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What Is the Official Published BSA
Enforcement Policy of the OCC?
BY STEPHENS B. WOODROUGH

In an article published in the BLJ in January 2002, the author posited the novel and iconoclastic conclusion that the Office of the Comptroller of the Currency (AOCC@) does not have the statutory power to assess a civil money penalty for violations of the Bank Secrecy Act (ABSA@) or its implementing regulations, but that Congress reserved the power to impose the civil money penalty sanction for BSA violations for the exclusive use of the Treasury Department and any designee.  In this article, the author updates his analysis of that conclusion and examines a series of events that have occurred over the past three and a half years since the first article was published.  During that period, the OCC has published no less than five public pronouncements focused specifically on the agency's enforcement policy and practice regarding compliance with BSA, as amended and supplemented by the anti money laundering provisions of USA Patriot Act.  The author concludes that there is nothing in the public record promulgated by the OCC that contravenes or conflicts with the original conclusion, and that, if anything, all of the public pronouncements made by the OCC since January 2002 actually corroborate and support the original conclusion.

This discussion is focused on the very narrow but important topic of identifying the official published enforcement policy and de facto practice of the Office of the Comptroller of the Currency (AOCC@) regarding violations of the Bank Secrecy Act (ABSA@),[1] 31 U.S.C. '' 5311-5330, and the implementing regulations promulgated by the OCC at 12 C.F.R. ' 21.21.[2] In the wake of the tragedy of 9/11 and the ensuing enactment of the USA Patriot Act (AUSAPA@),[3] there is universal agreement that federal enforcement of the reporting requirements and prohibitions of BSA, as supplemented by the anti money laundering (AAML@) measures in USAPA, has resulted in a much higher level of compliance scrutiny and enforcement priority by the OCC and the other federal banking agencies.[4] It is therefore both wise and necessary that all federally insured depository institutions subject to supervision by the OCC have a precise understanding of both the scope and nature of the policy and practice the agency will follow to enforce violations of BSA, as supplemented by USAPA.[5]

In an article published in The Banking Law Journal in January 2002,[6] the author concluded that the OCC and its sister banking agencies do not have jurisdictional authority to enforce violations of BSA and/or any of its implementing regulations, including those promulgated by the Treasury Department as well as those promulgated by the federal bank regulatory agencies by instituting a civil money penalty action pursuant to section 8(i)(2)(A)(i) of the Federal Deposit Insurance Act (AFDIA@), 12 U.S.C. ' 1818(i)(2)(A)(i), for such violations.  Instead, the article concluded that the discretionary authority of the banking agencies to impose a regulatory sanction for BSA violations[7] is restricted to the exercise of the agencies= cease and desist powers, as mandated by 12 U.S.C. ' 1818(s)(3).[8] Strong supporting arguments documenting the legal basis of that conclusion were advanced on several fronts, including a detailed analysis of banking legislation enacted by Congress in 1989 and 1994 and the application of firmly established judicial rules of statutory construction.

This discourse briefly summarizes and updates those arguments, and is followed by a review of a series of five recorded events that occurred after publication of the referenced article where the OCC made detailed public pronouncements regarding the nature and scope of the agency's official enforcement policy and de facto practice regarding its authority to impose formal regulatory sanctions under section 8 of FDIA, 12 U.S.C. ' 1818, for violations of BSA.

1.  Banking Legislation Enacted in 1989

Section 907 of the Financial Institutions Reform, Recovery and Enforcement Act of 1989

(AFIRREA@) amended section 8(i) of FDIA, 12 U.S.C. ' 1818(i), by vesting all of the federal banking agencies with the power to assess a civil money penalty for a “violation of any law or regulation.”[9] Notwithstanding the seeming all-inclusiveness of that terminology, the legislative record of FIRREA shows very clearly that Congress did not intend the newly expanded civil money penalty authority of the federal banking agencies to supersede or otherwise overlap with any prior Congressional enactment that vested another federal government agency with the power to impose a civil money penalty for violations of a specifically designated law.  Indeed, the Congressional analysis of section 907 of FIRREA itself includes a precise illustration of such intent, as applied to the previously enacted BSA and the enforcement authority of the Treasury Department (or its designee, FinCEN, [10] acting under a delegation of authority from the Secretary of the Treasury) delineated therein to impose civil money penalties for violations of BSA:

It is anticipated generally that use of this authority by a federal banking agency [to impose a civil money penalty for a Aviolation of any law or regulation@] would not be appropriate if there was a civil penalty authority under a more specific penalty statute such as 31 U.S.C. 5321.[11]  [Emphasis added.]

