviewing the statutory standards for removal and prohibition actions in order to determine whether issuing a regulation 

or agency guidance would facilitate bringing removal and prohibition actions under the statute. 

Q.3. How does the seriousness with which foreign Governments 

take compliance in this area affect U.S. regulatory efforts and bank 

compliance? 

A.3. During OCC regulatory reviews in foreign countries, we make 

it a practice to meet with local regulators to discuss findings and 

concerns allowed by country law. We also hold supervisory colleges 

where we share information. Finally, OCC gives consideration to 

Financial Action Task Force findings when scoping and conducting 

AML examinations. 

Q.4. Why didn’t foreign regulators, especially in the EU, pick up 

on the correspondent banking and cross-border problems, and the 

wire stripping activity, sooner? 

A.4. We are unable to address the question. This is a matter that 

should be asked of those foreign regulatory bodies in question. 

Q.5. Are there other particular areas of concern that you think 

must be addressed in your current discussions with foreign regulators? 

A.5. We will continue to meet with foreign regulators to further 

discuss our regulatory posture and we welcome the sharing of information when allowed by country privacy laws. Such a meeting 

was held recently on April 19 with the new U.K. Financial Conduct 

Authority. 

Q.6. In the last decade, major new innovative technologies and 

products have come onto the market, including prepaid access 

cards, mobile phone banking, smart ATM machines and kiosks, moVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00078 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
75 

bile wallets, Internet cloud-based payment processes, and others— 

and they are evolving rapidly. While they provide huge benefits to 

consumers, they can also pose major AML risks, including by making it easier to move large amounts of money on stored value cards. 

What are you doing to mitigate those risks now, and what should 

banks be doing to mitigate those risks on their own, even as they 

develop these products? 

A.6. The OCC, along with the other Federal banking agencies, is 

involved in the Task Force on the U.S. AML Framework. This task 

force was assembled to review the administration, implementation, 

and enforcement of the U.S. AML framework. In addition, the OCC 

regularly works with the other Federal banking agencies and 

FinCEN on industry guidance related to emerging AML risks, including risks arising from new products and services. For example, 

in 2011, the OCC issued guidance to national banks on assessing 

and managing the risks associated with prepaid access programs, 

including BSA/AML and OFAC-related risks. More recently, in 

January, the OCC in collaboration with other members of the Federal Financial Institutions Examination Council issued for comment proposed risk management guidance on the use of social 

media that highlights BSA/AML issues that can arise with the use 

of such media. 

Before offering new products or services, the OCC expects banks 

to conduct thorough due diligence to assess the potential risks and 

to determine how those risks can be mitigated. Banks should have 

in-place commensurate controls and should perform ongoing evaluations of the adequacy of processes devised to manage or mitigate 

risks arising from higher-risk products, services; customers and geographies. Banks should ensure they have in place appropriate risk 

assessment, customer due diligence, and suspicious activity monitoring processes. As part of the examination process, the OCC 

verifies that these processes are in place. 

Q.7. Comptroller Curry, you mentioned in a recent speech that you 

are concerned about the possibility that problematic transactions 

with third parties may begin to migrate from large financial institutions to smaller institutions as large banks exit high-risk business areas. To what extent can smaller banks become substitutes 

for larger more compliant banks, since most of them cannot directly 

clear dollar transactions internationally? What can smaller institutions do to protect themselves and how can regulators aid them in 

their efforts? 

A.7. To be clear, problematic transactions encompass more than 

just those with international implications. For example, we have 

seen higher-risk customers such as money services businesses 

(MSBs), ATM owners, third-party payment processors, etc., migrate 

to smaller institutions. Also, smaller banks can assume risk by providing banking services for high-risk businesses outside of just 

clearing dollar transactions. The banks can offer a variety of products and services that involve international exposure, such as international ACH, international wire transfers, and remote deposit 

capture, or the banks may have international customers. The OCC 

has consistently discussed with community banks, during examinations and through outreach efforts, the risks involved with these 

76 

products and services and has cautioned the bankers about the 

need to carefully monitor customer transactions. The OCC has 

made it clear that it is vital that community banks understand the 

nature of their customers’ businesses and transactions, including 

how they do what they do, why they do it, and for whom they do 

it, and that the banks appropriately and carefully monitor customer transaction activity. An important way a small bank can protect itself is to resist accepting customer relationships that are in 

business sectors with which the bank is unfamiliar or that are so 

large and complex the bank cannot properly administer the relationship (i.e., properly monitor transaction activity). OCC portfolio 

managers assigned to community banks perform quarterly reviews 

that include questions about what new products the bank is offering to help identify activities that could signal a change in a bank’s 

BSA/AML risk profile. Additionally, the OCC conducts a Money 

Laundering Risk survey annually for all community banks, which 

is targeted at identifying products that pose higher levels of BSA/ 

AML risk. 

Q.8. Your testimony reasonably cites cutback of compliance staffs 

during the financial crisis as one element of the recent spate of 

cases. Why didn’t regulators act more decisively as they saw compliance staffs being cut back, since those staffs are critical for an 

adequate AML system under the BSA? 

A.8. Compliance management metrics failed to point out the risk 

of declining staff, and banks often cut staff while making the case 

that system enhancements permit efficiencies. That can be true 

and it sometimes takes time to see a negative effect of reduction 

in personnel. It is something we now pay closer attention to and 

expect the banks to have better MIS to provide early warning internally when staff cannot keep pace with workload or quality. Our 

heightened expectations around risk management and audit are directed at these functions doing better to identify such issues. 

Q.9. You have noted that there is now a growing belief that—for 

the first time in recent memory, operational risks—including those 

related to AML issues—rather than credit risk pose the greatest 

potential for loss for many banks and thrifts. How do banks and 

thrifts ensure that operational risk, including that in regards to 

BSA issues, does not undermine safety and soundness? What are 

bank regulators doing to ensure these steps are being taken? 

A.9. As I mentioned in my March 4, 2013, speech before the Institute of International Bankers, operational risk is at the top of our 

safety and soundness concerns for the large banks we supervise. In 

order to properly manage this risk, senior bank compliance personnel need to be involved in product development. This is especially true when banks are contemplating whether to offer higherrisk products and services that may require robust controls. The 

critical ingredients for a sound BSA/AML program include the 

strength of an institution’s compliance culture, its willingness to 

commit sufficient resources, the strength of its information technology and monitoring processes and the adequacy of risk management protocols. The OCC regularly examines banks to determine 

the adequacy of policies, procedures, and processes devised to manage or mitigate risks. We expect banks to have risk management 

77 

processes commensurate with the quantity of risk arising from 

products and services offered and customers and geographies 

served. 

Q.10. Under current law, what statutory provisions would apply to 

limit the business activities of a bank if that bank was convicted 

of a violation of the BSA, but its charter was not terminated? 

A.10. There is no statutory provision that specifically limits the 

business activities of a bank that has been convicted of a criminal 

BSA or money laundering violation, but whose charter has not 

been revoked under 12 U.S.C. §93(d). However, the OCC has the 

authority to limit the business activities of a bank under its general cease-and-desist authority set forth in 12 U.S.C. §1818(b). The 

OCC has exercised this authority in its BSA/AML enforcement orders. In merger transactions, the USA PATRIOT Act further requires the OCC to consider the effectiveness of a bank or savings 

association, including its overseas branches, in combating money 

laundering activities. 12 U.S.C. §1828(c). 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO 

FROM THOMAS J. CURRY 

Q.1. Deferred Prosecution Agreements: The use of a Deferred Prosecution Agreement, or DPA, represents the continuation of a trend 

in enforcement matters in economic sanctions, export controls, and 

other matters. In opting for a DPA, companies may avoid criminal 

prosecution; in exchange, they assume ongoing responsibilities and 

risks. The DPA is open, on average, for about 18 months. 

If it sometimes takes years to uncover BSA violations and other 

bad behavior, how useful is the DPA as an enforcement tool? 

What is an example of the lowest trigger for a violation of a 

DPA? 

How long have DPAs been in place on financial institutions and 

has any resulted in a violated? What was the end result? 

A.1. A DPA is an agreement between the Department of Justice 

(DOJ) and a bank or savings association. Consequently, the DOJ 

is in a better position to assess the usefulness of DPAs as an enforcement tool than the OCC is. The triggers for determining a 

DPA violation are solely within the DOJ’s jurisdiction, although the 

DOJ will normally consult with the OCC prior to terminating a 

DPA against a national bank or Federal savings association. If the 

OCC identifies a breach of a DPA by a financial institution, or if 

the OCC identifies continuing problems with an institution’s BSA 

compliance program after it has entered into a DPA, the OCC 

would notify the DOJ of the breach or problems. No such instances 

have occurred. 

Q.2. Referrals and Examinations: Has either OCC or the Federal 

Reserve made any criminal referrals to Federal or other law enforcement officials as a result of examinations and, if so, what were 

the results? 

A.2. Yes. Suspicious transactions and potential criminal violations 

are usually reported to law enforcement through the filing of a Suspicious Activity Report (SAR) with the Financial Crimes Enforcement Network (FinCEN). Federal and State law enforcement agenVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00081 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
78 

cies have direct, online access to the SAR database. Depending on 

the significance of the SAR filing, the OCC may contact the DOJ 

to direct its attention to particular suspicious activity at financial 

institutions. In some cases, the OCC may file a SAR itself, direct 

an institution to file a SAR, or refer the matter through other 

means. 

While the OCC does not have information concerning the disposition of most of these SARs, one example of a SAR that resulted in 

successful prosecutions was at Jefferson National Bank. Here, the 

OCC identified money laundering transactions, filed reports with 

law enforcement, and took the lead in scheduling several meetings 

with Federal, State, and Canadian law enforcement personnel 

alerting them to the significance of the OCC’s findings and the 

large sums of illicit funds flowing through accounts at this bank. 

Additionally, the OCC brought a removal action against a director 

and issued a personal cease-and-desist order against the president. 

Based upon this information, law enforcement began an investigation that resulted in one of the most successful money laundering 

prosecutions in U.S. Government history. The case resulted in 21 

indictments, and law enforcement’s seeking the recovery of $557 

million. It also resulted in a December 1999 guilty plea by a subsidiary of R.J. Reynolds Tobacco Company and the payment of a 

$15 million criminal fine. Seven bank officers and directors were 

ultimately convicted of crimes. 

In addition to filing SARs, the OCC provides extensive support 

to law enforcement in criminal cases. For example, we regularly 

provide documents and information, make our staff available for 

interviews or to assist an investigation, and provide expert witnesses to testify at trial. Over the years, the OCC has been involved in several high profile BSA/AML investigations and penalty 

actions involving large national banks that also involved a parallel 

criminal investigation, including Union Bank of California, 

Wachovia Bank, N.A., and HSBC Bank USA, N.A. The OCC’s findings and contributions in these cases were instrumental in bringing 

those cases to closure. 

Q.3. Have the results of any BSA examinations had any negative 

impact on a bank’s CAMEL rating? 

A.3. OCC issued internal guidance, ‘‘Consideration of Bank Secrecy 

Act/Anti-Money Laundering Examination Findings in the Uniform 

Interagency Rating Systems and OCC’s Risk Assessment System’’ 

in 2012. The guidance was effective beginning July 18, 2012. As 

part of that guidance, staff were reminded that in keeping with 

current policy, examiners must consider BSA/AML examination 

findings in a safety and soundness context as a part of the management component of a bank’s FFIEC Uniform Financial Institutions 

Rating System (CAMELS ratings). Since then, the results of BSA 

examinations have had a negative impact on certain banks’ management components. For Federal branches and agencies, BSA/ 

AML examination findings must be considered as part of the risk 

management component of the ROCA rating system. Examination 

procedures used to evaluate the adequacy of a bank’s BSA/AML 

compliance remain unchanged. 

79 

Q.4. Exam Consistency: The Committee understands that, in the 

interests of exam consistency, all of the Federal regulators now use 

the Federal Financial Institutions Examination Council or FFIEC 

manual for Bank Secrecy Act examinations. 

Are there differences in the manner of which each agency conducts its examinations? Particularly, is there a substantial difference in the manner so-called pillar violations or program violations are treated before there is movement to a formal enforcement 

action. If so, why? 

A.4. In 2005, the members of the FFIEC developed a comprehensive ‘‘FFIEC Bank Secrecy Act/Anti-Money Laundering Examination Manual’’. The FFIEC BSA/AML Examination Manual has been 

revised a number of times and was most recently published in 

2010. While the manual provides a consistent examination framework across the agencies for evaluating BSA/AML compliance, each 

agency may supplement the framework with additional tools or 

guidance. For example, the OCC has developed and deployed a 

Money Laundering Risk System that collects risk information from 

the banks the OCC supervises and factors the information into 

each bank’s examination strategy development. OCC examiners use 

this information to help determine appropriate areas to select for 

transaction testing during an examination. 

In August of 2007, the FFIEC issued the Interagency Statement 

on Enforcement of Bank Secrecy Act/Anti-Money Laundering Requirements, which is the guiding enforcement policy for all of the 

Federal banking agencies. As noted in our written testimony, we 

have amended our approach for citing pillar violations to provide 

more flexibility for citing BSN/AML violations for individual ‘‘pillar’’ violations (i.e., internal controls, BSA officer, testing, and 

training) and to make our approach consistent with the other Federal banking agencies. The OCC has communicated this change to 

our examination staff and now expects examiners to cite pillar violations when warranted. The OCC has drafted and will soon issue 

formal internal guidance for examiners to follow when considering 

such violations. 

Q.5. OCC and Federal Reserve Practice: What is the practice of the 

OCC and Federal Reserve on prevention and resolution of deficiencies within its supervisory framework? 

A.5. The OCC has a range of supervisory responses depending on 

the severity of individual examination findings. The OCC makes 

use of informal actions, including: matters requiring attention 

(MRAs), commitment letters, and memorandums of understanding 

(MOUs). The OCC can also take formal actions, including: formal 

agreements, cease-and-desist orders, and civil money penalties, as 

well as actions to remove individuals from banking. 

Q.6. In the course of resolving deficiencies, has a member bank, or 

other entity, ever opted to leave either the national banking system 

or the Federal Reserve System rather than accept an enforcement 

document? 

A.6. While the OCC does not keep records of banks that have converted from the national banking system because of an OCC enforcement action, anecdotal information and informal interactions 

with bankers suggest that there have been banks that have 

80 

switched charters because of an OCC enforcement action or because of a desire to be subject to less rigorous supervision. One 

such bank is Colonial Bank, N.A., which converted to a State charter and subsequently failed. Section 612 of the Dodd-Frank Act specifically addresses this issue by restricting the ability of a national 

bank, state-chartered bank, or Federal or State savings association 

to convert charters if they are subject to a cease-and-desist order 

or other formal enforcement action. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED 

FROM THOMAS J. CURRY 

Q.1. Earlier this year, the Office of the Comptroller of the Currency 

(OCC), along with the Federal Reserve and 13 mortgage servicers, 

reached a $9.3 billion settlement to dispense with the Independent 

Foreclosure Review process. As part of the settlement, banks were 

ordered to identify military members and other borrowers who 

were evicted in violation of Federal law. It was reported by the 

New York Times in early March that over 700 military families 

were identified through this process as victims of wrongful foreclosure. This article notes that ‘‘the people with direct knowledge 

cautioned that the numbers were not precise and could underestimate the extent of the problems . . . .’’ 

Given the reports that roughly 700 foreclosures could be an 

underestimation, are there efforts underway to ensure that all impacted military families are identified and provided relief? Can you 

assure me that these military families will get the relief that they 

deserve? 

A.1. At the outset of the Independent Foreclosure Review, independent consultants were required to identify 100 percent of SCRA 

eligible borrowers. These borrowers were identified through a process by which the entire in-scope population for each of the servicers 

(all 4.2 million borrowers) was checked against the DoD database. 

As part of the settlement, the servicers were required to either: (1) 

assume an SCRA violation for all identified SCRA eligible borrowers and pay the maximum financial injury, or (2) to have the 

independent consultant complete a review to determine if there 

was an SCRA violation with respect to the identified SCRA eligible 

borrowers. For this reason, we are confident that there was not an 

underestimation of the number of SCRA violations. If anything, the 

SCRA numbers would be over-reported due to the number of SCRA 

borrowers whose errors were assumed. 

Q.2. This same New York Times article reports: ‘‘Under the settlement, banks receive credit for the size of the outstanding loan balance, rather than the amount of actual assistance provided. For example, if a bank cut a borrower’s $100,000 mortgage debt by 

$10,000, the lender could then reduce its commitment under the 

settlement by $100,000. In a previous foreclosure settlement, the 

banks received credit only for the $10,000.’’ 

Please confirm whether this characterization is accurate. If true, 

please explain why banks are now being given extra credit. 

A.2. The Amendments to the Consent Orders, which implemented 

the Independent Foreclosure Review settlement, are specific about 

81 

1See, e.g., Annunzio-Wylie Anti Money Laundering Act of 1992, §§1501–1507, Pub. L. 102- 

550, 106 Stat. 3680 (1992). 2 12 U.S.C. 1818(e) and (g). 

3Dept. of Justice, Press Release, Dec. 11, 2012, available at: http://www.justice.gov/opa/pr/ 

2012/December/12-crm-1478.html. 4Senate Permanent Subcommittee on Investigations, ‘‘U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History’’, July 16, 2012, available at: 

http://www.levin.senate.gov/download/?id=90fe8998-dfc4-4a8c-90ed-704bcce990d4. 

the standards the regulators will use to measure the servicers’ performance on loss mitigation and foreclosure prevention. They emphasize sustainable and meaningful home preservation actions for 

qualified borrowers and that preference should be given to activities designed to keep borrowers in their homes. 

The unpaid principal balance (UPB) is straightforward, transparent, and an easily measurable barometer of the value of the 

foreclosure that was prevented. It does not measure the expense of 

the action taken or the economic benefit for the consumer, but simply measures the foreclosure that was prevented based on what the 

borrower owes, which therefore reflects the amount of assistance 

received. Complicated crediting formulas are not transparent, and 

people tend to find ways to manipulate complicated formulas, 

which can often have unintended consequences. Further, sustainable modifications come in numerous forms, not only through principal reductions, but also through, for example, reduced interest 

rates. 

Finally, the OCC will focus on the overall efforts and results of 

the loss mitigation and foreclosure prevention programs of each 

servicer as we evaluate compliance with the remainder of our original Consent Orders. In doing so, we will evaluate the effectiveness 

of all the loss mitigation and foreclosure prevention activities, not 

just those they request credit for under the Amendments to the 

Consent Orders. We intend to ensure that loss mitigation efforts 

will be done in a manner consistent with the principles we described in the Amendments to the Consent Orders. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN 

FROM THOMAS J. CURRY 

Q.1. The United States Government takes money laundering very 

seriously. A bank that launders drug money or terrorists’ money 

can be shut down, 1 and individuals in the bank can be banned 

from banking. 2 In December, HSBC admitted to laundering at 

least $881 million for Colombian and Mexican drug cartels, and 

violating U.S. sanctions against Iran, Cuba, Libya, Sudan, and 

Burma. 3 These were not one-time actions. The bank was warned 

over and over and told to fix the problem, and it didn’t. It just kept 

making money by laundering money for drug dealers. 4

In the hearing, you noted that the threshold determination for 

revoking a bank’s charter is dependent on prosecution and conviction, and you testified that the Justice Department makes determinations about when it is appropriate to prosecute. However, 

there are other tools available to hold accountable banks and bankers who engage in illegal activity, such as banning individuals from 

the banking industry. Could you please describe: 

82 

Whether your agency has any regulation, guidance, policies, formal or informal, that guide when individuals should be banned 

from banking under 12 U.S.C. §§1818(e) and (g). If so, please provide those documents. 

A.1. The standards for removal and prohibition actions are set 

forth in the applicable statutes, 12 U.S.C. §§1818(e) and (g). In addition, individuals who are convicted of certain criminal violations 

are prohibited from banking by operation of law under 12 U.S.C. 

§1829. The following OCC guidance and policies address when individuals should be banned from banking under those sections: 

A. OCC Policies and Procedures Manual (PPM) 5310-8; 

B. Fast Track Enforcement Program Procedures Manual; 

C. Charters for Washington Supervision Review Committee and 

Major Matters Supervision Review Committee; and 

D. Delegations of Authority for Major Matters, Large Bank Supervision, and Midsize and Community Bank Supervision. 

The OCC will provide copies of these documents. [See below] 

83 


PPM 5310·8 (REV) 

C) POLICIES & PROCEDURES MANUAL 

Comptroller of the Currency 

Administrator of National Banks 

Section: Enforcement and Compliance Subject: Fast Track Enforcement Program 

TO: All Department and Division Heads and All Examining Personnel 

PURPOSE 

This issuance revises the Office of the Comptroller of the Currency's (OCC) PPM 5310-S 

(REV), Fast Track Enforcement Program, dated September 23, 2003. This program does not 

replace or supersede existing policies and procedures for enforcement actions that arise from 

other circumstances. The guidelines in this PPM are for use by OCC staff only and do not create 

any substantive or procedural rights enforceable at law in any judicial or administrative 

proceeding. 

REFERENCE 

• PPM 5310-8, Fast Track Enforcement Program, dated September 23, 2003 

• 12 CFR 21.1 1 

• 12 USC ISIS 

• 12USC1S29 

• 12USC lS13(u) 

BACKGROUND AND SCOPE 

Twelve CFR 21.11(c) requires national banks to report certain known or suspected federal 

criminal violations or other suspicious activities committed or attempted by an institutionaffiliated party (known as an " lAP," which includes a bank officer, director, principal 

shareholder, employee, or agent) against the bank by filing a Suspicious Activity Report (SAR) 

with the Treasury Department's Financial Crimes Enforcement Network (FinCEN). The SAR 

details the facts about the activity that may serve as the basis for criminal investigation and 

prosecution by law enforcement agencies (e.g., Federal Bureau ofInvestigation, Secret Service 

(Homeland Security), United States Attorneys, and local law enforcement agencies). The Fast 

Track Enforcement Program uses this SAR information to develop certain OCC enforcement 

cases against individuals. 

Date: December 20, 2007 Page 1 of5 
84 


PPM 5310·8 

POLICY 

It is the OCC's policy to support and enforce the requirements of 12 CFR 2UI (c) as well as 

applicable enforcement statutes, including 12 USC 1818 and 12 USC 1829, aimed at keeping the 

banking industry safe and sound. The Fast Track Enforcement Program was established to 

implement this policy. 

The Fast Track Enforcement Program implements streamlined enforcement procedures to be 

used in specific situations in which there is a conviction of, an admission by, or clear evidence 

that an lAP has committed a criminal act(s) or other significant act(s) of wrongdoing involving 

an insured depository institution that are actionable under the agency's enforcement authority. 

Streamlined enforcement procedures for the Fast Track Enforcement Program are also included 

in the agency's delegation matrices. 

PROCEDURES 

Quarterly, the OCC loads selected SAR information of national banks into the OCC's SAR Fast 

Track Database (SAR Frr DB). Each SAR in the database contains information, such as bank 

name, contact information, name and address of the lAP(s), narrative description of the 

suspicious activity(ies), and information about law enforcement contacts. 

The OCC uses this SAR information to identify and pursue appropriate enforcement relief under 

12 USC 1818 or 12 USC 1829 against the lAP as follows: 

1818 Prohibition Order 

Under 12 USC 1818, if certain legal standards are met, the OCC may issue an order of 

removal or prohibition I to ensure that the lAP does not again become employed by an 

insured depository institution2 

While prohibition orders are a primary objective of the Fast Track Enforcement Program, 

the OCC also may issue, in appropriate cases, an order to cease and desist (C&D)J that 

I Under 12 USC 1818(e), a prohibition order requires the agency to establish that: (i) the lAP violated a law, 

regulation, cease and desist order, falUlal agreement, or condition imposed in writing or participated in an unsafe or 

unsound banking practice or committed a breach of fiduciary duty; (ii) such conduct resulted or will probably result 

in a loss to the bank, resulted in financial gain or other benefit to the lAP, or has prejudiced the interests of the 

depositors; ond (iii) such conduct evidences dishonesty or a continuing or willful disregard for the safety and 

soundness of the bank. 

2 An insured depository institution includes all institutions insured by the Federal Deposit Insurance Corporation, 

including national banks, state banks, thrifts, and saving and loans. A prohibition also prevents an lAP from acting 

as agent to an insured depository institution as well as, among other things, participating in the affairs of a credit 

union, an insured depository institution or its holding company, or transferring or voting the stock of such 

companies. 

1 Under 12 USC 1818(b), a C&D requires theagency to establish thalthe lAP has: (i) violated a law, rule, 

regulation, fannal written agreement, or a condition imposed in writing; or (ii) participated in an unsafe or unsound 

practice. In addition, if the C&D requires an lAP to take certain affirmative action, make restitution, or provide a 

guarantee against loss, the agency must show that the lAP was unjustly enriched or recklessly disregarded the law. 

Date: December 20, 2007 Page 2 of5 
85 


PPM 5310-8 

requires the lAP to, among other things, take certain affirmative action, make restitution, 

or provide a guarantee against loss. In addition, the OCC has authority to assess a civil 

money penalty (CMP)4 in appropriate cases. 

All of the above actions can be based on an lAP's consent or based on an order issued by 

the Comptroller following a hearing before an administrative law judge. 

