FROM THE OFFICE OF PUBLIC AFFAIRS

July 15, 2004
js-1788

Statement of Deputy Secretary Samuel A. Bodman Before the Bank Secrecy Act Advisory Group Subcommittee on Examinations

Good morning. We are pleased you could join us today to discuss this critically important topic: the need for aggressive and comprehensive administration of the Bank Secrecy Act (BSA). As representatives of both the regulatory community and private sector financial institutions, you and your colleagues on the BSAAG can collectively provide valuable insight to the Treasury as we seek to meet our statutory obligations and responsibilities as administrators of this Act.

I can assure you that this is an issue of utmost importance to Secretary Snow, to me, and to the senior leadership team of this Department. We view this, as I'm sure you do as well, as a matter of national security. And so we must achieve a high degree of certainty that the system is working.

That requires a strengthening of our current partnership with the regulatory agencies that have been delegated responsibility for examining institutions for BSA compliance. Treasury, through FinCEN, is the administrator of the Act. But we are not now in – nor do we have any intention of getting into – the business of examining financial institutions for compliance. Instead, we appropriately rely on the expertise and resources within the regulatory agencies. We do not want that to change. But we will be implementing other changes with regard to collecting data and assessing compliance.

The Treasury Department is taking steps to help achieve consistency in BSA administration across industries, while also ensuring application of the Act in the least burdensome manner possible for industry. These measures will comprise the following core elements:

•  Collection of Information from Regulators. FinCEN will collect information from the agencies responsible for examining BSA compliance. These data will include:

o Information on the agencies' BSA examination procedures, cycles, and resources.

o Instances of significant BSA violations or deficiencies, along with examination reports and supporting materials.

o Other aggregate examination data, including: the number of BSA examinations conducted, violations cited, actions taken – whether formal or informal, and the resolution of those actions; this information will be collected periodically.

• FinCEN realignment. FinCEN is realigning its resources to better position itself to oversee and properly administer the Act. Specifically, FinCEN is creating an "Office of Compliance" within its Regulatory Division charged with supporting the examination functions performed by the agencies. This office will collect, analyze and report on the information received from the regulating agencies, provide feedback and communicate with those agencies on relevant issues.

The data collected will bolster FinCEN's ability to assess the overall quality and effectiveness of system-wide compliance with the Bank Secrecy Act and permit FinCEN to report, on a quarterly basis, to the Secretary and Deputy Secretary of the Treasury on the health of Bank Secrecy Act compliance. FinCEN will utilize the data to help identify compliance issues across agency lines on a national basis. The information will also help FinCEN to ensure examination consistency, to assist with the development of examination best practices, and to coordinate follow-up enforcement actions, as appropriate. FinCEN will also be responsible for reporting to the regulators on their performance and coordinating the critical information give-and-take within the sector.

The Treasury Department is acutely aware of the need for independence and autonomy by the regulators to effectively and productively perform. Neither Treasury nor FinCEN will breach that independence. However, if Treasury and FinCEN are to be effective and responsible administrators of this Act, we must have a better understanding of how the regulators are supervising the financial institutions for which they are responsible. Greater coordination and collaboration between regulators and Treasury will lead to enhanced and more consistent administration of this critical law. These initiatives will help us achieve that goal.

Yesterday, I discussed these measures with four of the banking agencies, and over the next several weeks I will be having similar conversations with our other regulatory partners.

Your work, coupled with the measures I just outlined, will better enable us to protect our financial system and the American people. Thank you for coming today. Both Secretary Snow and I greatly appreciate your support and continued input.

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