The indisputable purpose of the foregoing statement is to show the legislative intent of enacting the new grant of civil money penalty authority to the federal banking agencies in FIRREA vis-à-vis the previously enacted exclusive grant of civil money penalty authority to the Treasury Department to enforce the requirements and prohibitions of BSA.[12] The cited excerpt conveys that intent with absolute clarity by making an unequivocal declarative statement specifically designed to preserve the then existing status quo regarding the previously vested and exclusive authority of the Treasury Department, or its designee under a delegation of authority from the Secretary of the Treasury, to assess civil money penalties for violations of BSA pursuant to 31 U.S.C. ' 5321.


2.  Banking Legislation Enacted in 1994

Five years after it enacted FIRREA, Congress unquestionably changed its mind and intent regarding the enforcement of BSA.  Following extended hearings concerning a growing money laundering problem in the United States and the ability of Treasury and FinCEN to single-handedly administer and enforce all of the provisions of BSA and its implementing regulations, Congress decided that the overall effectiveness anti money laundering efforts of the federal government would be enhanced by authorizing all of the federal bank regulatory agencies to play a direct role in the enforcement of BSA by vesting those agencies with the power to assess civil money penalties for violations of BSA.  In order to accomplish that result, however, and because Congress had previously vested the Department of the Treasury or its designee with the exclusive power to impose civil money penalties for violations of BSA, Congress had to work through the Secretary of the Treasury.  And that is precisely what happened when Congress enacted Section 406 of Title IV of the Riegle Community Development and Regulatory Improvement Act of 1994,[13] which is codified into law at 31 U.S.C. ' 5321(e).  The new statute provides in applicable part:

The Secretary of the Treasury shall delegate[14] in accordance with section 5318(a)(1) ... any authority of the Secretary to assess a civil money penalty under this section on depository institutions (as defined in section 3 of the Federal Deposit Insurance Act) to the appropriate Federal banking agencies ... [Emphasis added.]

The legislative history of 31 U.S.C. ' 5321(e) also supports and reconfirms the conclusion that prior to its enactment and codification into law in 1994, Congress did not intend to grant to the federal banking agencies the enforcement authority to impose civil money penalties for BSA violations.  In Congressional hearings conducted in the Senate prior to the enactment of the cited statute, the Assistant Secretary of the Treasury for Enforcement testified before the Committee on Treasury Initiatives of the Senate Committee on Banking regarding the specific provisions in the new law that directed the Secretary of the Treasury to delegate to the federal banking agencies the power to assess civil money penalties for violations of BSA:

This section directs the Secretary to delegate the authority to assess BSA civil penalties to the federal banking agencies (OCC, the Federal Reserve, OTS, FDIC, and NCUA).  From the inception of the BSA, Treasury has delegated [only] compliance and examination authority to these agencies.

                                                                          * * *

I am of the view that serious consideration should be given to delegation of this operational function not only to the banking agencies, but to IRS for the non-bank financial institutions and to Customs for CMIR violations.  All of these agencies have penalty authority and experience under other statutes.[15] [Emphasis added.]

The foregoing analysis of recorded expressions of legislative intent regarding the enactment of laws that either amend or impact upon the enforcement authority of the Treasury Department under 31 U.S.C. §5321 to assess civil money penalties for BSA violations supports two conclusions:

     (a)   Between 1982 and 1994, Congress intended to grant the enforcement authority to assess civil money penalties for violations of BSA solely to the Treasury Department (and its designee); beginning in 1987 Congress intended to grant to the federal banking agencies only the limited enforcement authority to issue a cease and desist order for such violations of law.