1829 Prohibition Letter 

Under 12 USC 1829, an lAP who has been convicted of, or entered into a pre-trial 

diversion programS for, a crime involving dishonesty or breach of trust is effectively 

prohibited from being employed at an insured depository institution by operation of law. 

Under the Fast Track Enforcement Program, the OCC obtains the judgment and 

conviction documents from the state or federal court records and issues a letter informing 

the lAP of the automatic prohibition. 

The purpose of an "1829 letter" is to put the person on notice that he or she has been 

prohibited by operation oflaw. As a result, if after receiving such a letter the person 

reenters the banking industry in violation of 12 USC 1829, he or she does so "knowingly" 

and may, therefore, be subject to criminal fines and penalties. 

With narrow exception, the OCC is required by statute, 12 USC 1818(u), to make all prohibition 

orders public. All such orders issued by the OCC since 1989 are listed on the OCC's Web site, 

as are all 12 USC 1829 prohibition letters. 

In federal criminal cases, U.S. Attorneys sometimes include various versions of model 

prohibition language in a defendant's plea agreement. 6 Regardless of the plea agreement 

language used, the OCC must follow up by issuing a 12 USC 1818 prohibition order Q!: (at a 

minimum) by processing an 1829 letter in order to make the matter public on the OCC's Web site 

and available to banks performing pre-employment due diligence on new hires. 

4 Under 12 USC 1818(i), an order to ass"s a first tier CMP requires the agency to establish that the lAP has violated 

a law, regulation, fannal written agreement, C&D, or condition imposed in writing. An order to assess a second tier 

CMP requires the agency to establish that: (i) the lAP has committed a first tier violation, recklessly engaged in an 

unsafe or unsound practice, or breached a fiduciary duty; and (ii) such conduct is part of a pattern of misconduct, 

caused (or is likely to cause) more than minimal loss to the bank, orresulted in pecuniary gain or other benefillo 

such party. 

5 Under a typical federal prNrial diversion agreement, an offender enters into a program of supervised probation, 

and upon successful completion the U.S. Attorney will decline prosecution and the charges will be dismissed. 

Similar programs at state level have various names, including deferred prosecution agreements. They will be 

referred to hereafter, collectively, as pre-trial diversion programs. 

6 The current model language, which may be accessed by U.S. Attorneys on the Department of lustice's intranet site, 

states that the defendant agrees not to become an officer, director, employee, or lAP of an insured depository 

institution without the prior written pennission of the appropriate federal financial institutions regulator. Additional 

optional language states that the defendant IIwill cooperatell with the relevant regulatory agency in an administrative 

prohibition proceeding instituted against the defendant under 1818( e). Model plea agreement language preferred by 

the OCC states more directly thalthe defendant "agrees to consent" to any 12 USC 1818 prohibition action taken by 

a federal financial institutions regulatory agency. 

Date: December 20, 2007 Page 3 of 5 
86 


PPM 5310-8 

The Enforcement and Compliance Division will maintain a detailed procedures manual for 

processing Fast Track Enforcement Program cases that are assigned pursuant to this PPM. 

GENERAL CRITERIA FOR THE PROGRAM 

This section sets forth general criteria for the program but is not meant to limit the agency's 

discretion to pursue, case by case, enforcement actions that do not meet these criteria. 

For 12 USC 1829 prohibitions, an lAP who is the subject of one or more SARs will be included 

in the program if the lAP is discovered to have been convicted of, or entered into a pre-trial 

diversion program, regarding a crime involving dishonesty or breach of trust and the dollar 

amount of the transaction(s) at issue in the SAR(s) equals or exceeds $5,000. In the case of an 

lAP who has entered into a pre-trial diversion program, which permits a dismissal of charges 

upon successful completion, an 1829 letter may be sent, provided the public record has not been 

expunged when the letter is issued and there is no indication that it will be expunged. 7 

For 12 USC 1818 prohibitions, the OCC generally will consider an lAP who is the subject of one 

or more SARs for inclusion in the program if the following general criteria are met: 

• Prosecution of the lAP has been declined by law enforcement authorities8 or prosecution has 

been initiated but not yet completed and there is no written objection to the OCC pursuing 

enforcement relief. 9 

• The subject of the SAR has confessed or facts and circumstances of the case otherwise 

clearly indicate that the subject of the SAR has committed a criminal act or has engaged in an 

act of significant wrongdoing that meet the standards for an OCC enforcement action (see 

footnotes I, 3, and 4 above); 

• The subject of the SAR was an lAP of a national bank as defined by 12 USC 1813(u) at the 

time of the criminal act or significant wrongdoing and the criminal act or wrongdoing 

occurred within the preceding five years; and 

7 Expungements are the exception, not the rule. However, under the FDIC's Statement of Policy governing 12 USC 

1829, if and when an lAP's criminal record is completely expunged, the 12 USC 1829 prohibition no longer applies. 

Therefore, fast track processors should carefully review the court documents to detennine whether expungement is 

contemplated (e.g., as part of the pre-trial diversion or deferred prosecution agreement). If expungement is 

contemplated, then the case should be processed for an 1818 prohibition. Consistent with this approach, 18291e"ers 

should inform the lAP that ifhislher criminal record is expunged in the future, the lAP may send the Director of 

Enforcement & Compliance evidence of the expungement, so the agency can detennine if it is appropriate to remove 

the 18291e"er from the OCC's web site. See 63 Federal Register 66177 (December I, 1998). 

Sin some instances, law enforcement agencies may decline to prosecute banking officials and employees for their 

activities. For example, the criminal act(s) may not meet prosecutorial guidelines (e.g., dollar amount of loss), or an 

lAP's actions may not constitute a violation of criminal law. In such cases, the lAP's actions may still constitute an 

act of significant wrongdoing that may serve as a basis for an acc administrative enforcement action against the 

lAP. 

'The OCC generally will not pursue fast track cases if the ma"er is being actively investigated or prosecuted by law 

enforcement. However, the agency reserves the discretion to do so and -- once a decision is made to proceed with a 

case -- will normally do so, unless law enforcement asks the OCC in writing, and the OCC agrees, to defer activity 

on a case. 

Date: December 20, 2007 Page40f5 
87 


PPM 5310-8 

• The dollar amount of the transaction(s) at issue in the SAR equals or exceeds $5,000 (subject 

to priorities set forth immediately below). This standard also will be satisfied if more than 

one insured depository institution files SARs on the lAP and the aggregate transaction 

amount meets or exceeds the $5,000 minimum. 

For those SARs in the SAR FIT DB that meet the above-mentioned general criteria, the 

Enforcement & Compliance Division will take into account the following priority factors in 

selecting cases for assignment under the fast track program: 

• SARs filed within the previous two years; 

• lAPs who are officers and!or directors; 

• A large dollar amount of the transaction(s) at issue (e.g., $25,000 and above); 

• lAPs on whom multiple SARs are filed; 

• Special areas of current interest (e.g., mortgage fraud, identity theft, computer intrusion). 

RESPONSIBILITIES 

The Enforcement and Compliance Division has primary responsibility for the program and for 

securing appropriate enforcement relief. 

FURTHER INFORMATION 

For further information, contact the Fast Track Counselor or the Director ofthe Enforcement and 

Compliance Division at (202) 874-4800. 

Isigned! 

Julie L. Williams 

First Senior Deputy Comptroller and Chief Counsel 

Date: December 20, 2007 Page 50f5 
88 


Fast Track Enforcement Program 

Procedures Manual 

June 18, 2012 

Updated Versions on 

Law Dept 0 Drive (under "Fast Track Program ") 
89 


Table of Contents 

Overview ofthe Fast Track Enforcement Program ......................... 3 

Fast Track Processor"" Detailed Instructions .......................................... 10 

Do's and Don'ts for Communicating with lAPs ...... ..... .......... ... ... 19 

Fast Track Procedures for E&C Attorneys ................................... 22 

Personnel Chart for Fast Track Program ....................... "., """,., 27 

Questions and Answers ............................ ......... , ...... ,........... 28 

Large Bank Contact List ....... . .. .. .. . .. . .. .. .. . .. .. .. .. . .. .. . .. . .. . .. .. ... .. . 32 

Fast Track PPM ......................................... .. .......... ............ 39 
90 


Overview of Fast Track Program 

I. Purpose of the OCC's Fast Track Program 

The OCC takes enforcement actions, in appropriate cases, to prohibit current or former 

bank employees (otherwise known as "Institution Affiliate Parties," lAPs) from working 

at insured depository institutions. The OCC generally obtains cases leading to 

prohibitions from two primary sources: (i) through the examination process (i.e., 

whereby examiners uncover wrongdoing); or (ii) through Suspicious Activity Reports 

(SARs) filed by banks.l 

The Fast Track (FT) program uses SAR information to identilY and pursue prohibition 

cases under 12 U.S.C. 1818 against individuals that meet the following program criteria: 

(i) there is an admission of wrongdoing Qr the OCC has obtained clear evidence of 

wrongdoing; and (ii) the amount of the loss or transaction is at least $5,000. In addition, 

for cases involving certain kinds of criminal prosecutions, the OCC is able to rely upon 

12 U.S.C. 1829 (in which the prohibition is by operation of law) and more streamlined 

procedures as discussed below. 

As noted above, there are two primary actions that can be taken under the OCC's IT 

program: 

I) "1818 prohibition order." An OCC prohibition order is an industry-wide ban 

that remains in effect indefinitely, unless terminated by the OCC. An 1818 prohibition 

order may be issued based on certain evidence demonstrating wrongdoing;2 and 

2) "1829 prohibition letter." Under 12 U.S.C. 1829, an individual is effectively 

prohibited by operation of law once he or she has been convicted of (or entered into a 

pre-trial diversion program regarding) a crime involving dishonesty or breach of trust. In 

I In general, a national bank is required to file a SAR that provides information on certain known or suspected 

rederal1aw violations (or attempted law violations) and/or suspicious transactions related (0 potential money 

laundering activity. 

'In general, a prohibilion order may be issued: (i) when such individual has violated the law, engaged in an unsafe 

or unsound banking practice, or breached a fiduciary duty; that (ii) has resulted (or will probably result) in loss to 

the bank, gain to the individual, or prejudice to depositors' interests; and that (iii) evidences dishonesty or a 

continuing or willful disregard for the safety and soundness of the bank. 12 U.S.C. 1818 (e). 
91 


such cases, the OCC obtains the judgment or conviction documents from the court and 

sends the individual a letter informing him or her of the automatic prohibition.] 

The OCC is required by statute, 12 U.S.C. § 1818(u), to make all prohibition orders 

pUblic. All prohibitions -- both 1818 prohibition orders and 1829 prohibition letters -- are 

listed on the OCC's Web site at \\~v~\ .occ.treas.gov. Through this means, the OCC is 

able to inform the public (including banks making employment decisions) that certain 

individuals are prohibited from working in the banking industry. 

II. Fast Track (FT) Program Operation 

The FT program is primarily a Law Department-supported program, with leadership and 

coordination of the program housed within the Enforcement & Compliance (E&C) 

Division. E&C staffs both a FT Coordinator (who, among other things, trains and 

provides guidance to FT processors) as well as a FT Counsel (a senior E&C attorney). 

Assignment ofFT Cases. On a quarterly basis, the OCC downloads all national bank 

SARs that relate to lAPs into its Lotus Notes SAR Database. Each SAR in the database 

includes information reported by the Bank on a SAR (i.e., bank name, contact 

information. name and address ofIAP, narrative describing the suspicious activity). 

From this database, E&C makes case assignments to Law Department support staff who 

have been designated as Fast Track processors.4 

Criteria for Selection ofFT Cases. SARs are screened and selected for processing based 

on the following criteria, among others: (i) wrongdoing involves an officer, director, or 

employee, but priority will be given to officers/directors and individuals that are the 

subject of multiple SARs; (ii) amount involved is at least $5,000,l but priority will be 

given to cases involving $25,000 and above; and (iii) date of SAR filing is within the 

previous two years. From time to time, there may be a focus on cases in a special area of 

interest (e.g .• identity theft, privacy of customer records, mortgage fraud). 

Initial Work Up / 1829 Prohibition Letter. Once a case is assigned, the FT processor 

determines (e.g. , by checking the PACER system for federal criminal cases and by 

contacting state/local officials if there is a known criminal case at that level) whether the 

'The purpose oflener is to put the individual on notice that he or she has been prohibited by operation of law. As a 

result, if the individual reenters the banking industry in violation of 12 U.S.C. 1829. he or she does so "knowingly" 

and may be subject to criminal fines and penalties. 

, A FT processor can be either a Fast Track Processor I (FTP I) or a Fast Track Processor II (FTP II). The duties of 

each position are summarized on page 7. 

s This standard is satisfied ifmore than one SAR is filed on an lAP and the aggregate amount involved is at least 

$5.000. 
92 


individual has been successfully prosecuted (i.e. , convicted or pled guilty to a crime 

involving dishonestylbreach of trust) OR has entered a pre-trial diversion program (i.e., 

deferred prosecution, deferred sentencing, or deferred adjudication that avoids conviction 

if the person successfully completes a probationary period). If so, the initial processor 

obtains the necessary judgment or conviction documents and arranges to send the 

individual an 1829 prohibition letter to inform the person of the automatic prohibition. 

As part of the close out of the case, the processor will send appropriate materials to OCC 

Communications to ensure the 1829 prohibition is searchable by name on the OCC web 

site. The E&C Director and each of the District Counsels have authority to issue 1829 

prohibition letters. 

Development of 1818 Prohibition Order Cases. If the case does not qualify for an 1829 

letter, a prohibition case may be pursued, provided that: (i) the individual has admitted to 

-- or there is clear evidence of --participation in the wrongdoing; and (ii) prosecution of 

the individual has been declined6 or is otherwise not being actively pursued by criminal 

law enforcement. As a first step in developing an 1818 prohibition case, IT processors 

will contact the Bank (in writing, with possible phone follow-ups) to gather 

documentation to support the allegations in the SAR. 

Once supporting bank documentation is obtained: (i) a FIP I will send the case file to 

E&C's FT Coordinator for further processing; or (ii) a ITP II will be authorized to 

contact the individual (in writing) to obtain additional information, formulate a proposed 

enforcement recommendation, and draft an initial Washington Supervision Review 

Committee (WSRC) memo before sending the case file to E&C's FT Coordinator for 

further processing. E&C's FI Coordinator will then further process the case and also 

provide quality control oversight function before such cases are referred to the E&C FI 

Counselor for review and possible assignment to an E&C attorney. Ultimately, 1818 

prohibition cases need to be presented by an E&C attorney to WSRC before a prohibition 

action is authorized and pursued (i.e., either via consent or litigation). Cases leading to 

1818 prohibition orders are non-delegated, assigned (or at least co-assigned) to an E&C 

attorney, and must be presented to the WSRC. 

The OCC will generally pursue fast track prohibition cases, unless law enforcement asks 

the OCC (in writing), and the OCC agrees, to defer activity on a case. Therefore, initial 

processors will document the case file for eventual assignment to an E&C attorney, even 

if law enforcement has not yet declined prosecution. Finally, if at any point during the 

6 Law enforcement agencies may decline to prosecute banking officials and employees for their activities if the case 

does not meet prosecutoriai guidelines (e.g., dollar amount of loss), or restitution has been made, or an lAP's actions 

does not constitute a strong case of criminal law violation. In such cases, the lAP's actions may still constitute an 

act of significant wrongdoing that may serve as a basis for an administrative enforcement action by the DCC against 

an lAP. 
93 


processing of an 1818 prohibition case, information becomes available that the individual 

has been convicted of a crime involving dishonesty or breach of trust, then an 1829 

prohibition letter may be issued and the case processed for closure. 

No Action Cases. A FT case may qualify for closure if: (i) there is no admission and no 

clear evidence of wrongdoing; (ii) several unsuccessful attempts have been made to 

contact the individual, (iii) the five-year statute of limitations has run.7 In such cases, a 

FT Processor II may write and submit a short "no action" memo (along with the case file) 

to E&C's FT Coordinator. Final decisions on "no action" cases will be made by E&C, 

which will determine, for example: (i) whether a case should be pursued even when the 

initial evidence is not clear - such cases may be developed through further investigation, 

including (in rare cases) an order of investigation; or (ii) in cases where the five-year 

statute of limitations has run, whether an enforcement action short of a prohibition should 

be pursued (e.g., a personal cease and desist order), after taking into account litigation 

risks. 

III. Fast Track Processor I and II 

Interested Law Department support staff (in both HQs and the Districts) undergo FT 

training followed by time to demonstrate competence to perform the work satisfactorily, 

which will lead to certification as a FT Processor I and (later, if appropriate) FT 

Processor II. Once certified, the FT function is added to the performance plan of the staff 

member. Thereafter, the staff member's fast track duties and performance are (like any 

other primary or secondary objective) factored into that person's overall performance for 

purposes of evaluations and compensation-related matters. E&C will communicate an 

individual's performance in processing FT cases to that individual's supervisor. 

The general duties of FT Processor I and FT Processor II are set forth in the next page. A 

more detailed description ofFT processor duties begins on page 10. 

1 1818 prohibitions are subject to a five year statute of limitations. In general, to avoid statute of limitations issues, 

the OCC has five years from the date of the lAP's bad act to settle the case or fitea notice of charges. A case may 

also be closed if the subject of the SAR is a foreign national who has committed a criminal act or significant 

wrongdoing in a foreign country where no U,S. domestic accounts were involved. 
94 


FT Processor I and II Duties 

FT Processor I 

--Receive assignments from the FT Counselor 

--Make entry on FT Assignment Sheet (i.e., a Word document in table format used to 

input the name of lAP, the bank, date assignment received) 

--Check PACER (federal court database) to determine whether there has been a criminal 

action involving the individual that would qualify the case for an 1829 prohibition 

letter 

--If an 1829 letter is appropriate, then: 

-obtain from court or PACER system judgment and conviction documents 

-prepare an 1829 worksheet & obtain the lAP's address 

-prepare an 1829 prohibition letter for signature by E&C Director (or District 

Counsel) 

-make entries in Lotus Notes SAR data base 

-make entry in EV (for mid-size/community banks) or LB-ID (for large banks) 

-make entry into Enforcement Action Reporting System (EARS) 

-fill out and submit worksheet to Communications (for DCC website) 

-send completed file to E&C's FT Coordinator 

--Ifan 1829 letter is not appropriate (and an 1818 case must be developed), then: 

-send letter to Bank requesting documentation supporting the SAR to be signed by 

E&C's Fast Track Counselor or District Counsel/designated District 

attorney 

-send copy of letter request to appropriate Assistant Deputy Comptroller (ADC), if 

small/mid-size bank 

-communicate as necessary with Bank investigator to obtain relevant 

documentation 

-once documentation is obtained, send case file to E&C's Fast Track Coordinator 

FT Processor II 

--performs all of the above-described functions as well as the following: 

--Perform Lexis search as required to locate individual's current address 

--once 1818 prohibition case documents are obtained, send standard letter to individual to 

obtain hislher input (letter to be signed by E&C's FT Counselor or District 

Counsel / designated District attorney) 

--write draft Washington Supervisory Review Committee (WSRC) memo 

--send completed 1818 file to Fast Track Coordinator 

--write "no action" memos, as necessary 
95 


IV. E&C Attorney Involvement 

An E&C attorney will complete the final processing of an 1818 prohibition case. As 

noted above, after the FT processor completes work on a case, the case file is sent to 

E&C's FT Coordinator for further processing and to provide quality control oversight 

function before such cases are referred to the FT Counselor for review and possible 

assignment to an E&C attorney. Once the 1818 case is assigned to an E&C attorney, it is 

treated as any other enforcement case in that the E&C attorney will finalized the WSRC 

memo, present the case to WSRC to received authorization to pursue the enforcement 

case, and then prosecute the case to obtain an 1818 prohibition (i.e., either via consent or 

litigation, if necessary). A more detailed description of fast track procedures for E&C 

attorneys may be found at page 22. 
96 


V. Condensed Flow Chart of FT Program 

I Bank files SAR 

U 

SAR infonnation downloaded into DCC Lotus Notes database called "SAR Frr DB" 

FT Counselor assigns SARs to FT processors 

If 1829 letter is warranted, then: 

-obtain court documents 

-prepare 1829 letter 

-make entries into appropriate databases 

-send work sheet to Communications 

If 1829 letter is not warranted, then: 

FT Processor I 

-obtain Bank documentation that 

supports SAR 

FT Processor Il 

-obtain Bank documentation that 

supports SAR 

-contact individual (in writing using 

standard letter) to obtain additional info 

-write draft WSRC memo (or "no action" 

memo as appropriate) 

FT Processor I and FT Processor Il sends case file to FT Coordinator, who: 

-receives 1818 and "no action" files from FT processors 

-consults with E&C FT Counselor, as necessary 

-completes processing I provides quality control oversight for (i) 1818 cases before 

transfer to E&C FT Counselor and (ii) "no action" files sent to E&C 

E&C FT Counselor reviews 1818 cases before assignment to E&C attorney 

E&C Attorney presents case to WSRC and obtains prohibition by consent 

or through litigation 
97 


FT Processor -- Detailed Instructions 

I. SAR Assignments 

Assignment a/Cases. E&C will assign cases to FT processors, who will be infonned of 

new case assignments by email. 

Determining Which Cases Are Assigned to You. To detennine or review which cases are 

assigned to you, go into the Lotus Notes SAR Fast Track Database (SAR Frr DB). 

··For officer/director SARs, once in the database, click on "I. Priority SARs," "A. 

Open," "I. Officers," "c. By Assignee" for all open officer, director and shareholder 

SARs. 

··For employee (e.g., non·officer/director) SARs, the process is the same, except 

instead of clicking on "I. Officers," click on "2. Employees and then "c. Assignee." 

··Under these views, all open SARs assigned to you will be listed, as well as the 

date they were assigned. Be sure to look under both views for your assigned cases. 

··An alternative method of finding cases assigned to you, click on "II. All lAP 

SARs," choose "F. By Last Assignee," and look under your name for all open SARs by 

date assigned to you. 

II. Beginning to Work on a Case 

A FT processor should do the following: 

··Enter the assignment on your FT Assignment Sheet. See Tab # I for the FT 

Assignment Sheet (electronic versioll located at "Templates Oil My Computer", Fast 

Track Tab) . 

.. Ensure your name is entered into the Lotus Notes SAR FT Database . 

.. Set up a case file and organization for case assignments: 

o Create a separate manila folder for each individual case. 

o Write the lAP's name on the folder tab. The bank's name & charter 

number may also be written on the folder tab. 

o Staple SAR on the right hand side of file folder. 

10 
98 


--Place file folders in a box or in an organization system by alphabetical order by 

lAP. 

--Develop a "tickler" system that you are comfortable with to know when to do 

follow-up on a case file or move it to the next stage in the process. 

--Take notes of every phone call along with the phone number either on the file 

folder itself or on a piece of paper securely kept in the case file. 

--After the establishment of the file, review the SAR to verify that the case 

qualifies for the Fast Track Program (see "Criteria for Selection of FT Cases" on page 4). 

III. Locating an lAP 

In order for a FT processor to send an 1829 letter or to fully process an 1818 prohibition 

(for FT Processor lIs), the lAP's current address is needed. To locate the lAP's current 

address, try the Internet at www.Lexis.com (person locator) or Law Enforcement 

Solutions or CLEAR (https:llclear.thomsonreuters.comlclear home index.jsp). These 

databases must only be used for work-related tasks (e.g. , working on an assigned FT 

case). If the lAP is currently serving time in a federal prison, you may find their address 

through the Internet at http://www.bop.gov . Click on "Inmate Locator." The Inmate 

Locator will show the Inmate Register Number and the address where mail is to be sent. 

Note: States also have similar websites. 

If you cannot locate an lAP after several attempts, try searching again in 2-3 months to 

see if a different or newer address is available. Otherwise, contact the FT Coordinator, 

who may be able to help you perform a more detailed search. 

IV. Determining if an 1829 Letter is Appropriate 

--An 1829 Letter is appropriate if either: (i) the lAP has either been prosecuted 

(i.e., convicted by a jury or pled guilty and sentenced) OR (ii) the lAP has entered into a 

pre-trial diversion (PID) program for a criminal violation involving dishonesty, breach of 

trust, or money laundering. 

-PID program. Under a typical PID program, an offender enters into a 

program of supervised probation, and upon successful completion the U.S Attorney will 

decline prosecution and the charges will be dismissed. Similar programs at the state level 

have various names, including deferred prosecution agreements. They will be referred to 

hereafter, collectively, at PTD programs. 

II 
99 


-Exception When Record May Be Expunged. You should carefully review 

the court/judgment documents to determine whether expungement of the criminal record 

is contemplated (e.g., the document might state that the record will be expunged 

sometime after successful completion of the PID program). If so. then you should 

consult with the Fast Track Coordinator to determine whether an 1818 prohibition case 

should be pursued instead. The reason for this is that an 1829 prohibition is no longer 

effective once the criminal record has been completely expunged. 

When to Issue and 1829 Letter. An 1829 letter should not be issued until 

after sentencing and the time for appealing all pleas has passed. As a general rule. wait at 

least 30 days after sentencing before mailing an 1829 letter. 

V. Steps for Processing An 1829 Letter 

.. FT Processors should obtain account and password information to access the 

Public Access to Court Electronic Records ("Pacer") hltp:llpacer.gov/findcase.html. 

