Am I In Trouble?

"Am I In Trouble?"

BANKERS' HOTLINE recently heard a disturbing sequence of events from a banking officer manager.

Seems there was a customer of the bank in this midwest town that "everyone knew" was dealing in drugs. The manager was aware of the fact that the individual had an account in her office. She also knew that this person was making large cash deposits several times a week . Not enough to file on, but enough to be noticed.

The written policy of the financial institution instructed the banking officers to report suspicious transactions in the form of a memo to the Bank Secrecy Act compliance officer.

When we got the call, the manager had done as instructed. Shortly after the memo was sent, the manager was required to attend a meeting of all managers where they were informed that no more memos were to be written regarding suspicious transactions. All such incidents were to be reported to the compliance officer by telephone, and the compliance officer and administration would decide whether or not to file with the proper authorities and agencies and telephone the manager with instructions as to what to do. All these directives were oral. Nothing is in writing. The written instructions regarding the filing of memos are still in the procedure book.

The customer was still making frequent cash deposits at the banking office. The phone calls were being made. The decision was always not to file a Currency Transaction Report, not to call IRS, and not to file a Criminal Referral Form. The transactions were not considered by the compliance officer to be "suspicious."

The customer was just arrested and is now under indictment for money laundering and drug dealing. The banking manager who called me wanted to know, "What is my position? Am I in trouble?"

From what we know of the case, if the banking manager can document, by witnesses or any other way, that the telephone calls were actually made, she is not in nearly as much trouble as the compliance officer and the banking institution.

If the examiners discover a violation of the Bank Secrecy Act, they report it to the Department of the Treasury and/or the Department of Justice who will do the investigations and make the decisions regarding prosecution. In the above case, because an arrest and charges have been made, it is more likely that one of these two agencies will be in touch with the financial institution directly. At the very least, the bank is in danger of some major fines. In light of existing legislation mandating the removal of the institution's charter for some cases of BSA violation (prosecutors call this the "death penalty"), the financial institution and the compliance officer are in a great deal more trouble than the bank officer. Her concern is to document what she has done, and has reported to her superiors. The lesson to be learned here cannot be over-stated-

Document, document, document!

Copyright © 1992 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 12, 3/92