Could anyone direct me to a source that states
what the penalty for Reg D violations are. Such
as letting customers exceed withdrawal limits on
savings accounts?

Thanks for any help.

Your biggest "penalty" would be if you are found to be treating savings (including MMAs) accounts as transaction accounts but not reserving for them accordingly. In this case, the examiners may make you reclassify all of your savings accounts as transaction accounts and re-reserve for them going back several years. This can add up to a lot of money. It's much more efficient to comply with the transaction limitations.

The file searches and revised call reports can cost as much or more than the reserves, from what I have been told.

Deena is right: here is section 204.7, Reg D's penalty section.

The big kicker here is that if you do not have effective controls to enforce the savings account transaction restrictions, the Fed can reclassify all your MMDA or savings accounts as transaction accounts, not just one account.