Each case assignment should be checked for convictions or PTD programs in Pacer. 

Pacer is the applicable internet site for federal cases. Note: For state cases, you can 

check the state court listed on the internet or county courts. Several state and counties 

have the documents available without charge on their websites . 

.. Once you have accessed Pacer: 

o Enter the Criminal Courts 

o Type in lAP name,last name first (ie., Smith, Edward) 

o Pacer will come up with a list, if applicable 

o Find lAP's name, for common names cross check the state in which the 

crime occurred. When in doubt an e-mail may be sent to the AUSA to 

confirm the identity or check the indictment or information statement 

document located in Pacer. The indictment may list the date of birth or 

other helpful identifying information. See Tab #2 for sample e-mail to 

AUSA . 

.. Print the Pacer court docket report along with the judgment & conviction 

document (the judgment document will be near then end of the Pacer court docket 

report). If the case is a PTO, make sure to review the document carefully to 

determine if expungement of the criminal record is contemplated .. if so, consult with 

the Fast Track Coordinator as noted above . 

.. Staple the court documents on the left-hand page of the manila folder case file 

that you prepared (as noted on page 10). 

12 
100 


--Complete the 1829 Worksheet. See Tab #3 for 1829 Worksheet (electron;c 

version located at: "Templates on My Computer", Fast Track Tab) 

--Perform a search for the lAP's recent address to send the 1829 letter. See section 

on "Locating an lAP." 

--Fill out the required information on the 1829 letter template. See Tab # 4 for the 

1829 Leller Templale (electron;c vers;olllocated at: "Templates 011 My Computer", 

Fast Track Tab). The 1829 Letter Template includes several documents as follows: the 

1829 Letter to the lAP, The Notice to Other Agencies of Conviction ("agency notice 

letter"), the Completed Enforcement Action Form for Communications, EARS form, and 

EVILB-ID database form. 

Note: In the 1829 Letter to the lAP and "The Notice to Other Agencies," the contact 

person entered into the 1829 Letter should be either the Fast Track Coordinator or the 

Fast Track Counsel. See page 26 for FT Personnel Chart. 

--Make all entries in the databases, EVILB-ID, EARS and SAR database 

--In EV or LB-ID, identify the lAP action as an 1829 Letter. Be sure to enter the 

appropriate information -- the "Initiated Date" is the date of the final court judgment, 

and the "Completed Date" is the date of the 1829 letter. 

o Once in EV or LB-ID, enter a narrative identifying whether the lAP was 

convicted by ajury or pled guilty, the crime(s) at issue, the court and state in 

which the sentencing took place. Also, include the date the 1829 Letter was sent 

(date ofletter), your name and division. An example of the narrative is as 

follows: "As part of the Fast Track program, OCC found that the lAP pled guilty 

to one count of bank embezzlement in U.S. District Court of Maryland, the 1829 

letter was sent February 19,2003. J. Doe, SPSU." Also include sentencing 

information. Note: The same type of language may be entered into the SAR 

Data base in the Comment Section. 

--Print out the 1829 Letter documents and print a copy of the EVILB-ID entries. 

Place all print outs in the case file. 

--Enter the SAR Fast Track Database and enter the lAP's SAR. Enter the 

following information on the SAR in the appropriate areas 

o Indicate whether the conviction was in local, state, or federal court, 

o Change the Status field to Prosecuted, 

o Enter the date of the 1829 Letter, 

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o Change the case to "Closed," and enter the "Closed Date." 

o Enter in the Comment Section the docket number, the court and 

sentencing information 

VI. Distribution of the 1829 Letter 

Once the 1829 Letter is signed, distribute the documents as follows: 

1. Send the signed 1829 Letter to the lAP by certified mail·retum receipt. 

2. Send the Completed Enforcement Action form with a copy of the 1829 Letter 

to Communications, Attn: Jackie England (Mail Stop 3·3). 

3. Place the EARS, EVILB·JD forms and the Completed Enforcement Action 

form in the case file. (Make sure all information has been placed in the 

applicable databases) 

4. Send a copy of the 1829 Letter to the other agencies (FED, FDIC, OTS and 

NCVA), along with the agency notice letter. 

S. Initial the top of the completed Fast Track case file and send to the IT 

Coordinator for indexing and subsequent shipment to the Federal Records 

Center, in accordance with OCC record·retention policy. 

VI. Steps for Developing An 1818 Prohibition Case 

--If an 1829 case is not appropriate, then the processor should take the steps 

outlined below toward developing an 1818 prohibition case. 

--First check Institution Database Lookup in Lotus Notes to make sure the Bank is 

still a national bank. You may also check with Central Records for this information (202· 

874-S0S0). 

--Then the FT Processor should make a written request to the Bank (e.g., the 

individual who filed the SAR or the Bank's investigator) for all documentation that 

supports the SAR. See Tab #5 for letter requesting Balik documents (electrollic version 

located at: "Templates on My Computer", Fast Track Tab). Regarding the specific 

contact at the Bank, use the contact person listed on the SAR for Mid-size/community 

Banks. For Large Banks, use the Large Bank Contact List is on page 31 . 

-The OCC's letter requests a hard copy of the SAR, documentation to 

support the SAR, employment application/resume (used for multiple SAR filings),law 

enforcement status and contact person, loss figures and any restitution payments made. 

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--Once the Bank responds with the documentation supporting the SAR, the FT 

Processor should review the bank documentation supplied per the OCC's request to 

ensure all necessary documents have been obtained. 

Fast Track Processor I Steps 

--If all documentation has been received, Processor I will forward the case file and 

all related documents to the Fast Track Coordinator in the Enforcement & Compliance 

Division. At that time, Processor I will make an entry in both the FT Assignment Sheet 

and in the Lotus Notes fast track database (called SAR Fff DB) to reflect the transfer of 

the case file . 

Fast Track Processor II Steps 

--FT Processor II will review the documentation to determine ifthere appears to 

be sufficient evidence to support an 1818 prohibition action (see footnote 2 on page 3). 

Questions may be directed to the Fast Track Coordinator. 

Introduction Letter. If there appears to be sufficient evidence to support an 1818 

prohibition action, FT Processor II should then contact the lAP by letter to notify him or 

her that the OCC may commence an enforcement action. 

--See Tab# 6 for lAP introduction leiter or "Intra Leiter" (electronic version 

located at: "Templates on My Computer", Fast Track Tab). The Intro Letter should be 

sent to the lAP via UPS with signature required. 

--The Intro Letter should provide the lAP with a 10 to 15 day time frame to 

contact the FT Processor II. 

If the lAP Responds by Phone to the Intra Letter. If the lAP (or the lAP's attorney) 

responds to the Intro Letter by making a phone call to Processor II, then please adhere to 

the following guidance (see also ''Do's and Don'ts for Communicating with lAPs" on 

page 18): 

-tell them you are investigating the case. 

-ask lAP to explain the allegations and present their side of the story. 

-take detailed notes of the telephone conversation(s). 

-do not mention tbe existence of tbe SAR. 

-use the telephone conversation as an opportunity to acquire additional evidence or 

get written documentation from the lAP. Take notes. You may be able to determine 

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whether the lAP would consent to an enforcement action or be inclined to litigate the 

case. 

-ask the lAP to confinm their contact infonmation. 

-if appropriate, inform lAP of their right to seek counsel. 

-if appropriate, ask the lAP confinm conversation by a letter or bye-mail. Provide 

your e-mail address in addition to your physical address. It is extremely helpful to obtain 

a physical address and phone number of the lAP. Ask for cell phone number. Note: The 

lAP may be apprehensive to provide you with the infonmation but try to obtain a place 

where you can contact them. 

-if the lAP asks what happens next, you may briefly describe the internal process 

that the OCC will use to detenmine whether to pursue an enforcement action (i.e. , the case 

is still in the investigation stage; once the investigation is complete, it will be referred to 

the Enforcement & Compliance Division of the Law Department; if appropriate, the case 

will be presented to a committee that hears enforcement cases; and if the agency 

detenmines that an enforcement action is appropriate, then an enforcement attorney will 

contact them directly with the decision). 

If the lAP Responds in Writing to the OCC Intro Letter. If the lAP responds in writing to 

the Intro Letter, you may still want to contact the lAP by phone to obtain clarifications. 

Final Review of Case File Before Drafting WSRC Memo. After the lAP responds to the 

OCC Intro Letter, review the entire case file, including the Bank's documentation again, 

to ensure that all necessary documents have been received and that the evidence supports 

an 1818 prohibition case. Follow up with the Bank investigator, if necessary, to obtain 

additional documentation. 

Draft WSRC Memo. The next step is to prepare a draft WSCR memo. Use the Fast 

Track WSRC memo template to draft the memo. See Tab # 7 for WSRC Memo 

(electronic version located at: "Templates on My Computer", Fast Track Tab). In the 

draft memo, provide a clear and concise description of the facts along with your 

recommendation. Once completed, send a hard copy of the draft WSRC memo along 

with the entire case file to the FT Coordinator for additional processing. Send an email to 

the IT Coordinator indicating that the file is being sent, along with an electronic version 

of the draft WSRC memo. 

--Once the case file and draft WSRC memo is forwarded to the IT Coordinator, 

make the appropriate entries in both the FT Assignment Sheet and in the SAR IT 

Database showing the transfer of the case to the IT Coordinator. 

--The FT Coordinator will further review and process the case before passing the 

case file on to the Fast Track Counsel for possible assignment to an E&C attorney. The 

FT Counsel will advise the IT Coordinator of the assigned attorney. IT Coordinator will 

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enter the appropriate data into Chief Counsel's Lotus Notes Project Tracking System 

(PTS) and in the SAR FT Database. The FT Processor II may be contacted by the 

assigned E&C attorney if questions should arise. 

V. No Action Procedures 

If at any time during the processing of a fast track case, it becomes clear that: (i) the case 

does not meet the FT program criteria (i.e., no written admission and no clear evidence of 

wrongdoing), (ii) several unsuccessful attempts have been made to contact the individual 

(see "Locating an lAP" on page II), or (iii) the five-year statute of limitations has run 

(see footnote 7 on page 6), a short "no action" memo may be written and submitted 

(along with the case file) to E&C's FT Coordinator. See Tab #8 for No Action Memo 

(electronic version located at "Templates on My Computer", Fast Track Tab). 

--No Action memos may be written after evaluating the documentation received 

from the Bank. For example, there may be circumstances where the documentation does 

not support an OCC's enforcement action i.e., lack of evidence ofJAP's responsibility for 

the bank's loss. 

--FT Processor lIs will prepare a draft No Action memo addressed and forwarded 

to the FT Coordinator. Send the case file to the FT Coordinator, along with a hard copy 

as well as an electronic version of the memo. 

--Also, remember that when a case assignment leaves the Processor's desk, an 

entry should be made on the FT Assignment Sheet and in the comment section of the 

SAR. 

--If appropriate, the FT Coordinator will present the case to the FT Counsel and/or 

E&C Director for disposition. 

--No Action Memos should briefly discuss facts as needed and state the reason(s) 

why the FT case should be closed. 

-- Final decisions on no action cases will be made by the E&C Director, who will 

determine, for example: (i) whether a case should be pursued even when the initial 

evidence is not clear - such cases may be developed through further investigation, 

including (in rare cases) an order of investigation; or (ii) in cases where the five-year 

statute of limitations has run, whether an enforcement action short of a prohibition should 

be pursued (e.g., a personal cease and desist order), after taking into account litigation 

risks. 

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105 


--If appropriate, the FT Coordinator will close the case in the SAR FT Database 

and will retain the case file for indexing and subsequent shipment to Federal Records 

Center, in accordance with acc records-retention policy. 

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106 


"Do's" and "Don'ts" for Communicating with lAPs 

When communicating with lAPs, it may be When communicating with 

appropriate to ... lAPs, do not ... 

Explain who you are and why you are calling, 

without disclosing the existence of an SAR. Have all 

available Bank documents while talking to the 

individual. 

Before receiving any substantive information from 

the lAP regarding the case, ask the lAP whether 

he/she is represented by an attorney. 

If the lAP does have an attorney, ask for counsel's Do not communicate directly 

name and phone number and communicate only with the lAP (particularly 

through lAP's attorney. regarding any substantive matter 

in the case) once you have been 

informed that she/he is 

represented by counsel. 

If the lAP does not have an attorney, inform the lAP 

that he has the right to be represented (at any point in 

the process) by an attorney. 

If asked, tell the lAP that the issue of whether to seek Do not give advice as to whether 

the advice of counsel is his/her decision. the lAP should seek the help of 

an attorney. 

Emphasize that the OCC is still in the informationgathering mode - the agency has not yet decided 

whether to pursue a particular action in the case. 

Inform the lAP that you are investigating whether to 

recommend an action - you may let them know that 

I you are not the ultimate decision maker. 

Get the lAP's version of the story if she/he is inclined Do not necessarily assume that 

to give it. Request or accept any information that the information in the SAR is 

would contradict or tend to disprove the facts as accurate. 

suggested by the file contents (i.e. , SAR, other 

documents). If there is an admission/confession, ask 

what the individual's current view is regarding the 

admission/confession. 

Ask whether the individual is currently employed in 

the banking industry. If not in the banking industry, 

ask whether the individual has any intention of 

working in the industry again. 

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107 


Ask whether there has been any other action 

(particularly criminal action) against the individual 

for hislher activity and, if so, in which court. 

If asked, you may provide a general overview of the Do not inform the lAP what 

process leading up to an OCC decision to pursue the action you or anyone else at the 

case (i.e., currently investigating, evidence and OCC will (or are likely to) 

recommendations will be presented to a committee, recommend. 

who will help determine what, if any, action oce 

will takel 

You may inform the lAP that the OCC only has the 

authority to pursue civil administrative actions (e.g., 

prohibition from working for an insured depository 

institution, restitution, and/or eMPs) -- not criminal 

actions. You may explain the type of actions under 12 

USC 1818: Prohibition Order, Personal Cease & 

Desist Order, Restitution Order and Civil Money 

Penalties. Seefootnotes l3,IS, and 160fFTPPM 

on pages 39 and 40. 

You may let the lAP know the general scope of a 

prohibition (i.e., he/she would not be permitted to 

work for or otherwise participate in the conduct of 

the affairs of any insured depository institution, 

including national banks, state banks, thrifts, S&Ls, 

or credit unions). 

If asked, you may provide a very general description 

of the litigation process (i.e., oce files charges with 

administrative law judge, there is an opportunity for 

document discovery and depositions, there is a 

hearing/trial before an Administrative Law Judge 

(ALJ), briefs are written, a decision is made by the 

oce, and there is the opportunity for appealing the 

decision in Federal Appeals Courts). At a minimum, 

you may want to inform them that if the OCC decides 

to take action and if the case is not settled, the lAP 

has the right to a full hearing before an ALJ. 

If asked how the OCC became aware of the lAP's Do not mention a SAR and do 

actions, explain that the OCC regulates national not, under any circumstances, 

banks (including the Bank involved) and became give out any information as to 

aware ofhislher actions due to the OCe's regular whether a SAR has been filed. 

supervisory activities. 

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108 


While the general rule would be to not share evidence Do not provide the lAP with 

before the case goes into litigation, it may be either a description (or copy) of 

appropriate to share (e.g., a strong written confession all the evidence that we have 

by the lAP) one piece of evidence that would tend to against himlher. 

make the case a slam-dunk to promote settlement. 

Discuss with the FT Coordinator before sharing any 

evidence. 

If appropriate, you may ask the lAP whether he is 

prepared to resolve the OCC's concerns by 

consenting to an order (e.g. , prohibition order). 

If relevant, ask whether the lAP has made restitution 

and, if not, whether shelhe would be willing to make 

restitution. 

If it comes up, it is appropriate to inform the lAP that Do not speculate as to what the 

- should the OCC decide to take an enforcement OCC may agree to as part of a 

action - there will be an opportunity to settle the settlement. 

case. 

If it comes up, it may be appropriate to inform the 

lAP that - with regard to cases that settle - the only 

public document is the consent order itself. 

If it comes up, it may be appropriate to inform the 

lAP that - regarding litigated cases before an 

administrative law judge - the presumption is that all 

evidence entered by either side will be available to 

the public. 

If appropriate, qualify your answer by encouraging 

the lAP - for an authoritative, complete answer -- to 

consult the appropriate statutory references (e.g., 12 

U.S.C. § 1818, 12 U.S.C. § 1813) and to seek the 

advice of an attorney. 

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109 


Fast Track Procedures for E&C Attorneys 

I. Creation of the OCC's Fast Track (Ff) SAR Database 

• In accordance with 12 C.F.R. § 21.11, all banks must file suspicious activity 

reports (SARs) with the Treasury Department's Financial Crimes Enforcement 

Network (otherwise known as FinCen). The reports are initially compiled by the 

Detroit Computing Center of the IRS. The OCC, which has direct access to the 

database, downloads national bank-related SARs quarterly into a Lotus Notes 

database, called SAR FIT DB. 

• The Fast Track IT Administrator oversees the creation of the SARFIT DB. Each 

file in the database includes information from the SAR (i.e., bank name and 

contact information, name and address of lAP, narrative describing the suspicious 

activity) plus some added information (i.e., investigation/prosecution status from 

FBI reports, etc). 

II, Initial Assignment to Fast Track Processors 

• E &C selects cases from the SAR FIT DB to assign to Law Department FT 

Processors (in both Headquarters as well as in the Districts).! SARs are generally 

selected based on the following criteria, among others: (i) wrongdoing involves 

an officer, director, or employee, but priority will be given to officers/directors 

and individuals that are the subject of multiple SARs; (ii) amount involved is at 

least $5,000,9 but priority is given to cases involving $25,000 and above; and (iii) 

date of SAR filing is within the previous two years. From time to time, there may 

be a focus on cases in a special area of interest (e.g., identity theft, privacy of 

customer records, computer intrusion, mortgage fraud). 

• The FT Processors first determine (e.g., by checking the federal court PACER 

system) whether the lAP has been prosecuted (i.e., convicted or pleaded guilty to a 

criminal violation involving dishonesty) or has entered a pre-trial diversion (PTD) 

agreement. If so, the initial processor arranges to send the lAP an 1829 

prohibition letter. All prohibitions, including 1829 prohibitions, are listed on the 

I As noted on pages 6 and 7 (Overview of Fast Track Program), FT Processors undergo training and are certified as 

either a IT Processor I or a FT Processor II. 

• This standard is satisfied if more than one SAR is filed on an lAP and the aggregate amount involved is at least 

$5,000. 

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110 


OCC's Web site at www.occ.treas.gov.toinform the public (including banks 

making employment decisions) that certain individuals are prohibited from 

working in the banking industry. 

• If the lAP has not been convicted and has not entered into a PID agreement, the 

FT Processor will pursue the case as a potential 1818 prohibition action. The FT 

Processor will make a request for Bank documents that support the SAR 

allegations. Once supporting bank documentation is obtained: (i) a FT Processor 

I will send the case file to E&C's FT Coordinator for further processing; or (ii) a 

FTP II will be authorized to contact the individual (in writing) to obtain additional 

information, formulate a proposed enforcement recommendation, and draft an 

initial WSRC memo before sending the case file to E&C's FT Coordinator for 

further processing. 

III. E&C Processing ofFT Case / Assignment to E&C Attorney 

• The FT Coordinator will process cases and also provide quality control oversight 

function before such cases are referred to the FT Counsel for review and possible 

assignment to an E&C attorney. 

• After checking with the E&C Assistant Directors, the FT Counsel will periodically 

assign FT cases to E&C attorneys. Upon assignment of a case, the E&C Attorney 

will receive the case file as well as an electronic version of the draft WSRC memo. 

• PTS. Once a FT case is assigned to an E&C Attorney, the FT Coordinator will 

create a project entry in the Chief Counsel's Project Tracking System (PTS) 

reflecting the new FT assignment. Thereafter, the E&C attorney will be 

responsible for all further updates/edits in PTS. 

• SAR FIT Database. Once a FT case is assigned to an E&C Attorney, the FT 

Coordinator will also update the SAR FIT DB to reflect the new FT assignment. 

The E&C attorney will not be responsible for updating this database. However, 

once the FT assignment is completed or closed out, the E&C Attorney must email 

the FT Coordinator with a short note on the final disposition of the case (with a cc 

to the FT Counsel). The FT Coordinator will then make a final entry and close out 

the case in the SAR FIT Database. 

• The Fast Track Counsel will keep a record of attorney assignments (i.e. , to include 

the date assigned, to whom, date case brought to WSRC, statute of limitations time 

period and date/nature of final disposition). 

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111 


IV. Final Processing of Fast Track Case by E&C Attorney 

• The E&C attorney should submit a final draft WSRC memo (along with the case 

file) to the relevant E&C assistant director. Once signed off by the assistant 

director, the case can be scheduled for WSRC consideration. 

• While prohibition orders are a primary objective of the FT Program, the OCC also 

may issue, in appropriate cases, an order to cease and desist (C&D) that requires 

the lAP to, among other things, take certain affirmative action, make restitution, or 

provide a guarantee against loss. In addition, the OCC has authority to assess a 

civil money penalty (CMP) in appropriate cases. 

• The final WSRC memo should be a memo from the assigned attorney (as well as 

the FT Coordinator or FT Processor, if either is still involved in the case). The 

assigned attorney will present the case. If still involved in the case, the FT 

Coordinator or FT Processor may attend the WSRC meeting. If appropriate, the 

E&C attorney may specifically request the FT Processor or FT Coordinator's 

attendance. 

• Once WSRClDeputy Comptroller authority is given to pursue an action, the E&C 

attorney should use the "Fast Track Stipulation" template to produce the 

appropriate documents (includes an lAP letter, a stipulation/consent order, forms 

for initiating and completing the action, and applicable instructions). For 

additional guidance, please refer to applicable post-WSRC instructions in the 

"Procedures for Enforcement Actions" section of the E&C Attorney Handbook. 

Although any Director of Special Supervision (SPSU) has authority under the 

delegation matrix (including for Large Banks) to sign fast track prohibition 

consent orders, Deputy Controller for SPSU Kris Whittaker has been signing 

these. 

• Upon completion of the enforcement action, the close out of a FT case is identical 

to any other case (see "Procedures for Enforcement Actions" section of the E&C 

Attorney Handbook) -- with one exception: Upon completion or close out, the 

E&C Attorney must email the FT Coordinator a short note on the final disposition 

of the case (with a cc to the FT Counsel). The FT Coordinator will then make a 

final entry and close out the case in the SAR Frr Database. 

V. Parallel Actions 

• The OCC will generally pursue fast track prohibition cases, unless law 

enforcement asks the OCC (in writing), and the OCC agrees, to defer activity on a 

case. Once a written request is received, the OCC will generally agree to defer 

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112 


activity the case for a short period of time (e.g., four months), provided the matter 

is being actively investigated or prosecuted by law enforcement. However, if the 

acc is facing a statute of limitations issue, it may not agree to the requested 

deferral. 

• Plea Agreement Language. If law enforcement is actively prosecuting a case, 

there may be an opportunity to ask the AUSA to include prohibition language in 

the defendant's plea agreement. There is currently model prohibition / plea 

agreement language in the U.S. Attorney's USA book, which AUSA's are able to 

access on the Department of Justice's intranet site. lo However, you may advise the 

AUSA that the acc prefers the following language: 

"Defendant agrees to consent to any regulatory action taken by a Federal 

financial institution regulatory agency to permanently remove defendant from 

office and/or prohibit defendant from participating, whether as an institutionaffiliated party or otherwise, in the conduct of the affairs of any insured 

depository institution or depository institution holding company, or any other 

organization or entity provided in Section 8(e) of the Federal Deposit 

Insurance Act, 12 USC 1818(e)." 

• 1818 Prohibition vs. 1829 Prohibition. Recent legislation II has expanded the scope 

of an 1829 prohibition, making its coverage very similar to an 1818 prohibition 

order. The acc may rely, when appropriate, on the relatively more streamlined, 

less resource-intensive 1829 prohibition letter process, which will conserve limited 

resources, However, it will continue to be appropriate in some cases (e,g., if 

model prohibition language is in the plea agreement or for significant cases 

involving officers/directors or large dollar amounts) to pursue a full 1818 

prohibition order. If an 1829 Prohibition is deemed appropriate, the E&C 

Attorney may give the case to E&C support staff or the IT Coordinator to process 

the 1829 letter. 

• Expedited WSRC Approval Process for Certain 1818 Prohibition Cases. In cases 

10 The DOJ intranet site provides two suggested alternative models: "Defendant agrees not to become or continue 

servicing as an officer, direttor. employee, or institution-affiliated party ... or participate in any manner in the 

conduci oflheaffairs of any institution oragency specified in 12 USC ISIS(e)(7)(A) wilhoullhe prior written 

approval oflhe appropriale federal financial instilUtion regulalory agency" . Defendant agrees to provide an 

executed copy oflhis agreement to the [relevant federal financial institution regulatory agency) within forty-five 

days of the public filing of the plea agreement" QR "Defendant will cooperate with [the relevant regulatory agency) 

in administrative removal/prohibition proceedings instituted against Ihe defendant pursuant to 12 USC ISIS(e). 

"See Section 710, Public Law 109-351, The Financial Services Regulatory Relief Act (October 13,2006); 12 USC 

IS29. 

