WASHINGTON Comptroller of the Currency John D. Hawke, Jr.
told a Senate panel today that he has ordered the OCCs Quality Management
Division to conduct a top-to-bottom review of the agencys handling of Bank Secrecy
Act (BSA) compliance at Riggs Bank N.A. and to report back to him in 90 days.
It is clear to me that there was a failure of supervision,
the Comptroller said in testimony before the Senate Banking Committee. We
should have been more aggressive in our insistence on remedial steps at a much
earlier time. The types of strong
formal enforcement action that we ultimately took should have been taken
sooner. We should have done more
extensive probing and transaction testing of accounts.
In addition, Mr. Hawke said, We failed to appreciate the risks inherent in Riggs embassy
banking business and in certain of the accounts handled by the bank, as well as
the significance of the deficiencies in the banks systems and controls in
relation to those risks.
The Comptroller told the
Senate panel that for the past 30 years, the OCC has placed great importance on
developing policies and procedures designed to ensure that financial
institutions have the necessary controls in place and provide the requisite
notices to law enforcement to make certain that they do not become vehicles
for money laundering
Our examiners are
dedicated, our BSA/anti-money laundering examination techniques are highly
regarded, we have strived to keep our exam techniques current and responsive to
new developments, and we work cooperatively and successfully with law
enforcement, he said.
In light of the OCCs strong commitment, Mr. Hawke said he
found the situation involving Riggs, N.A. deeply troubling, and said the
Senate panels keen interest in Riggs is entirely appropriate.
Mr. Hawke said that OCC examiners had identified problems in
Riggs BSA program as early as 1997. When these deficiencies were brought to
the attention of the bank, management appeared to be cooperative and
responsive. As a result, the agency
graded the banks compliance program as either satisfactory or generally
adequate.
Following the September 11, 2001 attacks, the OCC conducted
a series of anti-terrorist financing reviews at large and high-risk banks,
including Riggs. A subsequent Riggs exam ran from January to May 2003 and
involved extensive cooperation with law enforcement agencies. It focused on
certain suspicious transactions involving the Saudi embassy relationship, and
culminated in a July 2003 Cease and Desist order, directing Riggs to undertake
a long list of corrective measures.
When OCC examiners returned to the Bank in October 2003, the
same pattern surfaced. While progress had been made toward complying with the
July order, a new set of problems had become evident, this time relating to the
banks relationship with Equatorial Guinea.
Our reaction this time was fundamentally different than
before, and ultimately led to the assessment of a record $25 million civil
money penalty against the bank, Mr. Hawke said. We also continue to evaluate
whether additional actions are warranted.
The Comptroller said the agencys review will seek answers
to at least three important questions:
- Why
was there a failure of supervision in the Riggs case?
- Are
there similar shortcomings in OCC supervision of other banks?
- What
can be done to assure there will be no other situations like that at
Riggs?
Meanwhile, he said, he has instructed the agencys senior
supervision managers to communicate with all OCC examination staff to raise
their level of alert for suspicious or high-risk accounts and to reemphasize
the need for deeper investigation and transaction testing where such
circumstances exist.
The Riggs episode reminds us that Bank Secrecy Act and
money laundering issues are not only of extreme importance to national
security, Mr. Hawke said. They also have huge reputation implications for the
banking industry.
Mr. Hawke said that this heightened awareness, coupled with
the many technical and other improvements in the approach to Bank Secrecy Act
and Anti-Money Laundering supervision programs already adopted or contemplated
by the OCC and its sister financial regulatory agencies, should strengthen the
ability of our financial system to resist those who would use it for hostile
purposes.
The Comptroller said the OCC stands ready to work with
Congress, law enforcement, the other financial regulatory agencies, and the
banking industry to continue to develop and implement a coordinated and comprehensive
response to the threat posed to the nations financial system by money
launderers and terrorists. Mr. Hawke
said he would share the results of the internal review of Riggs with the Senate
panel.
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