     (b)   After 1994, Congress intended to grant the enforcement authority to assess civil money penalties for violations of BSA to both the Treasury Department (and its designee), and also the federal bank regulatory agencies, thus enabling FinCEN and OCC to exercise concurrent enforcement authority to impose civil money penalties for BSA violations.  As a means of facilitating that legislative intent, Congress directed the Secretary of the Treasury to delegate to the banking agencies the enforcement authority vested with the Treasury Department to assess civil money penalties for BSA violations provided in 31 U.S.C. ' 5321.

3.  Application of Judicial Rules of Statutory Construction

The legal merit and persuasive strength of the foregoing conclusions are supported and fully corroborated, without qualification, by the application of three firmly established judicial theorems of statutory construction.  In summary form, those rules of construction state:

      (a)  In the absence of a clear legislative intent to the contrary, a statute with “specific” terminology regarding its applicability to a particular set of circumstances will always be given precedence over a statute of “general” application regardless of the sequence of their enactment.[16] There is nothing in the legislative record that indicates Congress intended the enforcement authority to assess a civil money penalty for violations of law pursuant to 12 U.S.C. ' 1818(i)(2)(A)(i) should be accorded a higher priority or preference over the enforcement authority  to impose a cease and desist order for BSA violations pursuant to 12 U.S.C. ' 1818(s)(3).  Ergo, the mandated application of the authority to institute a cease and desist action for violations of a specified law (BSA) provided in 12 U.S.C. ' 1818(s)(3) must take precedence over the general application of the authority to assess a civil money penalty for the generic “any” violation of law or regulation in 12 U.S.C. ' 1818(i)(2)(A)(i).

      (b)  Since all statutes must be construed so that all of their terms are accorded meaning, the provisions of one statute cannot be construed in a manner that effectively renders the provisions of another statute as meaningless surplusage.[17] This rule of construction is predicated upon the underlying principle that an act of Congress should never be construed as a useless, time-wasting, or meaningless exercise.  In the present case, there are three distinct applications of this rule of construction.

      (1)  When Congress enacted the provisions of law codified at 12 U.S.C. ' 1818(s)(3) in 1986, the OCC was already vested with the enforcement authority to institute a cease and desist action for violations of BSA pursuant to 12 U.S.C. § 1818(b).  Ergo, the term “shall” in 12 U.S.C. § 1818(s)(3) must be construed as mandating the exercise of cease and desist authority by the OCC to enforce BSA violations, since a permissive construction of that term would have the effect of rendering the provisions of that statute as nothing more than a meaningless duplication of preexisting enforcement authority of the OCC provided in 12 U.S.C. § 1818(b).

      (2)  As construed under the first rule, above, 12 U.S.C. § 1818(s)(3) imposes a mandated statutory requirement that the OCC enforce BSA violations by instituting a cease and desist order against the offending institution for such violations.  Ergo, the provisions of 12 U.S.C. ' 1818(i)(2)(A)(i) cannot be construed as vesting the OCC with the option of exercising discretionary enforcement authority to impose a civil money penalty for BSA violations, since to do so would have the effect of rendering the mandatory exercise of the cease and desist authority by the OCC for  violations of BSA provided in 12 U.S.C. ' 1818(s)(3) as meaningless surplusage.

      (3)  Congress enacted the provisions of law codified at 31 U.S.C. ' 5321(e) in 1994.  That statute specifically and unequivocally directs the Secretary of the Treasury to delegate to the OCC (and other banking agencies) the authority to enforce violations of BSA by imposing civil money penalties for such violations.  Ergo, the provisions of 12 U.S.C. ' 1818(i)(2)(A)(i), which Congress enacted five years earlier in 1989, cannot be construed as vesting the OCC with the discretionary enforcement authority to impose civil money penalties for BSA violations, since to do so would render the mandated delegation of enforcement authority to the OCC by the Secretary of the Treasury in 31 U.S.C. § 5321(e) as being totally meaningless.

      (c)  The repeal of a statute (or any portion thereof) by necessary implication is not sustainable unless there are irreconcilable differences with another statute.[18] All of the provisions set forth in 12 U.S.C. ' 1818(i)(2)(A)(i) and 12 U.S.C. ' 1818(s)(3) are completely reconcilable. There is no conflict of any kind between the two statutes.  Ergo, the argument that 12 U.S.C. ' 1818(s)(3) enacted into law in 1987 was repealed by necessary implication when 12 U.S.C. ' 1818(i)(2)(A)(i) became effective in 1989 is not sustainable as a matter of law.