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where prohibition language has been included in the criminal defendant's plea 

agreement, authority to pursue an 1818 prohibition consent order may be obtained 

by sending an email to the Director of Enforcement & Compliance for forwarding 

to the Deputy Comptroller for Special Supervision. The email should include a 

brief description of the criminal acts that led to the plea agreement as well as a 

brief analysis of why it meets the prohibition standard. The Deputy Comptroller 

will then obtain concurrence from WSRC (by notation vote) followed by authority 

from the appropriate Senior Deputy Comptroller to pursue the case without the 

need to write a formal WSRC memo or formally present the case to WSRC. 

VII. No Actions 

• Once a case is assigned to an E&C Attorney, the case file will include evidence of 

wrongdoing. In some cases, however, the E&C Attorney may decide it is 

necessary to take some additional investigative steps to shore up the evidence 

before the case is ready for WSRC presentation. 

• A FT case may be closed if: (i) several unsuccessful attempts have been made to 

contact the individual (see "Locating an lAP" on page II) ill (ii) the evidence 

does not support an enforcement action, taking into account the evidence obtained 

(or that may be reasonably obtained). In such cases, a short no action memo 

should be written and submitted to E&C's Director (through your Assistant 

Director). 

• Keep in mind that even if the five year statute of limitations is an issue, it may be 

possible to pursue restitution or an enforcement action short of a prohibition (e.g., 

a personal cease and desist order), after taking into account litigation risks. 

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Fast Track Enforcement Program Personnel Chart 

As of March 1, 2008 

Position Person Mailine Address Telephone Number 

Fast Track Crystal McLaughlin OCC 202-874-7427 

Coordinator 250 E Street, SW 

Mail Drop: 7-1 

Washington, DC 

20219-0001 

Fast Track Counsel Jeffery Abrahamson OCC 202-874-5522 

250 E Street, SW 

Mail Drop: 7-1 

Washington, DC 

20219-0001 

Director, E&C Richard Steams OCC 202-874-4800 

250 E Street, SW 

Mail Drop: 7-1 

Washington, DC 

20219-0001 

Assistant Director, Gerard Sexton OCC 202-874-4800 

E&C Monica Freas 250 E Street, SW 

Ellen Warwick Mail Drop: 7-1 

James Hendriksen Washington, DC 

20219-0001 

Fast Track IT Michael Opiela OCC Mike: 

Administrator (until 7/31/12); 250 E Street, SW 202-874-4658 

George Nhu Mail Drop: 5-3 George: 

(after 7/31112) Washington, DC 202-874-3157 

20219-0001 

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Questions & Answers 

Q: Before requesting documents from a bank in order to begin developing an 1818 

prohibition case, why is it important to check the Institutional Database in Lotus 

Notes or to call Central Records to confirm that the institution is still a national 

bank? 

A: If, after the filing of the SAR, the bank has switched charters to either a state bank 

or a thrift institution, the OCC would no longer be the institution's federal 

supervisor. Therefore, if the OCC were to request and obtain documents from 

such an institution, it may raise significant issues under the Right to Financial 

Privacy Act (RFPA). It may be possible, after checking with OCC counsel, to 

avoid significant RFPA issues in such a case by having the institution's primary 

federal supervisor (i.e. , the Federal Reserve, FDIC, or OTS) obtain the documents 

for us. That said, if a bank has switched charters after filing the SAR, you should 

contact the FT Coordinator, who may have you return the case to E&C for 

disposition. 

Q: What if a FT processor is assigned a case and the SAR mentions the name of one 

or more other employees, in addition to the lAP who is the primary subject of the 

SAR. None of the named parties have been prosecuted. How should these other 

lAPs be handled? Should cases be worked up on each of them or only the person 

listed as the lAP? 

A: If the other persons mentioned are or were lAPs and each meet the criteria of the 

Fast Track Program, bring this to the attention of the IT Coordinator, so a decision 

can be made as to if, and how, to pursue the other lAPs 

Q: I have five SARs filed on an lAP by two banks where the lAP previously had 

worked. One of the SARs in the SAR Ff[' DB indicates that it (the SAR) has been 

cancelled by FinCEN. The lAP was convicted for his criminal wrongdoing at only 

one of the banks. Do I make close out entries in the SAR FfI DB for all five? 

A. Yes, all five, including the one cancelled by FinCEN (most likely a duplicate), 

should be closed out in the SAR FfI DB as an 1829 case. In the "OCC 

Comments" section of the SARs filed by the bank where prosecution was not 

pursued, reference should be made of the conviction for the wrongdoing at the 

other bank and that an 1829 letter was issued. 

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Q. I received a call from an attorney claiming he represents the lAP to whom I 

recently sent an lAP Introduction Letter. In addition to wanting to discuss the 

details of the case with me, he asked for copies of all the evidence we have linking 

his client to the wrongdoing. I told the attorney I will get back to him as to what I 

may share with him. What information and documents should I give him? 

A: The documents and case file should be forwarded to the Fast Track Coordinator to 

fu Ask the attorney to provide you with a letter representing that he is counsel for 

the lAP. This way you will be sure you are dealing with the authorized 

representative of the lAP. Once confirmation is received, discuss the request with 

FT Counsel. A determination will be made as to whether to share any 

documentary evidence with counsel at this or a later stage of the investigation. 

Q: How do I handle a case that, after receipt of all the documentation from the Bank 

does not meet the Fast Track Program criteria, but appears to meet the interest of 

the OCC in pursuing because the loss is a large dollar amount and might be in an 

area of interest? 

A: The documents and case file should be forwarded to the Fast Track Coordinator to 

further evaluate. The Fast Track Coordinator will prepare a memo to the Director 

ofE&C outlining the facts of the case and recommending assignment outside of 

the FT Program. The Director ofE&C will determine whether the OCC has 

resources to pursue the case, make assignments or make a recommendation on the 

course of action. 

Q: What happens to FT assignment when the FT Processor has completed his or her 

portion of the procedures? 

A: When the Processor I has completed gathering the documentation to support the 

SAR, the complete file will be transferred to the FT Coordinator, who will review 

the file and draft a recommended WSRC memo or a No Action memo. If a 

Processor II drafts a WRSC memo, the draft will be forwarded to the FT 

Coordinator for review. The FT Coordinator will deliver to the FT Counsel cases 

for assignment to the E&C staff attorneys. IT Counsel will notify FT Coordinator 

of assignment, at which time the FT Coordinator will make appropriate 

assignment entries into the Chief Counsel Project Tracking System (PTS) and into 

the Lotus Notes SAR database. All PTS entries will indicate that the enforcement 

action was derived from the FT Program. The IT Processor's name will be 

entered into the PTS assignment as a secondary person. 

29 
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Q: Before processing an 1829 letter, why do IT processors need to carefully review 

the judgment and conviction documents of the lAP to determine whether it says 

anything about a potential expungement of the criminal records? 

A: If it is clear, on the face of the judgment and conviction documents, that 

expungement of the criminal records is contemplated (i.e., if it says something like 

"the record will be expunged in three years after successful completion of the 

program"), then you should consult with the IT Coordinator because the case 

should probably be processed as an 1818 prohibition. The reason for this is that 

under the FDIC's policy statement on 12 USC 1829, once a conviction has been 

expunged, the lAP is no longer prohibited by operation oflaw. 

Q: The FT Program is run primarily by the Law Department. How is it coordinated 

with Supervision? 

A: The acc's FT program primarily involves prohibition cases brought as a result of 

SAR filings that otherwise would not be handled in the normal supervisory 

process. Thus, it is important to point out that this program is not meant to 

supplant examiner SAR reviews or other SAR-related initiatives at the acc. All 

IT prohibition cases are required to be presented to WSRC, thus providing an 

ongoing opportunity for Supervision to review every such case before an agency 

enforcement decision is made. There may be instances where it is appropriate to 

involve examiners in the development of a case before it reaches WSRC. When 

appropriate, actions that involve complex or novel issues, or otherwise necessitate 

extensive case development, should be handled jointly with Supervision and 

processed outside of the IT program under normal procedures, including the 

possible use of a formal investigation. Additionally, cases in which SARs come to 

the attention of the Supervisory affice or District Legal and are identified as 

significant or time critical matters may be handled as more traditional 1818 

actions. In all cases involving SARs, a coordinated approach is necessary to avoid 

duplication of efforts. 

Q: I have a fast track case that is approaching the five-year statute of limitations and 

the FBI Special Agent in-charge of the criminal investigation is saying this is an 

open case that is still under investigation. What should I do? 

A: The acc will generally pursue fast track prohibition cases, unless law 

enforcement asks the acc (in writing), and the acc agrees, to defer activity on a 

case. If you are a IT processor, you should discuss this immediately with FT 

Counsel. E&C attorneys should follow procedures on this point under "Parallel 

Actions" (page 23). 

30 
118 


Q: In cases where criminal prosecution is actively being pursued by the Assistant U.S. 

Attorney (AUSA), should the FT processor advise the AUSA of the OCC 

preferred prohibition language (see page 24, "Plea Agreement Language") to be 

inserted into plea agreements? 

A: The FT Counselor the assigned E&C attorney should discuss the plea agreement 

language with the AUSA. 

Q: How will I obtain updated versions of the IT procedures manual? 

A: Going forward, the FT procedures manual will be updated, as necessary, and you 

may obtain the most recent version of the manual by going into the Law 

Department 0 drive and locking under "Fast Track Program." The first page of 

the document will indicate when it was last updated. You should use the most 

recent version of the document to guide your processing of IT cases. 

31 
119 


Fast Track Large Bank Contact List 

(as of 3/1112008) 

LaSalle Bank NA Bank of America Corporation 

(Now part of Bank of America) Bank of America NA 

(main OCC contact for BofA) 

Les Olson, Vice President, Corporate 

Investigations Ms. Linda Bei 

LaSalle Bank NA Regional Investigations Manager 

5250 North Harlem Ave 14555 Market Street, 10lh Floor 

Chicago, Illinois 60603 Mail Code BA 5-707-10-0 

(773) 594-3351 San Francisco, CA 64103 

(773-594-3369 (fax) (415) 436-5681 (phone) 

1-800-900-9044 toll free number 

Standard Federal Bank NA 

(Now part of Bank of America) Richard Parker 

MidAltantic, Investigative Services 

Mr. Jeff Rolph, Senior Vice President (410) 605-1057 

Director, Corporate Investigations (DC, MD & NC)o 

2600 West Big Beaver, M900-570 

Troy, Michigan 48084 

(248) 637-2543 (phone #) 

(248) 637-2711 (fax) 

Bank of America Bank of America 

Sue Finney (Northern California) Jeff Bottenfield (Southern California) 

Mail Stop CA4-1080-03-3 CA58-152-01-01 

20220 Willowpass Road 23929 Valencia Blvd. 

Concord, CA 94520 Valencia, CA 91355 

Bank of America Bank of America 

Cindy Howell (Florida) Susan Morgan (GA) 

FI9-300-01-10 Mail Code GA6-007-01-01 

9000 Southside Boulevard, Bldg. 300 5295 Buffinton Road 

Jacksonville, Fla. 32256 College Park, GA 30349 

SusanA Morgan a bankofamerica.com 

32 
120 


Bank of America Bank of America 

Lonnie Dalrymple (Nevada) Elizabeth Bass 

Mail Code AZI -200-02-02 Senior Vice President 

201 East Washington Street Corporate Security, Investigative Services 

Phoenix, AZ 85004 Bank of America 

CA9-520-40-04 

444 South Flower Street, 40th floor 

Los Angeles, Ca 90071-2901 

(213) 345-9327 

(213) 345-5500 (fax) 

elizabeth. bass Q bankofamerica.com 

Bank of New York Mellon Corp Citigroup 

Mellon Bank NA 

Mr. J. Fortnier Imbert (back up) 

Mr. Daniel Doyle Legal Counsel 

Vice President, Manager Corporate Crimes Citicorp Security and Investigative 

Group Services 

One Mellon Center 399 Park Avenue, 3,d floor 

500 Grant Street, 19th floor New York, New York 10022 

Pittsburgh, PA 15258 (212) 559-0825 (direct line) 

(412) 234-7426 (phone) (212)793-0125 (fax) 

(412) 234-8775(fax) imbertja citigrouR.com 

Citibank Capital One Financial Corporation 

(formerly Hibernia) 

Mr. Chaires Sgro Capital One N A 

General Counsel 

Citicorp Security and Investigative Tom Holland 

Services Senior Director, Security 

399 Park Avenue, 3

n1 floor 15030 Capital One Drive 

New York, New York 10022 Richmond, VA 23238 

(212) 793-5436 (phone) (804) 284-3581 

(212) 793-0025 (fax) tomholland Q.caRitalone.com 

Sgroc a citigrouo.com 

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121 


Citizens Financial Group First Horizon National Corporation. 

Charter One Bank NA First Tennessee Bank NA 

Rbs National Bank First Horizon Home Loans 

Citizens Bank NA 

Ms. Sheila Bramlitt, Vice President 

Patricia (Tricia) Maloney, Manager COl]lOrate Security Department 

Vice President - COl]lOrate Security 300 Court Street 

Citizens Financial Group Memphis, TN 38101-8459 

20 Cabot Road MMF350 (901) 523-5335 (phone) 

Medford, MA 02155 (901) 523-5672 (fax) 

(781)-655-4028 (phone) 

Harris Bankcorp Inc. First Horizon National Corporation 

Harris NA First Tennessee Bank NA 

Mary E. Biron 

Vice President/Senior Manager Mr. David Scaff 

Corporate Security Investigator (Texas region only) 

(312)-461-5717 (phone) 4000 Horizon Way 

(312) 461-2115 (fax) Mail Code 1340 

Mm.Biron(a harrisbank.com Irving, Texas 75080 

(214)441-5709 

HSBC Huntington Bancshares 

HSBC Bank USA NA The Huntington National Bank 

Ms. Anne Liddy 

Senior Vice President, Group Director Mr. Richard Harp 

AML Oversight and Control Security Director 

452 Fifth Avenue, 7~ Floor 41 South High Street 

New York, New York 10018 Columbus, Ohio 

(212) 525-5906 (614) 33 1-9438 (phone) 

JP Morgan Chase & Company JP Morgan Chase Bank NA 

JP Morgan Chase Bank NA 

Michael Harmon (IX, OK, LA) 

Mr. Ed W. Cook Mail Code 1-2509 

lOS. Dearborn, 4th Floor P.O. Box 660197 

Mail CodeiL 1-0385 Dallas, Texas 75266-0197 

Chicago, Illinois 60603-5506 

(312) 325-6835 (phone) 

Ed.W.Cook a igmchase.com 

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122 


KeyCorp National City Corporation 

KeybankNA National City Bank 

Mr. Sean M. Covert Mr. Stephen Wells 

Director, Corporate Investigations Senior Vice President, Corporate Director 

2025 Ontario Street Loss Avoidance and Investigations 

Mail Code OH- 01-00-0405 2300 Millcreek Blvd, Locator 7541 

Cleveland, Ohio 44115 Cleveland, Ohio 44122 

(216) 813-0116 (phone) 

1(216) 813-4079 (fax) 

(216) 488-7901 (phone) 

PNC Financial Services Group Inc. TO Banknorth 

PNCBankNA TO Banknorth NA 

Mr. Bruce Wiegand Edward Schreiber 

Internal Investigations Executive Vice President, Chief Risk 

620 Liberty Avenue Officer & Regulatory Liaison 

Pittsburgh, PA 15222 Two Portland Square 

(412) 762-8493 (phone) P.O. Box 9540 

(412) 762-1882 (fax) Mail Stop ME -089-71 

Portland, Maine 04112-9540 

(207) 828-7057 

Edward.Schreiber(a TDBanknorth.com 

UnionBanCaI Corporation Union Bank of California NA 

Union Bank of California NA 

Mr. Willarn Ward (BSNAML Matters) 

Joy Bagnall SVP, Financial Intelligence Unit 

SVP - Manager Loss Prevention & 400 California Street 

Investigations San Francisco, CA 94104 

3151 East Imperial Highway (415) 765-2057 (phone) 

Brea, CA (415) 314-8884 (cell) 

(323) 278-4381 (phone) bill.ward@uboc.com 

ioy.bagnall a uboc.com 

Henry Espinoza (BSNAML Matters) 

VP, Manager- Investigations Unit 

400 California Street 

San Francisco, CA 94104 

(415) 765-2061 (phone) 

(562) 252-2652 (cell) 

he!lD'.csyoinoza a uboc.com 

35 
123 


Wacbovia Corporation Wacbovia Corporation 

Wacbovia Bank AN 

Mr, Walter J, Moser 

Mr. William E, Perry (primary contact) Vice President, Corporate Fraud 

Senior Vice President, Corporate Fraud Investigative Services 

Investigative Services Wachovia Corporation 

1525 West W,T. Harris Blvd, 1525 West W.T. Harris Blvd. 

Mail code NC5417 Mail Code NC5417 

Charlotte, NC 28288 Charlotte, NC 28262-5417 

(704) 590-0542 (office) 

(704) 590-0567 (cell) 

US Bancorp Wells Fargo & Co. 

U.S. BankNA Wells Fargo Bank NA 

Ms, Patricia Burk Loretta Sperle 

Vice President, Assistant Director of Investigations Manager 

Investigations 6

th and Marquette, 12th floor 

P,O. Box 1038 Mail Code N9305-121 

CN-OH-WI4C Minneapolis, MN 55479 

Cincinnati, Ohio 4501-1038 

(513) 639-6550 (phone) 

I (513) 639-6558 (fax) 

Wells Fargo & Company Zions Bancorporation 

Zions First National Bank 

Mr, Michael Bacon 

Director, Investigations 

(415) 396·2547 (phone) Mr. Frank Fisher 

Director, Corporate Security 

255 N, Admiral Byrd Road, Suite 108 

Salt Lake City, VT 84116 

(801) 326-5732 (phone) 

(801)326-5736 (fax) 

Francis.Fishcr a zionsbanco!].com 

Other investigators: 

Mr. Steve Cansler 

Bank of America 

Mail code 1-023-02-02 

525 N. Tryon Street 

Charlotte, NC 28255 

(704) 386-1862 (phone) 

(704)-388-0190 (fax) 

Brandson Hewson 

Lead International Investigator 

Bank of America (Florida) 

(704) 386-1292 (phone) 

36 
124 


Teresa Merick Paula Tritschter 

Investigator Bank of America 

Bank of America (Texas) Investigator - International- Florida 

(704) 388-4216 (phone) (813) 805-3407 (phone) 

Rorna Conley, Investigator Terry Gearhart 

National City Bank Citigroup Investigative Services 

(937) 910·3020 (phone) 6460 Las Colinas Blvd. 

Irving, Texas 

Linda Urban Scott Hamby, Investigator 

Bruce Johnson US Bancorp 

Investigators - National City Bank (816) 460-3505 (phone) 

(216)222-3034 (phone) 

Tommy Smith Missy Mills, Investigator 

Wells Fargo Bank NA Investigator Colonial Bank 

(518) 733-9467 (phone) (205) 402-8032 (phone) 

Don Dailey Bryan Mayhem, Investigations 

Wachovia Wachovia 

Mail Code PA 4295 (954) 784-5893 (phone) 

401 Market Street 

Philadelphia, PA 19106-7618 

(267)321-3361 (phone) 

37 
125 


Revised 1217107 PPM 5310-8 (REV) 

POLICIES & PROCEDURES MANUAL 

Comptroller of the Currency 

Administrator of National Banks 

Section: Enforcement and Compliance Fast Track Enforcement Subject: Program 

TO: All Department and Division Heads and All Examining Personnel 

PURPOSE 

This issuance revises the Office of the Comptroller of the Currency's (OCC) PPM 5310-8 

(REV), Fast Track Enforcement Program, dated September 23, 2003. This program does 

not replace or supersede existing policies and procedures for enforcement actions that 

arise from other circumstances. The guidelines in this PPM are for use by OCC staff 

only and do not create any substantive or procedural rights enforceable at law in any 

judicial or administrative proceeding. 

REFERENCE 

• PPM 5310-8, Fast Track Enforcement Program, dated September 23, 2003 

• 12 CFR 21.11 

• 12 USC 1818 

• 12 USC 1829 

• 12 USC 1813(u) 

BACKGROUND AND SCOPE 

Twelve CFR 21.11(c) requires national banks to report certain known or suspected 

federal criminal violations or other suspicious activities committed or attempted by an 

institution-affiliated party (known as an " lAP," which includes a bank officer, director, 

principal shareholder, employee, or agent) against the bank by filing a Suspicious 

Activity Report (SAR) with the Treasury Department's Financial Crimes Enforcement 

Network (FinCEN). The SAR details the facts about the activity that may serve as the 

basis for criminal investigation and prosecution by law enforcement agencies (e.g., 

Federal Bureau ofinvestigation, Secret Service (Homeland Security), United States 

38 
126 


Attorneys, and local law enforcement agencies). The Fast Track Enforcement Program 

uses this SAR information to develop certain OCC enforcement cases against individuals. 

POLICY 

It is the OCC's policy to support and enforce the requirements ofl2 CFR 21.1I(c) as 

well as applicable enforcement statutes, including 12 USC 1818 and 12 USC 1829, aimed 

at keeping the banking industry safe and sound. The Fast Track Enforcement Program 

was established to implement this policy. 

The Fast Track Enforcement Program implements streamlined enforcement procedures to 

be used in specific situations in which there is a conviction of, an admission by, or clear 

evidence that an lAP has committed a criminal act(s) or other significant act(s) of 

wrongdoing involving an insured depository institution that are actionable under the 

agency's enforcement authority. Streamlined enforcement procedures for the Fast Track 

Enforcement Program are also included in the agency's delegation matrices. 

PROCEDURES 

Quarterly, the OCC loads selected SAR information of national banks into the OCC's 

SAR Fast Track Database (SAR Fff DB). Each SAR in the database contains 

information, such as bank name, contact information, name and address ofthe lAP(s), 

narrative description of the suspicious activity(ies), and information about law 

enforcement contacts. 

The OCC uses this SAR information to identify and pursue appropriate enforcement 

relief under 12 USC 1818 or 12 USC 1829 against the lAP as follows: 

1818 Prohibition Order 

Under 12 USC 1818, if certain legal standards are met, the OCC may issue an 

order of removal or prohibition 12 to ensure that the lAP does not again become 

employed by an insured depository institution. JJ 

I! Under 12 USC 1818(e), a prohibilion order requires ihe agency 10 establish thaI: (i) ihe lAP violated a law, 

regulation. cease and desist order, formal agreement, or condition imposed in writing or participated in an unsafe or 

unsound banking practice or committed a breach of fiduciary duty; (ii) such conduct resulted or will probably result 

in a loss to the bank, resulted in financial gain or other benefit to the lAP, or has prejudiced ihe interests of the 

depositors; and (iii) such conduct evidences dishonesty or a continuing or willful disregard for the safety and 

soundness oflhe bank. 

n An insured depository institution includes all institutions insured by the Federal Deposit Insurance Corporation, 

including national banks, state banks, thrifts, and saving and loans. A prohibition also prevents an lAP from acting 

as agent to an insured depository institution as well as, among other things, participating in the affairs of a credit 

39 
127 


While prohibition orders are a primary objective of the Fast Track Enforcement 

Program, the OCC also may issue, in appropriate cases, an order to cease and 

desist (C&D)14 that requires the lAP to, among other things, take certain 

affirmative action, make restitution, or provide a guarantee against loss. In 

addition, the OCC has authority to assess a civil money penalty (CMP)IS in 

appropriate cases. 

All of the above actions can be based on an lAP's consent or based on an order 

issued by the Comptroller following a hearing before an administrative law judge. 

1829 Prohibition Letter 

Under 12 USC 1829, an lAP who has been convicted of, or entered into a pre-trial 

diversion programl6 for, a crime involving dishonesty or breach of trust is 

effectively prohibited from being employed at an insured depository institution by 

operation oflaw. 

Under the Fast Track Enforcement Program, the OCC obtains the judgment and 

conviction documents from the state or federal court records and issues a letter 

informing the lAP of the automatic prohibition. 

The purpose of an "1829 letter" is to put the person on notice that he or she has 

been prohibited by operation of law. As a result, if after receiving such a letter the 

person reenters the banking industry in violation of 12 USC 1829, he or she does 

so "knowingly" and may, therefore, be subject to criminal fines and penalties. 

union, an insured depository institution or its holding company I or transferring or voting the slock of such 

companies. 

14 Under 12 USC 18 I 8(b), aC&Drequires Iheagency to esJablish that the lAP has: (i) violated a law, rule, 

regulation, formal wrinen agreement, or a condition imposed in writing; or (ii) participated in an unsafe or unsound 

practice. In addition, if the C&D requires an lAP to take certain affirmative action, make restitution, or provide a 

guaranlee against loss, the agency must show that the lAP was unjustiy enriched or recklessly disregarded the law. 

"Under 12 USC 1818(;), an order to assessa first tier CMP requires theagency to establish that the lAP has 

violated a law, regulation, formal written agreement, C&D, or condition imposed in writing, An order to assess a 

second tier CMP requires the agency to establish that: (i) the lAP has committed a first tier violation, recklessly 

engaged in an unsafe or unsound practice, or breached a fiduciary duty; ond (ii) such conduct is part of a pattern of 

misconduct, caused (or is likely to cause) more than minimal loss to the bankl or resulted in pecuniary gain or other 

benefit to such party. 

16 Under a typical federal pre-trial diversion agreement, an offender enters into a program of supervised probation, 

and upon successful completion the U.S. Attorney will decline prosecution and the charges will be dismissed. 

