Comptroller Lambasted on Boston Violations: Senator Charges Agency with 'Gross Negligence' in Its 1982 Examination of Bank
Garsson, Robert, American Banker
WASHINGTON -- The Comptroller of the Currency was harshly criticized Tuesday by members of a Senate subcommittee investigating money laundering in the United States. One Senator accused the regulator of "gross negligence" for failing to spot currency reporting violations at the First National Bank of Boston.
"I got to tell you, from the statements we've heard, the office of the Comptroller doesn't work too well," said Sen. Warren B. Rudman, R-N.H., vice chairman of the Senate permanent subcommittee on investigations, which opened hearings on the laundering of illegally obtained money through banking and other financial institutions.
C.T. Conover, Comptroller of the Currency, said the agent from his office who conducted the examination of First National in 1982 was unaware of the requirement that foreign interbank currency transactions must be reported to the Internal Revenue Service.
"I can't justify that," Mr. Conover said. He added that his office is instituting new training procedures to make sure examiners know about the reporting requirement necessary under the Bank Secrecy Act.
"This is an absolutely basic requirement," Sen. Rudman responded. "Your examiners go into the Bank of Boston and they don't even know that $1 billion has to be reported. You say that's training. I say it's gross negligence."
Later in the day, Thomas rollo, an examiner for the Comptroller of the Currency, reversed himself and told the subcommittee he now believes he knew of the reporting requirements at the time of the examination. Mr. Rollo said he bases that position on a review of memoranda from the examination.
Sen. Rudman also charged that Comptroller employees had failed to cooperate with authorities investigating reporting violations at the bank.
"Any fair inference from the testimony today is that your office did nothing to cooperate with the U.S. Attorney and in fact gave misleading information," Sen. Rudman added.
When the Treasury Department advised the Comptroller of the possiblity of currency reporting violations in 1982, examiners reviewed the bank's reporting procedures and concluded that there was no problem.
Although the subcommittee heard from representatives of both the Bank of Boston and the Comptroller and was critical of both, members saved their strongest words for the Comptroller.
"We don't oversee Bank of Boston's management," Sen. Rudman told Mr. Conover, "but we do oversee the government."
Sen. Alfonse D'Amato, R-N.Y., told the subcommittee he was not at all surprised by disclosures that the Bank of Boston had exempted form currency reporting requirements two firms controlled by a reputed organized crime family.
"this is probably very, very wide-spread," he said. "And i'll tell you how it happens. It happens because branch managers are under intense pressure to show profits. So they are anxious to retain those deposits."
It is not so much a question of employees being paid off, he said, as a question of employees anxious for promotion being willing to accept deposits that they should have reported to law enforcement authorities.
The hearings were sparked by First National Bank of Boston's guilty plea to charges of failing to report $1.2 billion in international bank-to-bank currency transactions.
Following First National's guilty plea, it was disclosed that federal law enforcement authorities were investigating exemptions the bank granted to firms controlled by the Angiulo family, whom authorities regard as Boston's leading crime organization.
Bank of Boston officers were subjected to polite but pointed questions and some harsh critcism for their failure to comply with the reporting requirements under the Bank Secrecy Act. …