In view of the fact that when the referenced BLJ article was published in January 2002, the Secretary of the Treasury had not made any delegation of enforcement authority to the banking agencies, as directed in 31 U.S.C. ' 5321(e), the bottom-line conclusion was inescapable: The OCC and the other federal bank regulatory agencies do not have the enforcement authority to assess civil money penalties for violations of BSA. Congress vested that enforcement power solely with the Treasury Department and its designee, FinCEN.  That authority will remain so vested unless and until the Secretary of the Treasury complies with the mandated delegation of authority to the federal banking agencies in 31 U.S.C. ' 5321(e) or Congress enacts additional enabling legislation.

4.  Events and Developments Regarding BSA after January 2002 thru June 2005

      (a)  OCC Policy and Practice to Assess Civil Money Penalties for Violations of BSA and BSA-related Regulations, as Argued by OCC Attorneys in the D.C. Circuit Court of Appeals

Following the OCC determination to dismiss the civil money penalty action it had instituted against a former officer of a national bank mentioned earlier,[19] the author filed an application on behalf of Mr. Washburn under the Equal Access to Justice Act (AEAJA@)[20] for reimbursement of all attorney's fees and related legal expenses Mr. Washburn had incurred defending that action.[21] Mr. Washburn argued that he was entitled to a fee award under EAJA since he was a “prevailing party” and the OCC was not “substantially justified” to institute that action, as those terms are used in EAJA.  H argued that he was a “prevailing party” as a result  of the OCC dismissal, with prejudice, of all charges upon which the penalty action was instituted, and that the OCC was not “substantially justified” to institute that action because the agency did not have the legal authority or jurisdiction to institute such action for violations of BSA.

            The then Comptroller of the Currency, John D. Hawke, Jr. nevertheless denied Mr. Washburn’s EAJA application.  Even though it was determined that Mr. Washburn was a “prevailing party” within the meaning of EAJA, former Comptroller of the Currency Hawke concluded that the OCC was vested with the enforcement authority to assess a civil money penalty for violations of BSA under the “plain meaning” of 12 U.S.C. ' 1818(i)(2)(A)(i),[22] and that the agency was therefore “substantially justified” to institute the disputed penalty action against Mr. Washburn.  The final decision and order of the Comptroller was subsequently appealed to the U.S. Court of Appeals for the District of Columbia Circuit[23] and to the United States Supreme Court.[24]

The pivotal question in both appeals was whether 12 U.S.C. ' 1818(i)(2)(A)(i) vests the OCC with the enforcement authority to assess a civil money penalty for violations of BSA, or whether 12 U.S.C. ' 1818(s)(3) restricts the OCC’s enforcement authority over violations of BSA by requiring that the agency exercise its authority to institute a cease and desist action for such violations.  The OCC argued vigorously that it has jurisdictional authority to enforce BSA violations under either or both statutes.  In support of its position, the OCC represented that it had an established history of assessing civil money penalties against both banks and individuals for BSA violations, and that such penalty actions had been instituted in accordance with the agency’s authority provided in 12 U.S.C. ' 1818(i)(2)(A)(i).  The OCC also pointed out that virtually all of the referenced penalty orders imposed for BSA violations were issued without objection (i.e., by consent) to the agency's asserted authority under that statute.[25] According to the OCC, when the agency determines that a bank or an individual subject to the agency’s supervisory authority has committed violations of BSA, it has the enforcement authority and follows a policy and practice of institution an enforcement action tailored to the gravity and egregiousness of the violations in question.  The OCC argued that it may determine to institute a cease and desist action pursuant to U.S.C. ' 1818(s)(3); or it may determine that the imposition of a civil money penalty action pursuant to 12 U.S.C. ' 1818(i)(2)(A)(i) is more appropriate ,[26] or it may decide to institute both types of actions where warranted by the underlying circumstances and context in which the BSA violations were committed[27] Unfortunately, both federal appellate courts summarily dismissed Mr. Washburn’s appeal, without analysis or opinion.[28]

Less than a year later, however, the OCC announced and published an enforcement policy and practice regarding compliance with BSA and 12 C.F.R. ' 21.21 that is radically different from that portrayed and argued by agency representatives to the D.C. Circuit Court of Appeals.