Similar programs at stale level have various names, including deferred prosecution agreements. They will be 

referred to hereafter, collectivelYl as pre-trial diversion programs. 

40 
128 


With narrow exception, the OCC is required by statute, 12 USC 1818(u), to make all 

prohibition orders public. All such orders issued by the OCC since 1989 are listed on the 

OCC's Web site, as are all 12 USC 1829 prohibition letters. 

In federal criminal cases, U.S. Attorneys sometimes include various versions of model 

prohibition language in a defendant's plea agreement. 11 Regardless of the plea agreement 

language used, the OCC must follow up by issuing a 12 USC 1818 prohibition order Q!: 

(at a minimum) by processing an 1829 letter in order to make the matter public on the 

OCC's Web site and available to banks performing pre-employment due diligence on new 

hires. 

The Enforcement and Compliance Division will maintain a detailed procedures manual 

for processing Fast Track Enforcement Program cases that are assigned pursuant to this 

PPM. 

GENERAL CRITERIA FOR THE PROGRAM 

This section sets forth general criteria for the program but is not meant to limit the 

agency's discretion to pursue, case by case, enforcement actions that do not meet these 

criteria. 

For 12 USC 1829 prohibitions, an lAP who is the subject of one or more SARs will be 

included in the program if the lAP is discovered to have been convicted of, or entered 

into a pre-trial diversion program, regarding a crime involving dishonesty or breach of 

trust and the dollar amount of the transaction(s) at issue in the SAR(s) equals or exceeds 

$5,000. In the case of an lAP who has entered into a pre-trial diversion program, which 

permits a dismissal of charges upon successful completion, an 1829 letter may be sent, 

provided the public record has not been expunged when the letter is issued and there is no 

indication that it will be expunged. Ii 

"The current model language, which may be accessed by U.S. Anorneys on Ihe Departmenl of Juslice's inlr.met 

site, states that the defendant agrees not to become an officer, director, employee, or lAP of an insured depository 

institution without the prior written permission of the appropriate federal financial institutions regulator. Additional 

optional language states that the defendant "will cooperate" with the relevant regulatory agency in an administrative 

prohibition proceeding instituted against the defendant under 18 I 8(e). Model plea agreement language preferred by 

the acc states more directly that the defendant "agrees to consent" to any 12 USC 1818 prohibition action taken by 

a federal financial institutions regulatory agency. 

"Expungemen~ are theexception, not the rule. However, underthe FDIC's Statement of Policy governing 12 USC 

1829, if and when an IAP'scriminal record is completely expunged, the 12 USC 1829 prohibition no longerapplies. 

Therefore, fast track processors should carefully review the court documents to determine whether expungement is 

contemplated (e.g., as part of the pre-trial diversion or deferred prosecution agreement). If expungement is 

contemplated, then theease should be processed foran 1818 prohibition. Consistent with this approach, 1829 leners 

should inform the lAP that ifhislher criminal record is expunged in the future, the lAP may send the Director of 

41 
129 


For 12 USC 1818 prohibitions, the OCC generally will consider an lAP who is the 

subject of one or more SARs for inclusion in the program if the following general criteria 

are met: 

• Prosecution of the lAP has been declined by law enforcement authoritiesl9 or 

prosecution has been initiated but not yet completed and there is no written 

objection to the OCC pursuing enforcement relief. 20 

• The subject of the SAR has confessed or facts and circumstances of the case 

otherwise clearly indicate that the subject of the SAR has committed a criminal act 

or has engaged in an act of significant wrongdoing that meet the standards for an 

OCC enforcement action (see footnotes 1,3, and 4 above); 

• The subject of the SAR was an lAP ofa national bank as defined by 12 USC 

1813(u) at the time of the criminal act or significant wrongdoing and the criminal 

act or wrongdoing occurred within the preceding five years; and 

• The dollar amount of the transaction(s) at issue in the SARequals or exceeds 

$5,000 (subject to priorities set forth immediately below). This standard also will 

be satisfied if more than one insured depository institution files SARs on the lAP 

and the aggregate transaction amount meets or exceeds the $5,000 minimum. 

For those SARs in the SAR Frr DB that meet the above-mentioned general criteria, the 

Enforcement & Compliance Division will take into account the following priority factors 

in selecting cases for assignment under the fast track program: 

• SARs filed within the previous two years; 

• lAPs who are officers and/or directors; 

• A large dollar amount of the transaction(s) at issue (e.g., $25,000 and above); 

• lAPs on whom mUltiple SARs are filed; and 

Enforcement & Compliance evidence of the expungement, so the agency can determine if it is appropriate to remove 

Ihe 1829 letter from Ihe GCC's web sile. See 63 Federal Register 66177 (December I, 1998). 

191 n some instances, law enforcement agencies may decline to prosecute banking officials and employees for their 

aclivilies. For ",mple, Ihe criminal acl(s) may not meel prosecutorial guidelines (e.g., dollar amount of loss), or an 

lAP's actions may not constitute a violation of criminal law. In such cases, the lAP's actions may still constitute an 

act of significant wrongdoing that may serve as a basis for an oce administrative enforcement action against the 

lAP. 

"The GCC generally will not pursue fast track cases if the matter is being actively investigated or prosecuted by 

lawenforcement. However, the agency reserves the discretion to do so and -- once a decision is made to proceed 

with a case -- will nonnally do so, unless law enforcement asks the ace in writing, and the DeC agrees, to defer 

activity on a case, 

42 
130 


• Special areas of current interest (e.g., mortgage fraud, identity theft, computer 

intrusion). 

RESPONSIBILITIES 

The Enforcement and Compliance Division has primary responsibility for the program 

and for securing appropriate enforcement relief. 

FURTHER INFORMATION 

For further information, contact the Fast Track Counsel or the Director of the 

Enforcement and Compliance Division at (202) 874-4800. 

/s/ Julie L. Williams 

Julie L. Williams 

First Senior Deputy Comptroller and Chief Counsel 

43 
131 


i 

C) 

Comptroller of the Currency Administrator of National Banks 

Subject: Major Matters Supervision Review Committee Description: Charter 

xxx 

MAJOR MATTERS SUPERVISION REVIEW COMMITTEE (MMSRC) 

CHARTER 

PURPOSE & SCOPE 

The Committee's role is to ensure OCC bank supervision and enforcement policies are applied 

effectively and consistently on certain enforcement cases that are of heightened importance to 

the agency because of their visibility or policy sensitivity, the involvement of mUltiple agencies, 

potential systemic impact, the nature of the issues presented, or other factors (major matters). 

These include: 

Bank Secrecy Act (BSA) Enforcement Actions 

1. All Large Bank enforcement actioI'lS that include articles addressing BSA 

2. ' All civil money penalties for violations of BSA or violations of enforcement actions 

addressing BSA involving Large:Banks 

3. All prohibitions/removals against individuals for violations ofBSA (12 U.S.C. 

1818(e)(2)} 

Compliance and Fair Lending 

1. All enforcement actions based in whole or in part on unfair or deceptive acts or practices 

in violation of section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a}(I} 

2. All referrals to the Department of Justice for violations of the Equal Credit Opportunity 

Act or the Fair Housing Act . 

3. All enforcement actions for violations of the Equal Credit Opportunity Act 'or tile Fair 

HOllsing Act, where a referral to the Department of Justice is returned to the OCC. 

Safety and Soundness Actions against Large Banks 

All enforcement actions against Large Banks (informal and formal) based on safety and 

soundness ;',1 ~~: : 

Page 1 of X 

1_. 
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xxx 

i ___ _ 

Other Significant Cases 

1. Other cases may he referred to the Committee by a Senior Deputy Comptroller or the 

Chief Counsel 

2. Cases where the appropriate Senior Deputy Comptroller does not concur with the 

ccnsensus view of the members of the Washington Supervision Review Committee 

(WSRC) 

~i MEMBERSHIP 

The MMSRC is chaired by the Senior Deputy Comptroller for Bank Supervision Policy and 

Chief National Bank Examiner. 

Voting members shall be: 

• Committee on Bank Supervision (the Senior Deputy Comptroller for Bank 

Supervision Policy and Chief National Bank Examiner, Senior Deputy Comptroller 

for Large Bank Supervision, Senior Deputy Comptroller for Midsize and Community 

Bank Supervision, and Chief of Staff); and 

• Chief Counsel 

Ex Officio members shall be: 

• Chair of the WSRC; 

• Deputy Chief Counsel (responsible for Enforcement and Compliance); 

• Deputy to Chief of Staff; and 

• Senior Advisor to the Comptroller .(. 

The necessary quorum for MMSRC meetings shall be three voting members. Each member may 

designate an alternate to attend in the member's absence. At the discretion of tile Chair of 

MMSRC, individuals with special expe11ise 01' knowledge may also be asked to attend when 

'actions involving their area of expertise are under consideration. 

DELIBERA TJONS AND DECISIONS OF THE COMMITTEE 

The responsible Deputy Comptroller, Large Bank Examiner in Charge, Assistant Deputy· 

Comptroller, andlor the Director of Enforcement and Compliance (E&C) will present the 

relevant facts, supervisory history and recommended course of action. Members and participants 

will discuss tile case in order to reach a decision regarding the most appropriate course of action. 

The MMSRC shall exercise its delegated authority to decide cases by a majority vote of tile 

Committee. The Committee shall also determine the parameters for settlement. The Chair of the 

Page 2 of X 
133 


MMSCR shall brief the Comptroller on the Committee's decision promptly. Notwithstanding 

the above, the Comptroller of the Currency may, on any case, exercise his reservation of 

delegated authority and decide differently than the Committee. 

MMSRCPACKAGES 

The responsible Supervisory Office and the Enforcement and Compliance Division shall prepare 

a presentation package for MMSRC cases which shall include a memo summarizing the facts in 

the case, an objective analysis of the facts, other relevant issues and their recommendation. The 

Deputy Comptroller for the responsible Supervisory Office and the Director ofE&C shall sign 

the memorandum. Where there is disagreement as to the recommendation or presentation ofthe 

facts the memorandum shall include both recommendations, or alternatively at the discretion of 

the Deputy Comptroller or the Director ofE&C, two memoranda may be submitted. In addition, 

appropriate background documents sball be included in the presentation package. The 

background documents should include the reports of examination and/or supervisory letters that 

provide the basis for the recommendation, and the bank's response, if any, to draft examination 

conclusions, violations oflaw or IS day letters. 

xxx 

Copies of the presentation package are due to the Staff Assistant, Special Supervision by close of 

'business the five business days before the meeting, unless a later date is approved by the Chair of 

theMMSRC. 

COMMITIEE MEETINGS 

The Chair of the MMSRC shall establish regular dates and times for MMSRC meetings. Special 

meetings may be called as necessary and on rare occasion, decisions may be made through the 

use of notational votes. The Chair of the MMSRC will determine the need for a meeting outside 

of the regularly established meeting date or tbe appropriateness of a notational vote. Records of 

the meetings, including applicable case material shall be maintained by the Enforcement and 

Compliance Division. 

SETILEMENT OF ENFORCEMENT CASE 

All settlement offers within the parameters established by the Committee shall be decided by a 

concurrence of the appropriate Senior Deputy ComptroHer and the Chief Counsel. Settlement 

offers that exceed the parameters shall be presented to ~le MMSRC. 

COMMUNICATION OF DECISIONS 

The decisions of tile MMSRC or the Comptroller shaH be posted to the Special Supervision 

Intranet site, nomlaHy within two weeks of each meeting, by the Staff Assistant, Special 

Supervision. The decisions shall be in the form of an email from the Chair of the WSRC to the 

responsible Supervisory Office and tile Director of Enforcement and Compliance. 

Page 3 of X 
134 


i 

I 

I' 

I 

I 

I 

~ "",: I 

xxx Page 4 of X 
135 


() 

Comptroller of the Currency 

Administrator of National Banks 

Subject Washington Supervision Review Committee Description: Charter 

WASHINGTON SUPERVISION REVIEW COMMITTEE (WSRC) 

CHARTER 

PURPOSE & SCOPE 

The Committee's role is to ensure OCC bank supervision and enforcement policies are applied 

effectively and consistently, and to advise the Senior Deputy Comptroller, Midsize and 

Community Bank Supervision and Senior Deputy Comptroller, Large Bank Supervision on bank 

supervision and enforcement cases and issues. WSRC reviews enforcement actions pursuant to 

the current approved bank supervision delegation matrices. In addition, WSRC may also be 

asked to advise on cases that are highly unique or highly visible. To the extent that the cases 

brought before the WSRC raise policy issues, those issues are identified and brought to the 

attention of the Senior Deputy Comptroller, Midsize and Community Bank Supervision and 

Senior Deputy Comptroller, Large Bank Supervision. 

MEMBERSHIP 

Membership shall consist of a core group representing Midsize and Community Bank 

Supervision (MCBS), Large Bank Supervision, Policy, and Legal. In certain cases, this group, 

identified below, will include representatives of other divisions. Each member may designate an 

alternate to attend in the member's absence. Individuals with special expertise or knowledge 

may also be asked to attend when actions involving their area of expertise are under 

consideration. 

Regular members of the Committee: 

August S, 2011 

Deputy Comptroller for Special Supervision; 

Director for Special Supervision (in MCBS and fast track cases) (will alternate among 

the three Directors for Special Supervision); 

Director for Enforcement and Compliance; 

Deputy Chief Counsel (with responsibility for Enforcement & Compliance issues); 

Deputy Comptroller for Large Bank Supervision (may alternate among the four DCLB's); 

Deputy Comptroller for Thrift Supervision; 

Deputy Comptroller for Operational Risk; 

Deputy Comptroller for Midsize Bank Supervision; 

Page I of4 
136 


Senior Advisor to the Senior Deputy Comptroller for Midsize and Community Bank 

Supervision (for MCBS and fast track cases); and 

Senior Advisor to the Senior Deputy Comptroller for Large Bank Supervision (for Large 

Bank cases). 

Additional members for specific areas described: 

Director for Securities and Corporate Practices for securities related enforcement cases; 

Deputy Comptroller for Compliance Policy for consumer protection, fair lending, 

Community Reinvestment Act, Bank Secrecy Act and Office of Foreign Assets Control 

cases; and 

Director for Community and Consumer Law for consumer protection, fair lending and. 

Community Reinvestment Act. 

As appropriate, the following individuals generally may attend Committee meetings as observers 

for MCBS and fast track cases and receive copies of those WSRC packages (as applicable) when 

they are distributed to the Committee members. 

District Deputy Comptrollers 

Assistant Directors for Enforcement and Compliance; 

District Counsel 

Senior Public Affairs Specialist; 

Deputy to the Chief of Staff; 

Director for BSA & Anti-Money Laundering Compliance (when Bank Secrecy Act, money. 

laundering & Office of Foreign Assets Control issues are considered); 

Director for Consumer Compliance Policy (when fair lending, 

compliance, & unfair & deceptive practices issues are considered); 

Director, Bank Information Technology (data service provider and rr issues); 

Director, Asset Management (trust issues); 

Rotator in the Comptroller's Office; and 

Applicable field examiners or Assistant Deputy Comptrollers. 

WSRC PACKAGES 

Individuals preparing cases for WSRC are responsible for preparing a WSRC presentation 

package, which shall include (l) a memo summarizing the facts in the case, an objective analysis 

of the facts, their division's recommendation, any district recommendation, and other relevant 

issues; and (2) appropriate background documents. Copies of the presentation package are due 

to the Staff Assistant, Special Supervision by close of business the Friday before the meeting. 

For MCBS and fast track cases, twenty five copies of the package and an electronic version 

should be submitted. However, for cases submitted by Districts directly (without involving 

August 8, 2011 Page2of4 
137 


Enforcement & Compliance), an electronic version of the package may be submitted. The 

WSRC agenda and presentation packages (including phone number and conference codes) for 

each case on the agenda will be distributed (in hard copy and/or email) to all Committee 

members, Deputy Comptrollers and other known participants by noon on Tuesday before the 

Thursday meeting. 

For Large Bank cases, sufficient copies for the relevant members should be submitted to the 

Staff Assistant, Special Supervision and an electronic copy to the Deputy Comptroller for 

Special Supervision. The WSRC agenda and presentation packages (including phone number 

and conference codes) for each case on the agenda will be distributed to all Committee members 

by noon on Tuesday before the Thursday meeting. 

COMMITTEE MEETINGS 

WSRC meetings are held at 9:00 a.m. each Thursday if there are large bank cases to be 

considered, and at I 0:00am for all other agenda items for discussion. Also, to facilitate 

participation, a conference call will be arranged for all WSRC meetings. Cases on the agenda 

involving fair lending, compliance, and securities issues generally will be considered first. 

Special meetings may be called as necessary and on occasion, recommendations may be made 

through the use of notational votes. The Deputy Comptroller for Special Supervision will 

determine the need for a meeting outside of a normal Thursday meeting or the appropriateness of 

a notational vote and will approve accordingly. 

WSRC RECOMMENDATIONS 

The WSRC serves as an advisory committee to the Senior Deputy Comptroller, Midsize and 

Community Bank Supervision and the Senior Deputy Comptroller, Large Bank Supervision by 

providing its recommendations on the proposed supervision and enforcement actions presented 

to it. The Deputy Comptroller for Special Supervision shall present the WSRC 

recommendations to the Senior Deputy Comptroller, Midsize and Community Bank Supervision 

for MCBS and fast track cases involving midsize and community banks, and to the Senior 

Deputy Comptroller, Large Bank Supervision for large bank and federal branch/agency cases 

and fast track cases involving large banks and federal branches and agencies. The Senior Deputy 

Comptrollers for Midsize and Community Bank Supervision and Large Bank Supervision will 

make the final decision for their respective cases. 

COMMUNICATION OF DECISIONS 

The decisions of the Senior Deputy Comptroller, Midsize and Community Bank Supervision and 

Senior Deputy Comptroller, Large Bank Supervision, shall be posted to the Special Supervision 

Intranet site, normally within two weeks of each meeting. 

August e, 2011 Page 3 of4 
138 


REVIEW OF ENFORCEMENT CASE SETTLEMENT BY WSRC 

All settlement offers shall be presented to the Deputy Comptroller for Special Supervision, the 

relevant Director for Special Supervision, the Director for Enforcement and Compliance, and the 

relevant Deputy Comptroller for Large Bank SupervisionJDeputy Comptroller for International 

Banking Supervision in Large Bank cases, for approval, rejection, or counteroffer. In those cases 

where unusual or very large dollar amounts are involved, the aforementioned individuals shall 

defer settlement approvals, rejections or counteroffers to the Senior Deputy Comptrollers for 

Midsize and Community Bank Supervision or Large Bank Supervision. 

OPERATING PROCEDURES 

The Committee operates as authorized in PPM 53\0-3 (REV), and for securities related 

enforcement cases as authorized in PPM 5310-5 (REV). The Committee will review operating 

procedures and membership annually. Proposed changes should be submitted to the Senior 

Deputy Comptroller, Midsize and Community Bank Supervision and the Senior Deputy 

Comptroller, Large Bank Supervision. 

euni er C. Kell 

Senior Deputy 0 ptr I 

~ 

Midsize and Community Bank Supervision 

Senior Deputy Comptroller 

Large Bank Supervision 

August 8, 2011 Page 4 of 4 
139 


() MEMORANDUM 

Comptroller of the Currency 

Administrator of National Banks 

Washington, DC 20219 

To: Seoior Deputy Comptroller and Chief National Bank Examiner; 

Senior Deputy Comptroller for Large Bank Supervision; 

Senior Deputy Comptroller for Midsize and Community Bank Supervision; 

Chief Counsel; and 

Chief of Staff 

From: 

Date: 

Subject: 

A. Pursuant to 12 U.S.C. §§ 4a and I 462a, the Comptroller of the Currency delegates'his 

enforcement authority with respect to major matters, as described below, to the Major Matters 

Supervision Review Committee (MMSRC). The members of the MMSRC shall be the: 

I. Senior Deputy Comptroller and Chief National Bank Examiner, 

2. Senior Deputy Comptroller for Large Bank Supervision; 

3. Senior Deputy Comptroller for Midsize and Community Bank Supervision; 

4. Chief Counsel; and 

5. Chief of Staff. 

B. For the pwposes of this delegation of authority, major matters are: 

1. The following enforcement actions taken against allY national bank or federal savings 

association that has been designated as a large national bank or large federal savings 

association; any national bank affiliate or federal savings association affiliate of a large 

national bank or large federal savings association; or any federal branch or agency of a 

foreign bank or national bank affiliate of a federal branch or agency: 
140 


i. agreements or orders issued pursuant to 12 U.S.C. § IBIB(b) for 

violations of the Bank Secrecy Act, 31 U.S.C. § S3Il, et seq., and its 

implementing regulations (BSA) or for unsafe or unsound practices; 

ii. informal actions, including those issued pursuant to 12 U.S.C. § 1831p-1 

and 12 C.F.R. Parts 30 and 170, based in whole or in part on violations of 

the BSA or on unsafe or unsound practices; 

iii. temporary cease and desist orders pursuant to 12 U.S.C. § 1818(c) based 

in whole or ii/part on violations of the BSA or unsafe or unsound 

practices; and 

iv. assessment of civil money penalties pursuant to 12 U.S.C. § 1818(i) for 

violations oftlle BSA, violations of enforcement actions addressing BSA, 

or unsafe or unsound practices. 

2. All suspensions and prohibition ommoval actions pursuant to 12 U.S.C. §§ IBIB(e) or 

(g) for violations of the BSA. 

3. All enforcement actions based in whole or in part on unfair or deceptive acts or practices 

in violation of section 5 of the Federal Trade Corrunission Act, IS U.S.C. § 4S(a)(I) 

pertaining to any national bank or federal savings association, any affiliate of a national 

bank or federal savings association, or any federal branch or agency of a foreign bank. 

4. All referrals to the Department of Justice for violations of the Equal Credit Opportunity 

Act or the Fair Housing Act pertaining to any national bank or federal savings 

association, any affiliate of a'Mational' bank or federal savings association, or any federal 

branch or agency of a foreign bank. 

5. All enforcement actions for violations of the Equal Credit Opportunity Act or the Fair 

Housing Act, where a referral to the Department of Justice is returned to the OCC. 

6. Other cases referred to the MMSRC by a Senior Deputy Comptroller or the Chief 

Counsel. 

7. Other cases where the appropriate Senior Deputy Comptroller does not concur with the 

consensus view of the members of the Washington Supervision Review Committee. 

C. The authority delegated in paragraph B. includes the authority to issue, modify, tenninate, or 

withdraw: 

I. notices of charges; 

2. documents or orders entered into by stipulation or consent; and 

J I~H,' I. 2 
141 


3. orders issued in the absence of a stipulation or consent by the Comptroller of the 

Currency or his delegate. 

D. The signature authority to issue, modify, terminate, or withdraw notices of charges, 

documents, or orders entered into' by stipulation or consent which are issued pursuant to this 

delegation is delegated to the appropriate Deputy Comptroller. 

E. The authority provided by this delegation to the MMSRC shall be exercised jointly and shall 

be exercised in accordance with the MMSRC charter. 

F. The authority delegated herein may not be redelegated. 

G. The authority delegated herein is subject to the Memorandum from the Comptroller to the 

Executive Committee regarding Delegation of Authority, dated May 10,2012 . 

. .1. 
142 


c) MEMORANDUM 

Comptroller of the Currency 

Administrator of National Banks 

Washington, DC 20219 

To: Senior Deputy Comptroller for Midsize and Community Bank Su 

Senior Deputy Comptroller for Large Bank Supervision 

From: 

Date: November 28, 2012 

Subject: 

A, Pursuant to 12 U.S.C, §§ 4a and 1462a, the authority of the Comptroller of the Currency as 

specified in paragraphs B through D, below, is delegated to: 

1. the Senior Deputy Comptroller for Midsize and Community Bank Supervision with 

respect to: _ . 

a, any national bank, federal savings association or District federal savings 

association that is a midsized or conununity bank or savings association, or any 

credit card or trust company bank, that is not affiliated with a designated large bank 

or large savings association; and 

b. any non-bank or non-savings association affiliate or institution-affiliated party of 

any above-referenced bank or savings association; and 

2. the Senior Deputy Comptroller for Large Bank Supervision with respect to: 

a, any national bank or federal savings association that has been designated as a 

large bank or large savings association; 

b. any bank affiliate or savings association affiliate of a large bank or large savings 

association; 

c. any federal branch or agency of a foreign bank or national bank affiliate of a 

federal branch or agency; and 

d. any non-bank or non-savings association affiliate or any institution-affiliated 

party of any large bank or large savings association or its bank or savings association 

affiliate. 
143 


· B. The Comptroller's authority is delegated to the Senior Deputy Comptroller for Midsize and 

Community Bank Supervision and to the Senior Deputy Comptroller for Large Bank Supervision 

with respect to the following matters: 

\. the issuance, modification, termination, or withdrawal of the following notices, 

directives, orders, or documents: 

a. notices of charges authorized pursuant to applicable law, including 12 U.S.C. 

§ ISIS(b) and IS U.S.C. §§ 78o-4(c), 780-5(c), and 7Sq-l(c) and (d); 

b. temporary cease and desist orders authorized pursuant to applicable law, 

including 12 U.S.C. § IS IS(c) and IS U.S.C. §§ 78(i) and 78u-3; 

c. notices of assessment of civil money penalties authorized pursuant to applicable 

law, including 12 U.S.C. §§ 93(b), 504, 1467(d),ISI7Gl, ISIS(i) and IS U.S.C. 

