financial crimes enforcement network ( fincen ) for consideration of an enforcement action based solely on bsa violations, rather than a program failure or issues relating to safety and soundness. treasury has delegated to the federal financial banking agencies the authority to examine for bsa compliance those institutions they normally examine for safety and soundness ; however, treasury has not delegated the authority to take an enforcement action, such as the assessment of a fine, for violations of the bank secrecy act. federal reserve staff coordinates enforcement actions with other regulators or agencies, including in the area of anti - money laundering. if a banking organization ’ s problems involve entities supervised by different regulators, resolution of enterprise - wide problems may involve multiple enforcement actions. for example, the office of the comptroller of the currency ( occ ), fincen, and the federal reserve coordinated their recent enforcement actions against riggs national corporation ; riggs bank, n. a. ; and riggs international banking corporation, the bank ’ s edge act subsidiary, to ensure consistency and concurrent resolution of open issues. the federal reserve coordinates enforcement actions with state banking supervisors on a regular basis, and enforcement actions involving operations of foreign banking organizations may be resolved in cooperation with supervisors abroad. in several recent matters, there was close coordination with the u. s. department of justice as well. the applications process before i describe some more aspects of the federal reserve ’ s supervisory process, let me touch on a very important component of the federal reserve ’ s anti - money laundering process - the processing of applications and notices filed with the board. the federal reserve has had a longstanding practice of considering an applicant ’ s compliance with anti - money laundering laws in evaluating various applications, including bank mergers and acquisitions of insured depositories by bank holding companies as well as applications filed by foreign banks to establish u. s. banking offices under the foreign bank supervisory enhancement act. the usa patriot act included a provision memorializing our practice in the application area and required the board to take into account the effectiveness of an applicant ’ s bsa compliance program when it considers applications under various laws. under our longstanding protocols as well as the new law, every application matter considered by the federal reserve includes a bsa / aml compliance - related component whereby staff has to make specific judgments regarding an applicant ’ s compliance with the law in this important area. while i cannot, of course, comment on specific cases, i can report to you that board staff has on some recent occasions

susan schmidt bies : bank secrecy act enforcement testimony by ms susan schmidt bies, member of the board of governors of the us federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 3 june 2004. * * * mr. chairman, thank you for the opportunity to appear before the senate committee on banking, housing, and urban affairs to discuss the federal reserve ’ s participation in efforts to combat money laundering and terrorist financing. the federal reserve and the other federal financial institutions supervisory agencies play a critical role in these efforts, and the federal reserve is actively engaged in a number of initiatives to refine and strengthen examination protocols in this area and to effectively deploy resources to prevent, identify, and address problems at the banking organizations supervised by the federal reserve. in my remarks today, i will describe for you some of the important steps we are taking to fulfill our supervisory mission, to guide the institutions we supervise, and, in cooperation with the other banking and financial services regulators and the treasury department, to make every effort to use our supervisory tools to enhance the banking industry ’ s role in preventing and detecting money laundering and terrorist financing. the federal reserve ’ s anti - money laundering program is multifaceted. it involves work in bank supervision, applications, enforcement, investigations, training, coordination with the law enforcement and intelligence communities, and rule writing. this morning, i will touch on some of these aspects of the federal reserve ’ s anti - money laundering program, but will concentrate on bank supervision efforts and enforcement matters. i would like to begin with a few words about the federal reserve ’ s supervisory philosophy in this area. the federal reserve has long shared congress ’ s view that financial institutions and their employees are on the frontline of the effort to combat illicit financial activity. the federal reserve believes that the banking organizations it supervises must take every reasonable step to identify, minimize, and manage any risks that illicit financial activity may pose to individual financial institutions and the banking industry. accordingly, the federal reserve has required the financial institutions it supervises to put in place appropriate controls and risk management mechanisms, and has also devoted extensive resources to issuing guidance on legislative and regulatory requirements and sound banking practices, as well as to coordinating supervisory efforts with other agencies. in addition, the federal reserve uses its enforcement authority, where necessary, in the event that serious problems or risks cannot be satisfactorily addressed in the supervisory process. supervisory strategy and procedures for anti - money