      (b)  OCC Policy to Assess Civil Money Penalties for Violations of BSA or BSA-related Regulations Reflected in the Congressional Testimony of Top Agency  Representatives and Other Formal Public Pronouncements of the Agency

On June 3, 2004, then Comptroller of the Currency John D. Hawke, Jr. provided written and oral testimony[29] before the Committee on Banking, Housing and Urban Affairs of the U.S. Senate following the firestorm of criticism and controversy that emanated from the belated discovery of a massive money laundering operation at Riggs Bank, N.A.[30] In addressing the actions taken by the OCC against Riggs Bank, N.A., and the scope of the agency's enforcement authority to assess civil money penalties for violations of BSA, former Comptroller of the Currency Hawke testified:

Recent events surrounding Riggs Bank, N.A. have heightened interest in how the banking agencies, and the OCC in particular, conduct supervision for BSA/AML compliance.  Together with FinCEN, the OCC recently issued a record $25 Million civil money penalty (CMP) against Riggs Bank, N.A.  The OCC also imposed a supplemental cease and desist (C&D) order on the bank, requiring the institution to strengthen its controls and improve its processes in the BSA/AML area.  Along with the C&D order we issued against the bank in July 2003, these and other actions we have taken have greatly reduced the bank's current risk profile.

                                                                          * * *

OCC's Enforcement Authority[31]

The OCC also may use a variety of formal enforcement actions to support its supervisory objectives. ... Formal actions against a bank include C&D orders, formal written agreements and CMPs.[32] C&D orders and formal agreements are generally entered into consensually by the OCC and the bank and require the bank to take certain actions to correct identified [BSA] deficiencies. ...

In the BSA area, the OCC's CMP authority is concurrent with that of FinCEN.[33] In cases involving systemic noncompliance with the BSA, in addition to taking our own actions,[34] the OCC refers the matter to FinCEN.  In the case of Riggs Bank, the OCC and FinCEN worked together on [assessing] the CMP on the bank.[35] [Emphasis added, except where noted.]

Shortly after former Comptroller of the Currency Hawke testified, then Acting OCC Chief Counsel Daniel P. Stipano appeared before the Permanent Subcommittee on Investigations of the Senate Committee of Homeland Security and Governmental Affairs of the U.S. Senate on July 15, 2004.  His oral testimony and written statement are substantially similar to the testimony of former Comptroller Hawke a month earlier.[36] With regard to the OCC enforcement action taken against Riggs Bank, N.A., however, Mr. Stipano's testimony describing that action is slightly different in form (but not substance) from the description of that action by former Comptroller Hawke in his testimony in June 2004 to the Senate Committee on Banking:[37]

Our decision [at the OCC] to impose a Civil Money Penalty on the bank was reached in close consultation with the Financial Crimes Enforcement Network, or FinCEN, which is the administrator of the Bank Secrecy Act, and which has specific authority under the statute [31 U.S.C. ' 5321] to assess [civil money] penalties for BSA violations.  The $25 Million penalty is the largest ever monetary fine for BSA violations.[38] [Emphasis added.]

The written statement submitted by Acting OCC Chief Counsel Stipano describing the agency's policy and practice of exercising the agency’s  enforcement authority to assess civil money penalties for BSA violations employs exactly the same language that appears in the written statement of former Comptroller Hawke.  However, Mr. Stimpano’s testimony goes a step further by adding a considerable amount detail that dramatically illustrates exactly how the OCC views the scope of its enforcement responsibility and authority to impose civil money penalties for BSA violations:

In the BSA area, the OCC's CMP authority is concurrent with that of FinCEN.  In cases involving systemic noncompliance with the BSA, in addition to taking our own actions [i.e., instituting cease and desist actions, as required by 12 U.S.C. ' 1818(s)(3)], the OCC refers the matter to FinCEN [for the issuance of a civil money penalty for such BSA violations.] The referral guidelines developed by FinCEN (or its predecessor unit within the Treasury Department)[39] provide that the examiner should assess all of the facts and circumstances surrounding the violations, whether the violations represent an isolated incident caused by human error, and whether the deficiencies are indicative of significant noncompliance with the BSA and/or systemic weaknesses in the institution's BSA compliance program.  The examiner is instructed [in the referral guidelines] to consider whether the violations are the result of blatant, willful or flagrant disregard of the requirements of the BSA; whether there is a pattern of noncompliance with one or more sections of the [BSA] regulations; whether the violations result from inadequate policies, procedures or training programs; and whether they result from a nonexistent or seriously deficient compliance program.  The [referral] guidelines also provide that first time violations may or may not be appropriate for referral [to FinCEN] depending on the circumstances and, normally, isolated incidences of noncompliance should not be referred [to FinCEN]. The [FinCEN referral] guidelines also set out mitigating factors that should be considered by the examiner, including, the implementation of a comprehensive compliance program, voluntary reporting by the institution of the violations discovered, and positive efforts by the bank to assist law enforcement.  The Comptroller's handbook also contains an abbreviated version of these [FinCEN] referral guidelines and sets forth a number of factors that an [OCC] examiner should consider in making a referral to FinCEN [to assess a civil money penalty for BSA violations].[40]  [Emphasis added.]

Four months later on November 10, 2004, the OCC issued and published OCC Bulletin 2004-50, Enforcement Guidance for BSA/AML Program Deficiencies (AOCC Bulletin@), providing comprehensive guidelines regarding the agency's enforcement policy and practice of utilizing formal regulatory sanctions to enforce compliance with BSA, BSA-related regulations, and the AML provisions of USAPA.[41] The BSA enforcement policy and practice published in the OCC Bulletin is radically different from the agency's BSA enforcement policy and authority to assess a civil money penalty for violations of that law advocated by the OCC in the D.C. Circuit Court of Appeals.  Instead, the BSA enforcement policy and practice reflected in the OCC Bulletin follows the principles and policy depicted in the Congressional testimony of former Comptroller of the Currency Hawke and Acting OCC Chief Counsel Stipano in June and July 2004.

            The most significant aspect of the OCC enforcement policy set forth in the OCC Bulletin is the abject void of any mention or reference to the OCC's previously asserted optional enforcement authority to institute a civil money penalty action for violations of BSA.  The enforcement practice guidelines in the OCC Bulletin do not contain any indication (or even a parenthetical hint or footnote) that suggests that the OCC has alternative powers to enforce violations of BSA by instituting a civil money penalty action under 12 U.S.C. ' 1818(i) and/or a cease and desist action under 12 U.S.C. ' 1818(s) for such violations.  Rather, the newly published BSA enforcement guidelines speak only in terms of the agency's power to institute a cease and desist action for BSA violations pursuant to the mandate in latter statute.  Indeed, the OCC Bulletin does not mention or even hint at the agency’s purported enforcement authority under 12 U.S.C. ' 1818(i)(2)(A)(i) and that statute’s reference to Aviolations of law@ even though OCC Bulletin was published for the express purpose of informing the banking industry it regulates of the agency's enforcement policy and practice with regard to violations of BSA, as supplemented by USAPA.

 The restrictive BSA enforcement policy and practice announced in the OCC Bulletin was confirmed publicly just three months after it was first published.  The most compelling evidence of how the OCC views the nature and scope of its enforcement policy regarding BSA/AML compliance was provided in February 2005 when then Acting OCC Chief Counsel Stipano made a speech at a meeting of the Florida International Bankers Association in Miami, Florida.  Mr Stipano spoke at length in unequivocal and explicit terms regarding the means by which the OCC intends to enforce compliance with BSA/AML.[42] After stressing the increased importance of BSA because of 9/11 and the ensuing enactment of USAPA, the Acting OCC Chief Counsel explained that as a result the Congressional hearings that followed discovery of the money laundering violations at Riggs Bank, the OCC redoubled its efforts to enhance its enforcement policy and practice regarding BSA compliance, and that the one of the results of those efforts is reflected in the OCC Bulletin.