§ 78u-2(a); 

d. notices of suspension authorized pursuant to applicable law, including 12 U.S.C. 

§§ ISIS(e) or (g); 

e. notices of intention to remove and/or prohibit from office authorized pursuant to 

applicable law, including 12 U.S.C, §§ ISIS(e) or (g); 

f. notices establishi'ng minimum levels of capital for banks and federal savings 

associations as determined necessary and appropriate in light of the particular 

circumstances pertaining to such banks and savings association, as authorized 

pursuant to 12 U.S.C. §~i!?;97(a)(2) and 1464(s), and 12 C.FoR. Parts 3 and 167; 

g, directives authorized pursuant to 12 U.S,C. §§ 3907(b)(2) and 1464(s) and 12 

C.F,R. Parts 3 and 167 to banks or federal savings associations failing to maintain 

capital at or above levels established pursuant to 12 U.S,C, § 3907(a); 

h, notices, directives, or orders to foreign banks addressing changes to capital 

equivalency deposits and agreements, including increases or reductions in the 

amollnts of such deposits or changes in the telms of or assets pledged under existing 

capital equivalency deposit agreements; 

i. directives to national banks, federal savings associations, federal branches or 

agencies of foreign banks calling for the filing of additional reports of condition, 

special reports, and reports of affiliates authorized pursuant to applicable law, 

including 12 U.S,C, §§ 161 and 1464(v); 

j, imposing penalties for the failure to file reports or for the delinquent, false, or 

misleading filing of reports pursuant to applicable law, including 12 U,S.C. 

§§ 164,1464(v), and ISIS(i); 
144 


k. notices to national banks having boards of directors comprised of less than five 

members that such board composition constitutes a violation of 12 U.S.C. § 71a and 

that the continued operation with a board of less than five members,if not corrected 

within thirty days of such notice, provides authority for the appointnient of a 

conservator or receiver for the bank in accordance with applicable law; and 

I. orders to conduct formal investigations pursuant to applicable law, including 12 

U.S.C. §§ 481, 1464(d), 1818(n), 1820(c), 15 U.S.C. § 78u, and 12 C.FR Parts 19, 

Subpart) and 112, and subpoenas under applicable law, including 12 U.S.C. §§ 481, 

1464(d), 1818(n), 1820(c), and 15 U.S.C. § 78u; 

2. the issuance, modification, and termination of the following documents or orders entered 

into by stipulation or consent: ' 

a. commitment letters, memoranda of understanding, and formal written agreements 

. authorized pursuant to 12 U.S.C. § 1818(b); 

b. cease and desist orders authorized pursuant to applicable law, including 12 U.S.C. 

§ 1818(b) and 15 U.S.C.§§ 781(i) and 78u·3; 

c. orders of assessment of civil money penalties authorized pursuant to applicable 

law, including 12 U.S.c. §§ 93(b), 504, 1467(d), 18170), 1818(i), and 15 U.S.C. 

§ 78u·2(a); 

d. orders of removal and/or prohibition authorized pursuant to applicable law, 

including 12 U.S.C. §§ 1818(e) or (g); 

e. disciplinary orders authorized pursuant to applicable law, including 15 U.S.C. 

§§ 78o-4(c), 780·S(c), and 78q·1(c) and (d); 

3. the modification and termination of the following orders issued in the absence of 

stipulation or consent by the Comptroller of the Currency or his delegate: 

a. cease and desist orders authorized pursuant to applicable law, including 12 U.S.C. 

§ 1818(b) and 15 U.S.C. §§ 781(i) and 78u·3; 

b. orders of assessment of civil money penalties auth0l1zed pursuant to applicable 

law, including 12 U.S.C. §§ 93(b), 504, 1467(d), 18170), 1818(i), and 15 U.S.C. § 

78u.2(a); 

c. orders of removal andlor prohibition authorized pursuant to applicable law, 

including 12 U.S.C. §§ 1818(e) or (g); and 

d. disciplinary orders authorized pursuant to applicable law, including 15 U.S.C. 

§§ 780·4(c), 780·S(c), and 78q·l(c) and (d). 

'.)'1 
145 


4. the approval, approval with conditions, or disapproval of, and the response to requests for 

comments ofthe Office of the Comptroller of the Currency regarding the following: 

a. notices by federal savings associations of the intention to indemnify directors, 

officers and employees pursuant to 12 C.F.R. § 145.121; 

b. applications by national banks to invest in bank premises or to make other 

premises-related loans or investments pursuant to 12 C.F.R. § 5.37; 

c. notices or applications by federal savings associations to use an interest rate index 

that does not satisfy the requirements of 12 C.F.R § 160.35(d)(2), pursuant to 12 

C.F.R. § 160.35; 

d. applications by federal savings associations to use higher lending limits than 

those set forth in 12 C.F.R. § 160.93; and 

e. applications by a federal savings association to exceed the limitations set forth in 

12 U.S.C. § 1464(c)(2)(B)(i), regarding nonresidential real property loans, pursuant 

to 12 U.S.C. § 1464(c)(2)(B)(ii). 

C. In addition, the Comptroller's authoi'ity pursuant to 12 U.S.C. § 18310 and 12 C.F.R. Parts 6 

and 165 is delegated to the Senior Deputy Comptroller for Midsize and Community Bank 

Supervision and the Senior Deputy Comptroller for Large Bank Supervision. This authority 

includes: 

I. in consultation with the Federal Deposit Insurance Corporation (FDIC), the approval, 

approval with conditions, or disapproval of proposed capital distributions pursuant to 12 

U.S.C. § 18310(d)(I); 

2. the approval, approval with conditions, or disapproval of requests to pay bonuses or 

increase the compensation paid to senior executive officers proposed pursuant to 12 U.S.C. 

§ 18310(0(4); 

3. the approval, approval witll conditions, or disapproval of capital restoration plans 

submitted by undercapitalized, significantly undercapitalized, and critically 

undercapitalized banks, federal savings associations, or their branches pursuant to 12 

C.F.R. Parts 6, Subpart Band 165.5; 

4. the issuance, modification, ivitil(lrawal, and termination of notices calling for new or 

revised capital restoration planS; 

5. the issuance, modification, withdrawal, and termination of notices of proposed 

reclassifications of banks , or federal savings associations' capital categories based on 

unsafe and unsound conditions or practices and notices of reclassification pursuant to 12 

C.F.R. Pru1s 19, Subpart M and 165.8; 
146 


\' 

I 

6. the issuance, modification, withdrawal, and termination of notices of intent to issue 

directives imposing restrictions and requirements on undercapitalized, significantly 

undercapitalized, and critically undercapitalized banks or federal savings associations and 

issuance, modification, and withdrawal of directives pursuant to 12 C.F.R. Parts 6, Subpart 

B, and 165.7; ' .. ",' 

7, with the concurrence of the FDIC, the initiation of corrective actions other than the 

placement of critically undercapitalized banks, federal savings associations, or their 

branches into receivership or conservatorship pmsuant to 12 U,S.C. § 18310(h)(3), but not 

including the certification ofa critically undercapitalized institution's viability pursuant to 

12 U.S,C, § I 8310(h)(3)(C)(1I); and 

8. the approval, approval with conditions, or disapproval of requests for reinstatement filed 

pursuant to 12 C.F,R. Parts 19, Subpart N and 165,9, by directors and senior executive 

officers whose dismissals were previously directed under the authority of 12 U .S.C. § 

183\0(f)(2)(F). 

D. The Comptroller's authority pursuant to 12 U.S.C, § 1831 p-I and 12 C.F,R, Parts 30 and 170 

is also delegated to the Senior Deputy Comptroller for Midsize and Community Bank 

Supervision and the Senior Deputy Comptroller for Large Bank Supervision and may be 

exercised by each in carrying out examination and supervisory responsibilities, This authority 

includes: 

I. requiring the submission of plans within the meaning of 12 U.S.C, § 183Ip-l(e)(I) 

addressing the failure to meet applicable standards prescribed by either regulation or 

guideline; and 

2. the issuance, modification, withdrawal, and termination of notices of intention to issue 

orders relating to the failure to adhere to standards established pursuant to 12 U .S.C. § 

l83Ip-l(d) and issuing orders pursuant to 12 U.S,C, § I 83Ip-l(e)(2) with respect to banks 

that fail to submit or implement acceptable plans, 

E. In acting on any matter described in Paragraph A, B, or C above, the Senior Deputy 

Comptroller for Midsize and Community Bank Supervision and the Senior Deputy Comptroller 

for Large Bank Supervision are also authorized to exercise the authority set forth in 12 C.F.R. 

§ 100.2 to, for good cause and to the extent permined by statute, waive the applicability of any 

provision of 12 C.F.R, Parts 100 through 197. 

F, This delegation does not delegate, and expressly reserves for the Major Maners Supervision 

Review Committee (MMSRC), any authority related to the following maners: 

I. 111e following enforcement actions taken against any national bank or federal savings 

association that has been designated as a I.arge national bank or large federal savings 

association; any national bank aff'~iate or federal savings association affiliate of a large 

national bank or large federal s~vings association; or any federal branch or agency of a 

foreign bank or national bank affiliate of a federal branch or agency: 
147 


a. Agreements or orders issued pursuant to 12 U .S.C. § 1818(b) based in whole or in 

pal1 on violations of the Bank Secrecy Act, 31 U.S.C. § 5311, el seq., and its 

implementing regulations (BSA), or on unsafe or unsound practices; 

b. Informal actions, including those issued pursuant to 12 U.S.C. § 1831 p-I and 

12 C.F.R. Parts 30 and 170, based in whole or in part on violations of the BSA or on 

unsafe or unsound practices; 

c. temporary cease and desist orders pursuant to 12 U.S.C. § 1818(c) based in whole 

or in part on violations oX \he BSA or unsafe or unsound practices; and 

d. assessment of civil money penalties pursuant to 12 U.S.C. § 1818(i) for violations 

of the BSA, violations of enforcement actions addressing BSA, or unsafe or unsound 

practices. 

2. All suspensions and prohibition or removal actions pursuant to 12 U.S.C. §§ 1818(e) or 

(g) for violations of the BSA. 

3. All enforcement actions based in whole or in part on unfair or deceptive acts or 

practices in violation of section 5 of the Federal Trade Commission Act, 15 U.S.C. 

§ 45(a)(I) pertaining to any national bank or federal savings association, any affiliate of a 

national bank or federal savings association, or any federal branch or agency of a foreign 

bank. 

4. All referrals to the Depar1rnent of Justice for violations of the Equal Credit Opportunity 

Act and the Fair Housing Act pertaining to any national bank or federal savings 

association, any affiliate of a national bank or federal savings association, or any federal 

branch or agency of a foreign bank. 

5. All enforcement actions for'.~(61ations 'of the Equal Credit OPPOl1unity Act and the Fair 

Housing Act, where a referral to the Department of Justice is returned to the OCC. 

6. Other cases refelTed to the MMSRC by a Senior Deputy Comptroller or the Chief 

Counsel. 

7. Other cases where the appropriate Senior Deputy Comptroller does not concur with the 

consensus view ofthe members of the Washington Supervision Review Committee. 

G. Each Senior Deputy Comptrollel'is authorized to redelegate the authority provided by this 

delegation under such terms as the Senior Deputy Comptroller detennines to be appropriate. 

Redelegation by either Senior Deputy Comptroller may be effected through issuance of letters of 

authorization or any other means selected by the Senior Deputy Comptroller. 

H. Unless superseded by action of the Comptroller oftlle Currency or the appropriate Senior 

Deputy Comptroller, all outstanding redelegations of the authority provided by Ihis 

memorandum that are not inconsistent wilh this delegation remain in full force and effect 

./d 
148 


J. The authority delegated herein is subject to the Memorandum from the Comptroller to the 

Executive Committee regarding Delegation of Authority, dated May 10,2012.' 

Sha rine. Jnformation..&....R.!:SDODdiruuQ .. 

Mill! 

SOC I WSRC I DCSS I DSS I DOC I DSRC I AliDC 

xs 

x 

x 

x 

x 

xs xs 

x x 

x 

xs xs 

x A 

xs 

I The term "bankll" will rcfcr to mlliol1lll bnnks and fcderal SBVlngs associatiOns unless s peCifically meheated OLherwlSC:: 

ADC EIC I Other 

ROE'li require DSS and another 

signollJrc. 

PBS has signature puthori'Y Requires Consultation with Lc::gal Rc::quires Consultation with Leg.al 

Consult with DCSS M appropc-ialc. 

Recommendations to dcny FDIC's 

request must be discussed with the SOC. 

Denials can only be approved by the 

ComptTollcr. Copics of FDIC requests 

and OCC response or invitation should 

be sent to DSS. 

Appropriate Icgal division lIlgns rc::fC::mll. 

Also see 8nWOS Memo on Sbanmz. lnfo 

x - DeciSion Authon'Y - lowest Ic::vel - Includcs hlghc::r levc::1 offiCia ls (DeciSion Makcr Of" higher may. on a casc-by-casc mls. slgnaturc authonty 10 someone other than Duthof"l zcd by thiS delcgatlon) 

S - Signature Authon'Y - lowcstlevcl - Includes higher level ofT"lClals (Includes making nece.smry or appropriate edits and modifications to the applk:abIc document) 

A ... Presentation to and .dvlCC of SuperviSion Revlcw Commlttcc Rcqulred 

S OC - Scntor Depu'Y Comptrollcr fOf" MKlsll:e/Communi'Y Banks 

WSRC - Washington SuperviSion RevloCwCommlttec 

DCSS ... Dcpu'Y ComptroIlCT for Special SUperviSion DeMCC .. Deputy Comptrollcr for Midsize &. Credit Card Bnnk SuperviSIOn 

ess .. Director for SpcclDl SUpcrvlSlon 

DOC ... D,stnct Deputy Comptroller DSRC - Dlstnct SUperviSion Rcvlcw C omnuttee 

AsOC - AssoclDte Dcpu'Y Comptroller 

ADC .. ASSistant Depu'Y Comptroller 

E1C ... or Portfolio M::umgc::r 

SO """ SUpervisory OfTlCc 

E&:.C ... EnfOl"Ccmcnt &:. Compliance DIVISion 

(including ROE and acCC$S to EIC) to II problem bank's poCentlal purchasers, 

directOt'S, or semor executive officers. 

Requests to FDIC fOr cooctllTenc;e on 9O.day receivership penod under 

12 USC Ii 18310. 

B."k RtqllHCS &. Other Acllons DIVidends approvals (12 USC Pllrt60 &. 12 CFR § 5.64(c); 12 CFR § 

163. 143(0)(2), (1)(4), (b)(3» . 

Excess Investment in Bank Premises {12 CFR It 5.37; OTS Examination Handbook, Fixed Assels (Sec. 252» . 

CREC Expenditures &. Holding Period Extensions. 

NationDl Banks: OPC Holding Period Extensions (12 CFR § 1.7) 

Requc.sa to usc alternative IndeX lOpriee ARMs (12 CFR It 34.22; 12 CFR § 

160.3S(d)(3» . 

Golden Parachute & Sever.mce Payments/Agreements (12 CFR Part 359). 

Nall(lf18.l Bnnks: Require npphc:altonS to l$Sue or pn=-p4y :qJbordioaled debt 

pursu.ontto 12 CFR § S.47(b) 

Requests (or supplemental lending limit authority. 12 CFR § 32.7; OTS Examioatton Handbook 21 1.6 RequiringSpecial Rcpoc1.s pursuant to 12 USC It 161{a); 12 USC § 1464(v),clliling 

for the submission of business plans and Significant devlallons or changes 

to such plans. 

Orcc:ide Fonnal Appeals (other than to Ombudsman) 

soc I WSRC I OCSS loss I DDC I DSRC I AsDC 

xs 

-I----

xs XS 

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XS 

xs 

Xs Xs 

-t--

X 

XX 

X X 

Xs" 

ADC EIC I Other 

Z!£;V:icYI4106 Memo on Shnnog In(o 

Disclosure of non-publlc ace 

IOformation should be made only after 

consultation With the Law Department 

Requires coordlnatton With FDIC. 

x - DeCISion Authority -lowest level - mcludes higher level omelals (Decis"", Maker or higher may, on a case-by-case basiS. designate signature authOrity to someone other lhnn .authorIZed by thiS dch:gahon) 

S "" SigOllture Authority - lowest level - includes higher level orrK:lols (Includes maklOg necessary or nppropnale edits and modlficallons to the appllcabte documc:nt) 

A .. Present.ation to and adVICe of Supervision ReView Committee ReqUired 

Soc .. SenIor Deputy Comptroller (or MNtslzdCommunlty Bnnks 

WSRC .. WashinglOn SuperviSion Revu:w CommIttee 

DCSS .. Deputy Comptroller for Specull SUperviSion 

OCMCC ... Deputy Comptroller for Midsize &. Credit Card Bank Supervision 

DSS ... Director for Special SupervISion 

DOC - DlStnct Deputy Comptroller 

OSRC - Dislnci SUperviSion RevlCW Committee 

AsOC .. A$soclnte Deputy Compuoller 

ADC .. AsslsUmt Deputy Comptroller 

EIC - Ex.a.mlner-ln-Ch4rge or Portfolio Manager 

SO - SUpervlSOf)' ClTlCe 

E&:.C ... Enforcement &. COITIphiJlloCe DIVISIon 

WSRC "" Wushmglon SUperviSIon ReView Committee 

OCSS - Deputy Comptroller for Special SUpervISion 

OCMCC - Deputy ComptroUtt fOf' MidSIze k Credit Card Bank Supervision 

DSS - Dlfc<:tor for SpeCIal SuperviSion DOC .. Dislrlct Deputy Camptrollc:r 

DSRC - District SUpervISIOn RevlcwCommlltce 

AsOC - ASSOCiate Deputy ComptrOller 

ADC .. Deputy Comptroller 

EIC .., Examtncr-m-Charge 01" Portfolio Manager 

SO - SUpervisory OfJke 

E&C - Enforcement &, ComphltnCe DIVISion 

SUpervISOry m:ltlers 10 reeelvmg Federal Banking Agency per Dodd Frank Section 

612 ConversIon or Stale Charter to Nallonai or Federul Chnner: Development and 

submISSIOn of Plan to address slgnlficllnt supervisory motters 10 relinquishing 

Fedcrnl Bankmg Agency per Dodd Frank Section 612 Federal S."lngs Assocl.tions - Specific 

Loans 10 one BOHower: 

Requests 10 e)(cced the geneml lending limit ror loans 10 develop 

domestic residentia l housing units. (12 C.F.R. § 160.93(d){J)(iii}) 

Requests to milke additional expenditures on OREO: i.e. snlvBge powcrs 

investments in excess orthe lending limit. 12 C.F.R. § 159. 13 (OTS 

Examination Handbook, Scction 211) 

Business plan modificntions. (In accordance wilh the OTS ApplicBlions Handbook, 

rcquests nrc pc-ocessed under the geneml procedures in 12 C.F.R. § 116.210 - 290. 

Special Supervision Supervised B3nb 

SOC I WSRC I DCSS I DSS I DOC 

xs 

x 

x A 

x A 

x 

xs xs 

DSRC A,DC ADC EIC I Other 

In coordin3tioo with Dir«.tor or E&C. 

Requires Consultalion with Legal 

S - LIcenSing WIll process and tronsmlt 

deIC""ln:lllon. 

S - LIcensing WIll process nnd transmit 

dete""matlon. NsW:.. All conversions 10 

n nllllonal bank or redeml lhriR Me to receiVe DSRC revu:w even where Dodd 

Frnnk SectIon 612 does not apply. 

x - [)c:cision Authority - lowcstlevel- includes higher level ofnei::lls (Decision Mnker Of" higher mny, on 1'1 case-by-case basis, desigm!te signature authority 10 someone other th4n Butt'lOri7.cd by delegntion) 

S .. Signature Authority -Io .. vest level - includes higher level ofTkials (Includes milking neccssary Of" appropriate edits and modifications to the applieable document) 

A - Presentation to nnd advice or Supervision Review Commit!« Required 

Soc .. SeniOf" Deputy Comptroller for Midsi2:clCommunity Banks 

WSRC .. WBshington Supervision Review Commiltee 

DCSS .. Deputy Comptroller ror Specinl Supervision DCMCC Deputy Comptroller for Midsize &. Credit Card Bank Supervision 

DSS .. Director for Sp«:illl Supervision 

DOC - District Deputy Comptroller 

DSRC .. District Supervision Review Commiuce 

AsDC - Assocmte Deputy Comptroller 

ADC .. AssistDnt Deputy Comptroller 

EIC - E:'Cominer·in-Chru-ge or Ponfolio Manager 

SO .. SuperviSOfy OffICe 

E&C .. Enroreement &. Compliance Division 
156 

Q.2. Under what circumstances your agency has used 12 U.S.C. 

§§1818(e) and (g) in the past, including any actions taken against 

bankers in the largest financial institutions. 

A.2. As a matter of course, the OCC pursues all legally supportable 

removal and prohibition actions. The OCC has removed and prohibited bankers under sections 1818(e), (g), and 1829 in a variety of 

circumstances where the applicable legal standard is met. Most removal and prohibition cases involve instances of insider abuse and 

self-dealing. 

Since 2000, the OCC has issued 422 removal and prohibition orders under section 1818 and 3,963 prohibition notices under section 

1829. Forty-one percent of the 1818 removals and 67 percent of the 

1829 removal notices involved individuals affiliated with large 

banks. All OCC formal enforcement actions, including final orders 

of removal and prohibition, are listed on the OCC’s Web site at 

http://apps.occ.gov/EnforcementActions/. 

Q.3. The process your agency does or would follow to use its authority under 12 U.S.C. §§1818(e) and (g). 

A.3. The documents we identified in response to your first question 

govern the process the OCC follows to use its authority under sections 1818(e), (g), and 1829. 

Most OCC enforcement actions, including removal and prohibition cases, originate from examination findings and referrals from 

the examiners in the bank to the appropriate supervisory office. 

The supervisory office then works closely with the OCC’s Enforcement and Compliance (E&C) Division to develop the case. In many 

cases, the E&C Division will conduct an investigation to gather additional facts to support the action, aided by the OCC’s examiners. 

Once sufficient evidence has been obtained to support the case, the 

E&C Division presents its recommendation to the appropriate Supervision Review Committee. The OCC proceeds with an enforcement action if the OCC’s Major Matters Supervision Review Committee authorizes the action, or if the Senior Deputy Comptroller 

for Midsize and Community Banks authorizes the action after reviewing the recommendation of the Washington Supervision Review Committee. 

Upon receiving authorization, the E&C Division seeks to obtain 

the issuance of the order with the respondent’s consent. While the 

majority of removal and prohibition cases are resolved this way, 

the respondent has the right to contest the action and, in cases 

where the respondent does not consent, the E&C Division will initiate litigation by filing a notice of charges with the administrative 

law judge who adjudicates enforcement actions brought by the Federal banking agencies. The matter then proceeds to an administrative hearing, with the presentation of evidence and full briefing on 

the matter by both parties. Both parties may file exceptions to the 

administrative law judge’s recommended decision, and the Comptroller then issues a final agency decision. If the Comptroller issues 

a final order of removal and prohibition, that order is subject to review by an appropriate United States court of appeals. 

Q.4. Attorney General Holder testified before the Judiciary Committee that he is ‘‘concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00160 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
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ecute them when, . . . if you do bring a criminal charge, it will 

have a negative impact on the national economy, perhaps even the 

world economy.’’ 

Can you explain how your efforts to ensure compliance with 

money laundering laws are affected when so many people—even 

the Attorney General of the United States—think it is ‘‘difficult to 

prosecute’’ the biggest banks? 

A.4. The OCC’s efforts to ensure compliance with the BSA and 

AML laws are not affected by concerns that some banks are ‘‘difficult to prosecute.’’ Indeed, the OCC has brought many actions 

against large institutions for BSA violations in recent years, including actions against Key Bank, N.A. (2005), Union Bank of California, N.A. (2001), Wachovia Bank, N.A. (2010), Zions First National Bank (2010), Citibank, N.A. (2012), HSBC Bank USA, N.A. 

(2010, 2012) and JPMC Bank, N.A. (2012). 

The OCC’s willingness to take action is also not affected by a decision by DOJ to decline to prosecute a bank. The only significant 

impact of a decision by DOJ not to prosecute an institution is on 

the OCC’s charter revocation authority set forth at 12 U.S.C. § 

93(d). If the Attorney General declines to prosecute a bank or fails 

to obtain a criminal conviction for money laundering, the OCC does 

not have the legal authority to conduct a revocation hearing under 

that section. Revocation hearings can only be conducted upon the 

conviction of a bank of any criminal money laundering offense (18 

U.S.C. §1956 or 1957) and the OCC does not have the authority to 

conduct such a hearing on its own accord. 

Q.5. Are you worried that the size and interconnectedness of our 

Nation’s largest financial institutions negatively affects your ability 

to enforce the law and reduces your leverage? 