Once again, however, the most telling aspect of the presentation by Acting OCC Chief Counsel Stipano is not reflected in what he said, but in what he did not say.  In this regard, there is no indication or suggestion in Mr. Stipano's that the OCC has the optional enforcement authority to institute of a civil money penalty action for violations of BSA.  On the contrary, the Acting OCC Chief Counsel stressed and make it unmistakably clear that (using his words), the OCC’s “discretion as to [the choice of] remedy” for BSA violations is expressly “limited by law,” explaining that the mandate in 12 U.S.C. ' 1818(s)(3) literally compels the OCC to enforce BSA violations of BSA by using the agency's authority to institute a cease and desist action:

I should begin by pointing out that since 1999[43] the OCC has been conducting its BSA enforcement program under rules very similar to those spelled out in the recent guidance [in OCC Bulletin 2004-50].  Although the new guidance does depart in certain respects from our previous practice, what I think is most notable is that we have chosen to codify our practice and release it to the industry in order to encourage discussion and promote understanding of our rules and expectations.[44]  And thus far, we are the only agency to do so.[45]

The vast majority of bankers ... will be unaffected by the changes spelled out in the new [OCC enforcement guidelines for BSA].  And for those relative few that have a BSA compliance problem, the goal of our [enforcement guidelines] was [sic] not only to ensure that all such institutions promptly correct the problem, but that they also receive fair and consistent treatment.

It has been suggested that the [enforcement guidelines] limits examiners= freedom of action when it comes to citing an institution for a BSA violation.  But it must be realized that the law - 12 U.S.C. 1818(s) - requires the OCC (and each of the other banking agencies) to issue a cease and desist order whenever a bank [violates BSA and its implementing OCC regulation by failing] to establish and maintain BSA compliance program as required by regulation...

But while the law limits [agency] discretion as to the remedy once an institution has been cited [with a BSA violation], regulators have considerable flexibility in determining whether the threshold[46] for citation has been met.  Precisely because the OCC recognizes the gravity of citing a violation [of BSA], we have put in place a process of requiring all proposed citations to be considered by our Washington Supervision Review Committee, which reports directly to the Senior Deputy Comptrollers for Supervision.  Thus, a bank cannot be cited for a BSA compliance violation without approval at the very highest level of the agency.  If that approval is not granted, then [OCC] examiners have a variety of informal remedies at their disposal.[47]  [Emphasis added, except where noted.]

The foregoing statements of Acting OCC Chief Counsel Stipano regarding the policy and practice of the OCC to enforce violations of BSA are explicit, unequivocal, and very specific.  In sum, Mr. Stipano defined the parameters of the official policy and practice regarding the OCC's power to enforce compliance with BSA in terms that are identical to those the author first posited in 2002[48] and later advanced in formal written appeals filed with the Comptroller of the Currency, the U.S. Court of Appeals for the D.C. Circuit, and the United States Supreme Court.[49] Further, and perhaps most significant, the policy and practice outlined in Mr. Stipano's presentation in February 2005 is totally consistent with his testimony before Congress and that of former Comptroller of the Currency Hawke in June and July 2004.

In March 2005, then Acting Comptroller of the Currency Julie L. Williams addressed the Independent Community Bankers of America in San Antonio, Texas.  One of the topics she covered in her presentation was the agency's enforcement policy regarding compliance with the requirements and prohibitions of BSA and the AML provisions of USAPA.[50] The comments of the Acting Comptroller indicate very clearly that the OCC enforcement effort and practice concerning the formal means by which the agency compels compliance with BSA/AML requirements is limited to the institution of a cease and desist action under 12 U.S.C. '' 1818(b) or 1818(c).  The remarks of Acting Comptroller Williams are both clear unequivocal:

So, how many of you have heard that national bank examiners are empowered to impose a cease-and-desist order on their own authority, or that our recent enforcement guidance takes away examiners= discretion on whether or not to cite [an examined bank with BSA] violations?  Not true, not true.[51]