A.5. The OCC believes that no institution is above the law, regardless of its size and interconnectedness. Consequently, we take seriously our responsibilities as a regulator and we expect full compliance with BSA/AML requirements at all times. The OCC examines 

large banks for compliance using the FFIEC examination procedures. As noted immediately above, we have not been reluctant to 

enforce the U.S. banking laws against the largest banks. That said, 

there will always be challenges for our BSA/AML examinations of 

large financial institutions due to their global footprint, transaction 

volumes, diverse product lines, and the rapid changes in technology 

and payment systems. In addition, keeping pace with the innovation, flexibility, and speed with which criminals are able to alter 

their tactics to avoid detection is a constant challenge for both examiners and banks. In response to these challenges, the OCC continues to expand its ongoing dialogue with law enforcement to understand current money laundering and terrorist financing 

typologies. 

Through participation in international forums such as the Financial Action Task Force (FATF), the OCC works with international 

law enforcement, prosecutors, and regulatory counterparts to identify and understand risks to national banks and Federal savings 

associations from international money laundering and terrorist financing schemes that impact the largest international banks. The 

OCC disseminates this information internally to examiners 

158 

through training and guidance. The examiners also participate in 

external seminars, workshops, and conferences. 

The OCC will continue to refine its examination and enforcement 

processes to keep up with these challenges in this ever-changing 

environment, and to ensure that both large and community banks 

maintain effective BSA/AML compliance programs. The OCC will 

not hesitate to use its enforcement authority to ensure that the 

U.S. banking laws are complied with, suspicious activity is properly 

identified and reported to law enforcement, and wrongdoers are 

held accountable. 

Q.6. At the hearing, Under Secretary Cohen and Governor Powell 

both testified that the Justice Department was in contact with 

their institutions regarding the HSBC case. Without reference to 

any particular case, can you describe the general or usual process 

for cooperation between your institution and the Justice Department regarding money laundering and Bank Secrecy Act issues? 

In particular: Which office or offices in the Justice Department 

contact your institution? 

A.6. The OCC cooperates extensively with the DOJ in BSA/AML 

cases. This cooperation includes discussion of cases through meetings and calls, providing documents and information, and making 

OCC examiners available to discuss transactions or serve as witnesses in grand jury proceedings and trials. Depending on the case, 

the initial contact in such cases may be initiated by the OCC, or 

it may be initiated by the DOJ. The DOJ components that typically 

contact us in BSA/AML cases are the Asset Forfeiture and Money 

Laundering Section of the DOJ’s Criminal Division, and any U.S. 

Attorney’s Office that is conducting or participating in an investigation. The OCC is also often contacted by the FBI and other investigative agencies. 

In addition, we also interact with the DOJ through our active 

participation in several interagency groups focusing on BSA/AML 

compliance, including: (a) Treasury’s Interagency Task Force on the 

U.S. AML Framework; (b) the Bank Secrecy Act Advisory Group 

(BSAAG); and (c) the National Interagency Bank Fraud Working 

Group. 

Q.7. Which office or offices in your institution are contacted? 

A.7. Contact with the DOJ is typically conducted through the 

OCC’s Chief Counsel’s Office, although sometimes law enforcement 

agents will initiate contact with field examiners (field examiners 

who are contacted by law enforcement will typically direct the call 

to the Chief Counsel’s Office). 

Q.8. At what points in the enforcement process is your institution 

contacted? 

A.8. The timing of contact with the DOJ or other law enforcement 

agency varies depending on the case. In some cases, the OCC develops a case and refers it to law enforcement. In other cases, the 

OCC works closely with law enforcement on ongoing investigations. 

Q.9. What information is usually requested? 

A.9. Typically the DOJ will request OCC examination reports and 

underlying supervisory correspondence, examination work papers, 

look-back reports, investigation reports, and access to OCC examVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00162 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
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iners, due to their expertise and knowledge of the institution under 

investigation. In some cases, the OCC may obtain access to grand 

jury materials and OCC attorneys will participate and assist in the 

investigation process, interview or depose witnesses, and provide 

responses to DOJ information requests. 

Q.10. Are there are any formal or informal guidelines that are used 

for interagency cooperation on Bank Secrecy Act or Anti-Money 

Laundering issues? 

A.10. The OCC has a Memorandum of Understanding in place with 

both FinCEN and the Office of Foreign Assets Control (OFAC). 

These agreements provide guidance on information sharing and 

interagency coordination with those agencies. In addition, as described above, the OCC actively participates in various interagency 

groups that focus on BSA/AML compliance. Those groups generally 

have charter documents that describe their purpose and provide 

guidelines for participation. 

Q.11. As I understand it, when the OCC identifies a bank’s failure 

to comply with its internal policies regarding money laundering, 

the bank then develops a new policy to address these shortfalls and 

the OCC examines the bank’s practices during its next examination 

period. 

When the OCC evaluates a bank’s internal policies for BSA compliance, does it consider the extent to which, based on past supervision data, the policy is likely to be implemented effectively? If 

yes, can you explain the OCC’s method of evaluation? If the OCC 

does not consider past supervision data, then how is the OCC able 

to evaluate whether the bank’s policies are likely to lead to sufficient compliance with the BSA? 

A.11. OCC’s regulatory preplanning process for examinations includes an analysis of ongoing quarterly reviews of corrective actions taken to address matters requiring attention and violations 

of law and regulations. In addition, OCC examination planning includes a review of prior regulatory findings and those noted in 

bank internal audit, quality assurance and quality control reports. 

Finally, while on-site, staff review policy and system changes that 

were made to correct prior concerns. When applicable, this includes 

testing sustainability through transactional testing. 

Q.12. When the OCC does find potential weaknesses in money 

laundering detection or controls, does the OCC provide that information to the Department of Justice or other regulators? 

A.12. The OCC ensures that suspicious and potentially criminal activity is referred to the DOJ. In addition, in criminal cases, the 

DOJ will routinely contact the OCC and request examination reports and other supervisory information that documents any problems that the OCC identified in the bank’s BSA/AML compliance 

program. 

When the OCC finds potential weaknesses in money laundering 

detection or controls, the OCC provides the information to FinCEN 

and OFAC consistent with the terms of our MOUs with those agencies. If the weaknesses result in the failure to properly file reports 

with FinCEN or OFAC, including SARs, the OCC will typically coordinate with FinCEN and OFAC on any look-back or back-filing 

160 

requirements to ensure that activity is reported appropriately. If 

the weaknesses will result in a penalty action, the OCC will coordinate with FinCEN, which also has BSA penalty authority, and 

other applicable agencies (Federal Reserve, DOJ, State Attorney 

Generals, etc.). 

Pursuant to the MOU with OFAC, the OCC reports (as permitted 

by law) to OFAC any sanctions violations discovered in the course 

of an examination. The OCC also requires banking organizations 

under our supervision, which are suspected of sanctions violations, 

to communicate this information directly to OFAC. 

Q.13. Has the OCC adopted or will adopt a policy of imposing stiffer penalties for second, third, or repeated failures to achieve compliance? 

A.13. Yes. In the case of civil money penalty actions, the OCC will 

follow the statutory framework set forth in 12 U.S.C. 1818(i) which 

provides for increased penalty amounts depending on the severity 

of the wrongdoing. The statute also requires that in determining 

the amount of any penalty, the OCC shall take into account the appropriateness of the penalty with respect to the history of previous 

violations. 12 U.S.C. 1818(i)(2)(G). 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR HEITKAMP 

FROM THOMAS J. CURRY 

Q.1. As all of you mentioned, the sophistication and determination 

of money launderers, terrorist financiers, and other criminals has 

evolved and changed as they find ways to gain access to our institutions. How can we support smaller institutions that cannot afford 

to put the same programs in place as the large banks? In your examinations, have you noticed vulnerabilities on a large scale? 

A.1. We scale our expectations of smaller institutions to the risk 

and complexity of the products they offer. As long as the smaller 

institutions perform sufficient due diligence on their customers, 

and truly understand their customers’ use of their accounts and the 

risks associated with their customers’ transactions, small banks 

should meet regulatory expectations. We provide guidance to smaller banks through the examination process, as well as in various 

meetings and outreach sessions. We have, for instance, been very 

active for many years in offering workshops for bank directors to 

help them understand the risks associated with BSA. Additionally, 

as part of our examination process, we offer recommendations to 

bankers based on our unique knowledge of industry best practices. 

While the risks in smaller institutions vary from bank to bank, we 

have not noted significant vulnerabilities on a large scale. Rather, 

banks are adjusting to an increasing distance from their customers 

through technological innovation such as remote deposit capture 

and prepaid cards, some of which is facilitated through third parties with their own independent BSA programs. In many cases, 

reasonably sophisticated software is available to smaller banks to 

help them manage the increasing customer risks. 

161 

RESPONSES TO WRITTEN QUESTIONS OF 

CHAIRMAN JOHNSON FROM JEROME H. POWELL 

Q.1. The major AML–BSA cases discussed at the hearing all illustrate various forms of breakdown in the bank compliance systems 

on which the BSA/AML and economic sanctions rules depend. 

Would you favor a requirement that the CEOs of large banks certify the effectiveness of their BSA/AML/sanctions compliance systems annually? If not, why not? 

A.1. Imposing a Bank Secrecy Act/anti-money laundering (BSA/ 

AML) and U.S. sanctions certification requirement may result in 

changes to an institution’s strategic focus and the need to alter or 

curtail certain high-risk activities in order to reduce exposure. 

While such a change could reduce the risk profile of an institution 

and result perhaps in a more effective compliance program, it may 

also result in a reduced availability of certain financial services, 

such as private banking or correspondent bank services, or a curtailment of certain products and services in certain markets. 

Even without any specific certification requirements, the Federal 

Reserve reviews the quality of an institution’s BSA/AML and U.S. 

sanctions compliance programs through the ongoing exercise of supervision, and the results of these reviews are reflected in the 

‘‘management’’ or ‘‘M’’ rating component of the CAMELS rating system we use to evaluate these institutions. For large, complex banking organizations, safety and soundness examination is a continuous process, and BSA/AML compliance is incorporated into examinations conducted throughout the year. 

Additionally, the Federal Reserve has available at its disposal a 

broad range of supervisory tools to ensure appropriate compliance 

processes and programs. For example, the Federal Reserve may require an institution to address a BSA/AML or sanctions program 

deficiency through informal supervisory action, such as requiring 

an institution’s board of directors to adopt an appropriate resolution or executing a memorandum of understanding between an institution and a Reserve Bank. In the most serious cases, the Federal Reserve may take a formal enforcement action against an institution. 

Q.2. I understand that you are not prosecutors, but you are responsible for oversight of the Nation’s largest financial institutions. Are 

there reasons that it is especially difficult to adequately discipline 

individuals with civil fines, industry removals, use of injunctions, 

limits on certain categories of bank activities, or other sanctions, 

in connection with seemingly significant BSA/AML violations? 

A.2. The Federal Reserve and other Federal banking agencies have 

and use statutory authority to remove and prohibit insiders from 

participating in the banking industry. This authority is an effective 

tool in dealing with serious cases of insider abuse and self-dealing 

because it results in a lifetime ban on the individual working in the 

banking industry. In these cases, we may also determine that the 

assessment of civil money penalties is appropriate against the individual. In the past 5 years, the Federal Reserve has issued 44 prohibition orders, including several orders that included an assessment of a civil money penalty. 

162 

We believe that this existing authority to sanction misconduct by 

individuals is an effective tool to address significant BSA/AML violations involving specific insiders. For example, the Federal Reserve may prohibit an institution-affiliated party for violations of 

the BSA that are ‘‘not inadvertent or unintentional.’’ 12 U.S.C. 

§1818(e)(2). Significant violations of the BSA and related antimoney laundering laws typically involve parallel criminal investigations. An individual convicted of a felony offense also is subject 

to the prohibitions set forth in section 19 of the Federal Deposit Insurance Act (FDI Act). 12 U.S.C. §1829. In these instances, the 

Federal Reserve will typically defer the decision to commence an 

investigation of an insider, at the request of prosecutors, to avoid 

interference with any ongoing criminal investigation. The Federal 

Reserve’s enforcement program will instead focus on requiring an 

institution to remediate problem areas as quickly as possible in 

order to mitigate any negative effects on the bank and the U.S. financial system. We believe that the Federal Reserve’s approach to 

enforcement matters accomplishes the statutory objective set by 

the Congress of ensuring the safe and sound operation of the banking system. 

Q.3. How does the seriousness with which foreign Governments 

take compliance in this area affect U.S. regulatory efforts and bank 

compliance? Why didn’t foreign regulators, especially in the EU, 

pick up on the correspondent banking and cross-border problems, 

and the wire stripping activity, sooner? Are there other particular 

areas of concern that you think must be addressed in your current 

discussions with foreign regulators? 

A.3. Not all countries impose the same economic sanctions as the 

United States. Countries without these standards or with different 

sanctions than those in the U.S. do not approach sanctions enforcement in the same manner as the United States. 

The Federal Reserve believes that a sound global compliance program, and proper oversight, is critical to deterring and preventing 

illicit activities at, or through, U.S. banks and other financial institutions, and we continuously reinforce this view with our foreign 

supervisory counterparts. Many of the enforcement actions we have 

taken in this area have required institutions to implement global 

compliance measures that will help them evaluate risk comprehensively, taking into account the full range of products, services, customers, and geographic locations of the firm. In a number of BSA/ 

AML and U.S. sanctions enforcement cases, the Federal Reserve 

has enlisted the aid of our foreign counterparts, including what 

was formerly the U.K. Financial Services Authority, to ensure that 

a supervised institution is meeting its responsibilities in its home 

country and other jurisdictions where our examining authority is 

limited. 

The Federal Reserve promotes high supervisory standards for 

international BSA/AML and U.S. sanctions compliance and payment transparency through our participation in the U.S. delegation 

to the Financial Action Task Force (FATF) and the Basel Committee on Banking Supervision’s (BCBS) anti-money laundering experts group. For example, the U.S. delegation to the FATF continues to press for the strengthening of the international compliVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00166 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
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1 ‘‘Federal Financial Institutions Examination Council Bank Secrecy Act/Anti-Money Laundering Examination Manual’’. Available at: www.federalreserve.gov/boarddocs/ 

supmanual.default.htm. 

ance framework and has contributed to the revised set of international standards for AML compliance adopted by the FATF 

adopted its revised set of standards earlier this year. The BCBS’s 

anti-money laundering experts group provides a forum for regular 

cooperation on anti-money laundering matters, and has issued 

guidance in several key areas, such as cover payment transparency. In addition, the Federal Reserve has strong and ongoing 

coordination and communication channels with our counterparts at 

foreign regulatory agencies, including but not limited to the U.K.’s 

Financial Services Authority and its successor organizations, the 

Prudential Supervisory Authority and the Financial Conduct Authority. On an institution-specific basis, Federal Reserve also participates in supervisory colleges with its foreign supervisory colleagues. These groups are intended to promote information sharing 

and discussion on a range of supervisory issues and emerging risks 

at the institution, including anti-money laundering concerns. 

Q.4. In the last decade, major new innovative technologies and 

products have come onto the market, including prepaid access 

cards, mobile phone banking, smart ATM machines and kiosks, mobile wallets, Internet cloud-based payment processes, and others— 

and they are evolving rapidly. While they provide huge benefits to 

consumers, they can also pose major AML risks, including by making it easier to move large amounts of money on stored value cards. 

What are you doing to mitigate those risks now, and what should 

banks be doing to mitigate those risks on their own, even as they 

develop these products? 

A.4. The Federal Reserve has long recognized the anti-money laundering risks associated with prepaid cards and other payment systems and has taken steps to address these threats as they emerge. 

The Federal Reserve maintains an open dialogue with other regulatory agencies and the prepaid card industry and participates in 

many discussions focused on identifying risks associated with prepaid cards and other technologies. For example, in 2006 and 2010, 

the Federal Reserve, working with the member agencies of the Federal Financial Institutions Examination Council (FFIEC) working 

group on BSA/AML matters, incorporated guidance in the FFIEC 

examination manual on ways banks can mitigate the risks associated with prepaid card programs, and developed specific examination procedures for reviewing the adequacy of a bank’s BSA/AML 

program as it relates to its prepaid card program. The guidance is 

publicly available through the Federal Reserve’s Web site. 1

The Federal Reserve also serves as cochair to the BSA Advisory 

Group Subcommittee on Prepaid Access alongside the National 

Branded Prepaid Card Association (NBPCA). The subcommittee 

has been in existence now for several years, and includes representatives from the banking regulatory agencies (both Federal 

and State), the Financial Crimes Enforcement Network (FinCEN), 

law enforcement, and industry. In addition, Federal Reserve staff 

speaks regularly at conferences and meetings focused on prepaid 

cards and emerging payment systems, including NBPCA events 

164 

2 ‘‘Transparency and Compliance for U.S. Banking Organizations Conducting Cross-Border 

Funds Transfers’’ (November 19, 2009). Available at: www.federalreserve.gov/boarddocs/ 

srletters/2009/sr0909al.pdf. 

and the annual Federal Reserve Bank of Chicago’s Payments Conference. 

Q.5. The BSA regulations about wire transfers (at 31 CFR 

1010(f)(2)) allow a U.S. bank to accept and process a wire transfer 

from overseas even if the ‘‘transmitter’’ field is blank. That may 

have been understandable 15 years ago when the regulations were 

written. But why has the rule not been changed, in light of the 

sanctions abuses illustrated by these cases and the possibility of 

other attempts to avoid our sanctions rules in the future? The 

changes in the SWIFT regulations to require completion of all 

fields, which you mentioned in your testimony, do not appear to 

have the force of law. In a world in which banking institutions operate globally, effective money laundering control is extremely difficult without uniform and uniformly enforced cross-border standards within banks and under applicable law. 

A.5. Foreign banks that operate in countries without sanctions 

similar to those imposed by the United States have not always had 

in place the mechanisms to ensure transactions routed through the 

U.S. comply with U.S. law. In 2009, based on transparency concerns raised by the Board and others, the Society for Worldwide 

Interbank Financial Transaction (SWIFT) adopted a new message 

format for cover payments (the MT 202 COV) that provides intermediary banks with additional originator and beneficiary information, enabling them to perform sanctions screening and suspicious 

activity monitoring. In furtherance of these efforts, the Board 

issued guidance on the necessity for transparency and proper monitoring with respect to cross-border funds transfers. 2 The guidance 

clarifies that financial institutions should not omit, delete, or alter 

information in payment messages or orders for the purpose of 

avoiding detection of that information by any other financial institution in the payment process. Also effective since 2009, the domestic wire transfer systems, Fedwire and Clearing House Interbank 

Payments System (CHIPS), have created similar message formats 

to improve transparency of cross-border payment messages. 

While the SWIFT message format for cover payments does not 

have a direct statutory basis, it is enforced by SWIFT against its 

members, and any institution that fails to provide the appropriate 

information or that processes a transaction without the appropriate 

information is subject to penalties imposed by U.S. regulators if the 

transaction does not conform with U.S. law. 

The Board participates in several organizations that are actively 

involved in enhancing the uniformity of cross-border anti-money 

laundering standards. In particular, Board is a member of the U.S. 

delegation to the FATF, which was established with the objective 

of creating and promoting a common set of anti-money laundering 

standards for incorporation into the legislative frameworks of its 

member countries. FATF Standard 16 is primarily concerned with 

ensuring financial institutions include relevant information with 

165 

3For additional information, see http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATFlRecommendations.pdf. 

cross-border wire transfers, which includes accurate originator and 

required beneficiary information, as described in the standard. 3

Q.6. Various international activities of these major banks, especially foreign correspondent banking and other means for cross-border funds transfer, have been recognized by Congress as special 

risk areas since at least 2001. What further steps should be taken 

to prevent the movement of illicit funds into and out of the U.S. 

through banks’ non-U.S. branches in violation of U.S. law? What 

are your agencies doing specifically to address the myriad problems 

that have arisen in these areas, including by strengthening cooperation with foreign regulators who may be in a position to flag 

problem banks earlier for U.S. regulators? 

A.6. The management of complex international banking businesses 

creates inherent risks, which must be mitigated through sophisticated enterprise-wide risk management and internal controls. 

These systems and controls should be reasonably designed by financial institutions to ensure that the institution has effective antimoney laundering procedures in place, including procedures to 

cover transactions involving its overseas affiliates. The Federal Reserve has issued guidance that highlights the importance of enterprise-wide risk management, and has taken supervisory action to 

ensure that the internationally active firms we supervise have appropriate controls in place. In many cases, we have enlisted the assistance of foreign regulators, including what was formerly the 

U.K. Financial Services Authority, to ensure that the supervised 

institution is meeting its responsibilities in its home country and 

other jurisdictions where our examining authority is limited. 

The Federal Reserve has placed particular emphasis on the importance of risk management in the context of correspondent banking activities. Examiners regularly evaluate whether a bank’s compliance program can detect and report suspicious activity with respect to its foreign correspondent account relationships. In addition, we have prescribed advanced procedures for our examiners regarding specific money laundering risks for foreign correspondent 

banking activities, such as bulk shipments of currency, pouch activity, U.S. dollar drafts, and payable through accounts. 

Earlier this year, the FATF issued recommendations concerning 

the obligations of financial institutions with respect to customer 

due diligence (CDD). These new recommendations, which are based 

on input provided by the Federal Reserve and other members of 

the U.S. delegation to the FATF, emphasize that financial institutions must use CDD information to better understand customer behavior and query whether the customer relationship is being used 

for improper means. Through its participation at FATF, the Federal Reserve has encouraged our foreign regulatory counterparts to 

ensure that the financial institutions they supervise have the programs necessary to conduct CDD appropriately. 

166 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO 

FROM JEROME H. POWELL 

Q.1. International Coordination: The dangers of illicit global money 

must receive adequate and effective attention at the G20, IMF, 

World Bank, and foreign national levels. 

Do each of you, together with the Comptroller, at your particular 

levels of office, ever meet together to discuss and review BSA programs and policies, both domestically and abroad? 

A.1. The Federal Reserve maintains an active dialogue with its regulatory counterparts regarding efforts to combat illicit financing in 

the U.S. banking system, both domestically and abroad. In addition 

to strengthening the compliance programs of U.S. financial institutions, we remain committed to making the supervision of internationally active banking organizations more effective and we have 

engaged in several efforts to achieve this important goal. The Federal Reserve also coordinates with foreign regulators as part of our 

enforcement program. For example, the Federal Reserve’s recent 

enforcement action against HSBC involved participation from what 

was formerly the U.K. Financial Services Authority. Likewise, the 

ABN AMRO case involved De Nederlandsche Bank N.V. (the regulator of Dutch banks). 

On the domestic side, the Federal Reserve participates in the 

Federal Financial Institutions Examinations Counsel (FFIEC), 

which has an expansive Bank Secrecy Act and anti-money laundering (BSA/AML) working group that promotes high standards for 

bank examinations and compliance. The Federal Reserve, other 

FFIEC member agencies, and the Financial Crimes Enforcement 

Network (FinCEN) meet monthly to review and discuss supervisory 

issues and to share information regarding emerging risks and other 

matters regarding banking industry compliance with BSA/AML requirements. To further enhance the goals of the BSA working 

group, a broader set of Government agencies with supervisory and 

regulatory responsibilities under the BSA are routinely invited to 

participate in these discussions. 

The Federal Reserve also participates in the U.S. Department of 

the Treasury’s Interagency Task Force on Strengthening and Clarifying the BSA/AML Framework (Task Force), which includes representatives from the Federal banking agencies, the Department of 

Justice (DOJ), Office of Foreign Asset Control (OFAC), FinCEN, 

the Commodity Futures Trading Commission (CFTC), and the Securities and Exchange Commission (SEC). The primary focus of the 

Task Force is to review the BSA, its implementation, and its enforcement with respect to U.S. financial institutions that are subject to these requirements, and to develop recommendations for ensuring the continued effectiveness of the BSA and efficiency in 

agency efforts to monitor compliance. 

Q.2. How effective is the international compliance structure and 

how exposed are our financial system and individual institutions to 

cross-border enforcement challenges? 

A.2. With respect to international coordination efforts, the Federal 

Reserve is a member of the U.S. delegation to the Financial Action 

Task Force (FATF). The FATF’s primary objective is to set standards to promote the effective implementation of the AML frameVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00170 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
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work in its member countries. As a member of the U.S. delegation 

to the FATF, the Federal Reserve continues to press for the 

strengthening of the international compliance framework and has 

contributed to the revised set of international standards for antimoney laundering compliance adopted by the FATF earlier this 

year. These standards are intended to create a global AML framework that is consistent across countries. 

The FATF also conducts regular peer reviews, or mutual evaluations, of its member countries’ AML frameworks against the standards to facilitate compliance and a level playing field. The mutual 

evaluations are publicly available and identify specific deficiencies 

and opportunities for enhancement for each country. Once the 

FATF evaluates its member countries against the standards, it revises the standards to incorporate lessons learned and implement 

improved AML measures. Finally, the FATF has a structured process to enhance the AML frameworks of noncompliant countries, 

such as action plans, publishing lists of noncompliant countries, 

and engaging the countries’ senior Government officials. These 

measures will help U.S. financial institutions to conduct appropriate due diligence of foreign correspondent accounts involving 

noncompliant countries. 

The Federal Reserve also coordinates internationally through the 

Basel Committee on Banking Supervision (BCBS). The BCBS provides a forum for regular cooperation on anti-money laundering 

matters, and has issued guidance in several key areas, such as 

transparency with respect to cross-border payments. On an institution-specific basis, Federal Reserve also participates in supervisory 

colleges with its foreign supervisory colleagues. These groups are 

intended to promote information sharing and discussion on a range 

of supervisory issues and emerging risks at the institution, including anti-money laundering concerns. 

Q.3. It appears that BSA regulations permit wire transfers to enter 

the U.S. with an incomplete originator field. Since that situation 

can potentially harm a U.S. bank—what should be done to address 

this issue? 

A.3. Foreign banks that operate in countries without sanctions 

similar to those imposed by the United States have not always had 

in place the mechanisms to ensure transactions routed through the 

U.S. comply with U.S. law. In 1995, the Board and FinCEN issued 

a rule that requires U.S. financial institutions, at the initiation of 

a funds transfer, to collect and retain the name of the originator 

(and, if received with an incoming funds transfer order, the name 

of the recipient) on funds transfers in excess of $3,000. In 2009, 

based on transparency concerns raised by the Board and others, 

the Society for Worldwide Interbank Financial Telecommunication 

(SWIFT) adopted a new message format for cover payments (the 

MT 202 COV) that requires banks located outside the United 

States that send payments through or to the U.S. banking system 

to provide intermediary banks with originator and beneficiary information that enables them to perform sanctions screening and 

suspicious activity monitoring. In furtherance of these efforts, the 

Board issued guidance on the necessity for transparency and propVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00171 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
168 

1 ‘‘Transparency and Compliance for U.S. Banking Organizations Conducting Cross-Border 

Funds Transfers’’ (November 19, 2009). Available at: www.federalreserve.gov/boarddocs/ 

srletters/2009/sr0909al.pdf. 2For additional information, see http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATFlRecommendations.pdf. 

er monitoring with respect to cross-border funds transfers. 1 The 

guidance clarifies that financial institutions should not omit, delete 

or alter information in payment messages or orders for the purpose 

of avoiding detection of that information by any other financial institution in the payment process. Also effective since 2009, the domestic wire transfer systems, Fedwire and the Clearing House 

Interbank Payments System (CHIPS), have created similar message formats to improve transparency of cross-border payment messages. 

Through supervisory and enforcement efforts, the Board has, for 

many years, focused attention on the payment messages that accompany funds transfers. From a compliance standpoint, U.S. financial institutions routinely screen the information contained in 

cross-border payment messages to identify transactions that violate 

U.S. economic sanctions. 

The Board participates in several organizations that are actively 

involved in enhancing the uniformity of cross-border anti-money 

laundering standards. In particular, Board is a member of the U.S. 

delegation to the FATF, which was established with the objective 

of creating and promoting a common set of anti-money laundering 

standards for incorporation into the legislative frameworks of its 

member countries. FATF Standard 16 is primarily concerned with 

ensuring financial institutions include relevant information with 

cross-border wire transfers. This information includes accurate 

originator and required beneficiary information, as described in the 

standard. 2

Q.4. Deferred Prosecution Agreements: The use of a Deferred Prosecution Agreement, or DPA, represents the continuation of a trend 

in enforcement matters in economic sanctions, export controls, and 

other matters. In opting for a DPA, companies may avoid criminal 

prosecution; in exchange, they assume ongoing responsibilities and 

risks. The DPA is open, on average, for about 18 months. 

If it sometimes takes years to uncover BSA violations and other 

bad behavior, how useful is the DPA as an enforcement tool? 

A.4. Please see response for Question 6. 

Q.5. What is an example of the lowest trigger for a violation of a 

DPA? 

A.5. Please see response for Question 6. 

Q.6. How long have DPAs been in place on financial institutions 

and has any resulted in a violated? What was the end result? 

A.6. A Deferred Prosecution Agreement (DPA) is a tool of the law 

enforcement community. The Federal Reserve does not have the 

legal authority to impose criminal penalties against financial institutions for violations of the BSA/AML requirements or U.S. economic sanctions, and also does not use DPAs. The decision to use 

a DPA or any other criminal law enforcement tool rests solely with 

the DOJ. In cases where the DOJ has imposed a DPA on a financial institution supervised by the Federal Reserve, the institution 

169 

is also typically required to abide by any orders we impose requiring the firm to take corrective measures, which provides an additional mechanism for enforcing our enforcement actions. Together, 

these actions result in an overall improvement to the firm’s compliance program. The DOJ has imposed DPAs on institutions supervised by the Federal Reserve that are in place for as long as 5 

years. Any institution found by the DOJ to be in breach of a DPA 

may be subject to criminal charges, or any civil or administrative 

charge that was not filed as a result of the agreement. 

Q.7. Referrals and Examinations: Has either OCC or the Federal 

Reserve made any criminal referrals to Federal or other law enforcement officials as a result of examinations and, if so, what were 

the results? 

A.7. The Federal Reserve routinely coordinates with the DOJ and 

State law enforcement, as appropriate, as part of our enforcement 

program. When requested by the DOJ or other Federal law enforcement authorities, the Federal Reserve provides support to criminal 

investigative authorities in connection with criminal investigations 

that are initiated as a result of these interagency contacts, consistent with applicable legal restrictions. For example, many of the 

enforcement cases the Federal Reserve has pursued involving violations of the BSA, the related AML rules, and U.S. economic sanctions, have involved a coordinated resolution with the DOJ and 

State criminal enforcement authorities. These include our case 

against Riggs Bank, ABN Amro, American Express, Credit Suisse, 

Barclays, Standard Chartered, and HSBC. These cases are among 

the largest, most complex enforcement cases in the BSA and U.S. 

sanctions area. Collectively, these cases have generated billions of 

dollars in fines paid to the U.S. Treasury. 

Q.8. Have the results of any BSA examinations had any negative 

impact on a bank’s CAMEL rating? 

A.8. The Federal Reserve assesses the quality of an institution’s 

BSA/AML compliance program and the results are reflected in the 

management or ‘‘M’’ rating component of the CAMELS rating system. For bank holding companies, the Board conducts an annual 

supervisory assessment of the firm on a consolidated basis. BSA 

deficiencies at the holding company or at a subsidiary bank are 

taken into account in determining the Risk Management rating 

contained in the Board’s annual assessment. Specifically, BSA deficiencies are reflected in the Board’s evaluation of the risk management practices, policies, and internal controls at the firm. 

Q.9. Exam Consistency: The Committee understands that, in the 

interests of exam consistency, all of the Federal regulators now use 

the Federal Financial Institutions Examination Council or FFIEC 

manual for Bank Secrecy Act examinations. 

Are there differences in the manner of which each agency conducts its examinations? Particularly, is there a substantial difference in the manner so-called pillar violations or program violations are treated before there is movement to a formal enforcement 

action. If so, why? 

A.9. Since 2005, the Federal banking agencies and State regulatory 

authorities have relied on the FFIEC manual as a tool for proVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00173 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
170 

moting consistency in the BSA/AML examination process for the 

banking organizations we supervise. These agencies meet regularly 

under the auspices of the FFIEC working group on BSA/AML to 

share their examination experiences, and we have revised the manual several times to further ensure consistency in the examination 

process. Differences in the examination approach taken by the Federal banking agencies are typically the result of differing risk profiles of the individual banking organizations we supervise. 

In 2007, the Federal Reserve and the other Federal banking 

agencies issued a policy, again on an interagency basis, on the application of our enforcement authority in the BSA/AML area. This 

policy explains when the banking agencies must issue a cease and 

desist order against a depository institution that fails to establish 

and maintain a BSA/AML program as required by the agencies’ 

regulations. Under the agencies’ regulations, an effective BSA/AML 

program must have four minimum elements or ‘‘pillars,’’ including 

a system of internal controls to ensure ongoing compliance; independent testing of BSA/AML compliance; a designated individual 

responsible for managing BSA compliance (BSA compliance officer); 

and training for appropriate personnel. The enforcement policy was 

issued in 2007 to promote a consistent approach to agency enforcement of BSA/AML requirements and to make those standards more 

transparent to the industry. 

When an agency identifies a supervisory concern relating to a financial institution’s BSA compliance program in the course of an 

examination or otherwise, the agency may communicate those concerns to the financial institution by various means. In the most serious cases, the Federal Reserve may take a formal enforcement action against an institution. The Federal Reserve has a longstanding 

practice of citing institutions for failing to establish or maintain 

one of the individual BSA pillars in formal enforcement actions (referred to as a ‘‘sub-part’’ violation). Since the 1980s, the Board has 

had a specialized group in the Division of Bank Supervision that 

reviews BSA/AML examination findings and consults with examiners on enforcement actions to ensure that the Federal Reserve’s 

enforcement responses are consistent with the policy statement, 

and through this review we ensure an appropriate supervisory response to deficiencies in a bank’s BSA/AML compliance program, 

whether through a formal enforcement action or otherwise. 

Q.10. OCC and Federal Reserve Practice: What is the practice of 

the OCC and Federal Reserve on prevention and resolution of deficiencies within its supervisory framework? 

A.10. Please see response for Question 11. 

Q.11. In the course of resolving deficiencies, has a member bank, 

or other entity, ever opted to leave either the national banking system or the Federal Reserve System rather than accept an enforcement document? 

A.11. The Federal Reserve examines, on a regular basis, institutions for which we have been granted supervisory authority by 

Congress and, through that authority, reviews the programs financial institutions use to maintain compliance with BSA/AML requirements and U.S. economic sanctions. Enforcement measures 

may escalate depending on the nature, duration, and severity of 

171 

3 Interagency Statement on Section 612 of the Dodd-Frank Act Restrictions on Conversions 

of Troubled Banks (November 26, 2012). Available at: http://www.federalreserve.gov/ 

bankinforeg/srletters/sr1216al.pdf. 1See, e.g., ‘‘Annunzio-Wylie Anti Money Laundering Act of 1992’’, §§1501–1507, Pub. L. 102- 

550, 106 Stat. 3680 (1992). 2 12 U.S.C. 1818(e) and (g). 

the problem. Problems that cannot be corrected immediately will be 

formally reported to the institution in the examination report or in 

a supervisory letter as matters requiring management’s attention 

and corrective action. These matters are presented to the institution’s board of directors, which is charged with ensuring that management addresses and corrects them. Federal Reserve supervision 

staff will subsequently follow management’s actions to ensure that 

the problem is corrected. If a problem requires a more detailed resolution or is more pervasive at an institution, the Federal Reserve 

may enter into a memorandum of understanding with the financial 

institution in which the board of directors commits to specific actions to correct the potentially unsafe and unsound banking practice or possible violations of laws or regulations. More serious deficiencies may result in a public enforcement against the institution 

such as a written agreement, a cease and desist order, and civil 

money penalties. 

Congress has placed significant restrictions on a bank’s ability to 

change charters when subject to an enforcement action regarding 

a significant supervisory matter. Section 612 of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act generally prohibits charter conversions by an insured depository institution 

while the institution is subject to formal enforcement order issued 

by, or a memorandum of understanding entered into with, its current Federal banking agency, or a State bank supervisor with respect to a significant supervisory matter. The Federal Reserve and 

the Federal banking agencies have issued guidance to the institutions we supervise advising them of these restrictions. 3

Where a depository institution attempts to evade a formal enforcement action by converting charters in advance of the action, 

under section 612, the current Federal banking agency will notify 

the prospective Federal banking agency supervisor of any ongoing 

supervisory or investigative proceedings that the current Federal 

banking agency believes are likely to result in a formal action in 

the near term with respect to a significant supervisory matter. 

Under these circumstances, the current Federal banking agency 

will provide the prospective Federal banking agency supervisor 

with access to all investigative and supervisory information relating to the proceedings. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN 

FROM JEROME H. POWELL 

Q.1. The United States Government takes money laundering very 

seriously. A bank that launders drug money or terrorists’ money 

can be shut down, 1 and individuals in the bank can be banned 

from banking. 2 In December, HSBC admitted to laundering at 

least $881 million for Colombian and Mexican drug cartels, and 

violating U.S. sanctions against Iran, Cuba, Libya, Sudan, and 

172 

3Dept. of Justice, Press Release, Dec. 11, 2012, available at: http://www.justice.gov/opa/pr/ 

2012/December/12-crm-1478.html. 4Senate Permanent Subcommittee on Investigations, ‘‘U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History’’, July 16, 2012, available at: 

http://www.levin.senate.gov/download/?id=90fe8998-dfc4-4a8c-90ed-704bcce990d4. 

Burma. 3 These were not one-time actions. The bank was warned 

over and over and told to fix the problem, and it didn’t. It just kept 

making money by laundering money for drug dealers. 4

In the hearing, you noted that the threshold determination for 

revoking a bank’s charter is dependent on prosecution and conviction, and you testified that the Justice Department makes determinations about when it is appropriate to prosecute. However, 

there are other tools available to hold accountable banks and bankers who engage in illegal activity, such as banning individuals from 

the banking industry. Could you please describe: 

Whether your agency has any regulation, guidance, policies, formal or informal, that guide when individuals should be banned 

from banking under 12 U.S.C. §§1818(e) and (g). If so, please provide those documents. 

A.1. Please see response for Question 3. 

Q.2. Under what circumstances your agency has used 12 U.S.C. 

§§1818(e) and (g) in the past, including any actions taken against 

bankers in the largest financial institutions. 

A.2. Please see response for Question 3. 

Q.3. The process your agency does or would follow to use its authority under 12 U.S.C. §§1818(e) and (g). 

A.3. The Federal Reserve and other Federal banking agencies 

make decisions on whether to initiate actions to ban individuals 

from banking based on application of the statutory criteria to the 

facts of the particular case. To prohibit an individual from participating in the banking industry under 12 U.S.C. §1818(e), the Federal Reserve must show that the individual engaged in an unsafe 

or unsound practice, breach of fiduciary duty or violation of law 

that resulted in losses or other harm to the institution or gains to 

the individual, and that involved personal dishonesty, or willful or 

continuing disregard for safety and soundness. 12 U.S.C. 

§1818(e)(1). Congress has also provided the Federal banking agencies with authority to prohibit insiders in cases involving violations 

of the Bank Secrecy Act (BSA) if such violation ‘‘was not inadvertent or unintentional,’’ or is aware that an institution-affiliated 

party has engaged in a criminal violation of the BSA or the antimoney laundering laws. 12 U.S.C. §1818(e)(2). The Federal banking 

agencies may also suspend an institution-affiliated party who is 

charged with a felony involving dishonesty or a breach of trust or 

with a criminal violation of anti-money laundering laws, pending 

final resolution of the criminal charges. 12 U.S.C. §1818(g)(1). In 

these cases, we may also determine that the assessment of civil 

money penalties is appropriate against the individual. 

Because application of the statutory factors for a prohibition 

order is highly dependent on the individual factual record relating 

to a particular banker’s conduct, we have not issued any general 

guidance or policies related to the exercise of this authority. 

173 

An individual convicted of a criminal offense involving dishonesty 

or a breach of trust also is subject to the prohibitions set forth in 

section 19 of the Federal Deposit Insurance Act (FDI Act). 12 

U.S.C. §1829. Section 19 prohibits a convicted person from directly 

or indirectly owning, controlling, or participating in the affairs of 

any insured depository institution, or a bank or savings and loan 

holding company in the United States without the consent of the 

Federal Depository Insurance Corporation (FDIC), in the case of an 

insured depository institution, or the Board in the case of a holding 

company. 12 U.S.C. §1829(a)(1). The regulators may not consent to 

such service or control by a person who has been convicted of certain types of crimes, such as a conviction for money-laundering, for 

10 years from the date of the conviction. 12 U.S.C. §1829(a)(2). 

In the past 5 years, the Federal Reserve has issued 44 prohibition orders, including several orders that included an assessment 

of a civil money penalty, and notified more than 200 individuals of 

their ban from banking under section 19. These actions involve individuals employed by several large financial institutions, including 

UBS, Bank of New York Mellon, American Express, CitiFinancial, 

Wells Fargo, SunTrust, and Regions. These prohibitions involved, 

among other things, instances of unauthorized trading activity, falsification of records, and other unsafe bank practices and violations 

of law. 

The Federal Reserve and the Federal banking agencies have 

issued rules of practice and procedures that govern prohibition and 

removal actions. 12 CFR §263 et seq. A copy of these regulations 

is attached. The Federal Reserve makes public all of its prohibition 

orders and posts them on its Web site at: www.federalreserve.gov/ 

apps/enforcementactions/search.aspx. 

Q.4. Attorney General Holder testified before the Judiciary Committee that he is ‘‘concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when, . . . if you do bring a criminal charge, it will 

have a negative impact on the national economy, perhaps even the 

world economy.’’ 

Can you explain how your efforts to ensure compliance with 

money laundering laws are affected when so many people—even 

the Attorney General of the United States—think it is ‘‘difficult to 

prosecute’’ the biggest banks? 

A.4. Please see response for Question 5. 

Q.5. Are you worried that the size and interconnectedness of our 

Nation’s largest financial institutions negatively affects your ability 

to enforce the law and reduces your leverage? 

A.5. The Federal Reserve firmly believes that no institution is 

above the law or too large to be prosecuted for failure to comply 

with the law. Indeed, the Federal Reserve, which has authority to 

impose only civil penalties and orders, has on its own and in coordination with other law enforcement agencies, imposed a number 

of substantial fines and penalties against the largest, most complex 

financial firms using the enforcement authorities granted by Congress to the Federal banking agencies. In addition to fines, the Federal Reserve’s enforcement actions required firms to implement the 

necessary firm-wide compliance risk management programs. 

174 

Q.6. At the hearing, Under Secretary Cohen and Governor Powell 

both testified that the Justice Department was in contact with 

their institutions regarding the HSBC case. Without reference to 

any particular case, can you describe the general or usual process 

for cooperation between your institution and the Justice Department regarding money laundering and Bank Secrecy Act issues? In 

particular: 

Which office or offices in the Justice Department contact your institution? 

A.6. Please see response for Question 10. 

Q.7. Which office or offices in your institution are contacted? 

A.7. Please see response for Question 10. 

Q.8. At what points in the enforcement process is your institution 

contacted? 

A.8. Please see response for Question 10. 

Q.9. What information is usually requested? 

A.9. Please see response for Question 10. 

Q.10. Are there are any formal or informal guidelines that are used 

for interagency cooperation on Bank Secrecy Act or Anti-Money 

Laundering issues? 

A.10. The Federal Reserve maintains close contact with multiple 

offices of the Department of Justice (DOJ). In cases involving potential money-laundering or BSA violations, the Board’s Legal Division is typically in contact with the Asset Forfeiture and MoneyLaundering Section (AFMLS) of the Criminal Division of the DOJ. 

The Board and the Reserve Banks also maintain contact with the 

local United States Attorney. For example, in the HSBC case the 

Board and the Reserve Bank legal departments maintained contact 

with the local United States Attorney’s office, the District Attorney 

for New York County, and AFMLS. The Federal Reserve contacts 

the DOJ whenever we have reason to believe a criminal violation 

of the BSA has occurred. The Board also contacts Office of Foreign 

Assets Control (OFAC) and Financial Crimes Enforcement Network 

(FinCEN) as appropriate, as well as State prosecutors. The Federal 

Reserve provides support to criminal authorities investigating potential violations of the BSA, related anti-money laundering laws, 

and U.S. economic sanctions consistent with applicable legal restrictions. The kind of cooperation provided depends on the circumstances of the particular case. Typically, such assistance involves sharing supervisory information and expertise with staff 

from the criminal division of the DOJ and the local United States 

Attorney’s office. The Federal Reserve makes its own decision 

whether to bring a civil enforcement case; the decision to file criminal charges in a particular case is fully within the discretion of the 

DOJ or other Federal agency with the authority to press criminal 

charges. 

The rules or procedures that govern our interagency cooperation 

efforts depend on the type of assistance requested by law enforcement. For example, requests made by law enforcement for supervisory information and other assistance are subject to the rules and 

procedures regarding the availability of supervisory information. 12 

175 

5S.R. 08-8, ‘‘Compliance Risk Management Programs and Oversight at Large Banking Organizations With Complex Compliance Profiles’’ (October 18, 2008). Available at: 

www.federalreserve.gov/boarddocs/srletters/2008/SR0808.htm. 6 ‘‘Transparency and Compliance for U.S. Banking Organizations Conducting Cross-Border 

Funds Transfers’’ (November 19, 2009). Available at: www.federalreserve.gov/boarddocs/ 

srletters/2009/sr0909al.pdf. 

CFR §261.21. Conversely, the circumstances may require Federal 

Reserve staff to obtain access to Grand Jury information in order 

to lend our expertise on matters under consideration by the Grand 

Jury. Congress has prescribed a legal mechanism to facilitate the 

sharing of such information in these instances. 12 U.S.C. §3322(b). 

Q.11. The Federal Reserve has conducted a great deal of research 

around various topics in money laundering, including around compliance issues. As you know, the Federal Reserve has a unique 

ability to take a broader, deeper look at the industry and its practices, rather than focusing on a particular case. 

Has the Federal Reserve conducted any studies, similar to its 

private banking study, recently? If so, can you provide these studies? 

A.11. Please see response for Question 13. 

Q.12. Are there plans to conduct similar studies in the future? 

A.12. Please see response for Question 13. 

Q.13. Has the Federal Reserve conducted any studies of problems 

revealed during examinations on BSA issues? If so, can you provide 

these studies? 

A.13. Since the Federal Reserve’s efforts to highlight the illicit financing risks associated with private banking activities in 1996, 

we have continued to addresses perceived anti-money laundering 

vulnerabilities in the banking industry by developing supervisory 

guidance and making improvements to our examination procedures. For example, in 2008, the Federal Reserve issued supervisory guidance regarding firm-wide compliance expectations for 

large, complex banking organizations. 5 A firm-wide compliance 

function that plays a key role in managing and overseeing compliance risk while promoting a strong culture of compliance across the 

organization is particularly important for large, complex organizations that have a number of separate business lines and legal entities that must comply with a wide range of applicable rules and 

standards. In 2009, based on transparency concerns raised by the 

Board and others, the Society for Worldwide Interbank Financial 

Telecommunication (SWIFT) adopted a new message format for 

cover payments (the MT 202 COV) that provides intermediary 

banks with additional originator and beneficiary information, enabling them to perform sanctions screening and suspicious activity 

monitoring. In furtherance of these efforts, the Board issued guidance on the necessity for transparency and proper monitoring with 

respect to cross-border funds transfers. 6

The Federal Reserve’s expectations in the area of firm-wide compliance have been incorporated into the procedures utilized by the 

member agencies of the Federal Financial Institutions Examination 

Council (FFIEC) for conducting compliance examinations under the 

BSA and anti-money laundering (BSA/AML) rules and regulations. 

The Federal Reserve has not conducted any special studies; howVerDate Nov 24 2008 14:41 Aug 30, 2013 Jkt 048080 PO 00000 Frm 00179 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-07 PATTERNS OF ABUSE -- ASSESSING BANK SECRECY ACT CO
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ever, we have recently begun working with the FFIEC member 

agencies to identify additional areas of concern that require heightened attention by the banking organizations we supervise, based on 

our examination experience, and will incorporate the results of this 

effort as part of our continuing effort to update our examination 

procedures. 

Currently, as a member of the U.S. Department of the Treasury’s 

Interagency Task Force on Strengthening and Clarifying the BSA/ 

AML Framework (Task Force), the Federal Reserve is engaged in 

a review of the BSA, its implementation, and its enforcement with 

respect to U.S. financial institutions that are subject to these requirements. The Task Force will develop recommendations for ensuring the continued effectiveness of the BSA and efficiency in 

agency efforts to monitor compliance. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR HEITKAMP 

FROM JEROME H. POWELL 

Q.1. As all of you mentioned, the sophistication and determination 

of money launderers, terrorist financiers, and other criminals has 

evolved and changed as they find ways to gain access to our institutions. How can we support smaller institutions that cannot afford 

to put the same programs in place as the large banks? In your examinations, have you noticed vulnerabilities on a large scale? 

A.1. Financial institutions are expected to maintain a Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program 

scaled to the specific risk profile of the institution. An institution’s 

risk profile involves factors such as the size of the banking organization, the products and services it offers, and the markets it 

serves. Consequently, the risk profile for a smaller community 

banking organization will be different than that of a large, complex 

banking organization with international operations, and the examination process will be tailored in accordance with that profile. The 

Federal Reserve understands that some community banks may not 

share the same level of risk and resources as their larger peers. 

When determining the depth of a BSA/AML review, our examiners 

consider the institution’s risk profile, history of BSA/AML compliance, and emerging risks in the markets it serves. 

While the majority of the institutions supervised by the Federal 

Reserve have well-administered programs for complying with the 

BSA, there have been occasions when examiners have raised concerns with the programs maintained at smaller institutions. For example, in 2012, the Federal Reserve issued a Cease and Desist 

Order against Asian Bank, Philadelphia, Pennsylvania, for BSA 

compliance deficiencies and required the bank’s management maintain effective control over, and supervision of the bank’s BSA/AML 

compliance program. The Federal Reserve and the member agencies of the Federal Financial Institutions Examination Council 

(FFIEC) have developed a uniform manual for examining the programs used by banking organizations to maintain compliance with 

the BSA/AML rules and regulations. Examinations are based on 

the broad principle that an effective BSA/AML compliance program 

requires sound risk management. This FFIEC BSA/AML examination manual also provides guidance that smaller institutions can 

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use to identify and control these risks. The manual undergoes periodic revisions to ensure it is relevant and responds appropriately 

to risks identified by examiners or law enforcement, and that those 

procedures apply to those specific institutions that carry those 

risks.