First, no national bank examiner has the power to issue a cease and desist order.  Second, the OCC's recent enforcement guidance[52] preserves the ability of national bank examiners to exercise their judgement in determining when to recommend that a [BSA] violation be cited.  Any citation of a bank for a BSA violation must be reviewed and approved at the highest levels of the OCC.  Because we realize the gravity[53]of citing a violation of the BSA rules, we have put in place a process for all proposed citations to be considered by our Washington Supervision Review Committee, which reports directly to our Senior Deputy Comptrollers for Bank Supervision.[54]

Since our enforcement guidance was issued in November 2004, approval to issue a cease-and-desist order has been granted only on the infrequent occasion when we found that a bank's BSA violations met a standard of persistence or egregiousness that set it apart.  And where we conclude that a violation [of BSA or 12 C.F.R. § 21.21] should not be cited, examiners have a variety of informal remedies that they can pursue, based upon the circumstances of the particular bank.[55]  [Emphasis added, except where noted.]

There is nothing in the Acting Comptroller's discourse regarding the OCC's enforcement powers for BSA violations that indicates (or even suggests) that, even in a case where the BSA violations in question satisfy Aa standard of persistence or egregiousness,@ the OCC follows a policy that gives the agency an option to exercise an alternative enforcement power to assess a civil money penalty for such egregious violations. It is incomprehensible why the Acting Comptroller of the Currency, in describing the manner and means by which the agency intends to enforce violations of BSA to bankers her agency supervises, would choose to omit any mention of an agency policy or practice that provides for the use of an alternative punitive enforcement power to assess a civil money penalty for Apersistent and egregious@ violations of BSA.  The most logical explanation for the omission is that the OCC has not actually adopted and does not, in fact, have an official published BSA enforcement policy that provides for the agency's exercise of an alternative power to assess a civil money penalty for BSA violations.

On May 10, 2005, the Financial Services Roundtable (FSR@)[56] filed a formal petition with the FinCEN and all of the federal bank regulatory agencies requesting that the agencies modify certain of their policies and practices regarding enforcement of violations of BSA.[57] One of the key recommendations made by FSR focused specifically upon the enforcement power to assess civil money penalties for violations of BSA.  The FSR petition states:

FinCEN Should Revise Current Practices on Civil Money Penalties[58]

The Money Laundering Suppression Act of 1994 authorized[59] the Treasury Department to develop a system to delegate responsibility for civil money penalty (ACMP@) enforcement to the relevant bank regulatory agencies.  To date, this has not occurred.  In 1998, the General Accounting Office (AGAO@) reported that FinCEN was struggling in its effort to manage BSA civil money penalties.  The Roundtable believes that FinCEN should delegate the enforcement [power to impose] CMPs to an institution's primary [federal] regulator....

If FinCEN wishes to retain CMP authority [for BSA violations], we recommend[60] that the agency develop a matrix for CMPs similar to those used by the other [bank] regulators.[61] This would eliminate the perceived arbitrary manner in which these penalties are [calculated and] issued.[62]

Based upon the foregoing, there is a substantial amount of evidence in the public record that shows the OCC has professed to follow one of two very different enforcement policies and practices regarding the agency's legal authority to assess civil money penalties for violations of BSA and its implementing OCC regulation (12 C.F.R. ' 21.21).  The different policies are:

      AEnforcement Policy and Practice Based Upon 12 U.S.C. §' 1818(b) and 1818(s).

In cases where the Supervision Review Committee in Washington determines the BSA violations are sufficiently egregious[63] and/or committed under aggravating circumstances,[64] as provided in guidelines promulgated by FinCEN,[65] the OCC will pursue both of the following actions. It will (1) institute a cease and desist action pursuant to 12 U.S.C. § 1818(b), as required by 12 U.S.C. § 1818(s)(3), and (2) refer the violations to FinCEN for the purpose of enabling that agency to institute a civil money penalty action for such violations pursuant a delegation of authority received from the Treasury Department.  In cases involving less egregious BSA violations or where there are mitigating circumstances, the OCC will undertake one of several informal supervisory actions such as requiring that the offending institution enter into a memorandum of understanding or other informal agreement to correct any deficiencies and strengthen the effectiveness of the institution's BSA compliance program.

B.     Enforcement Policy and Practice Based Upon 12 U.S.C.  '' 1818 (b)and 1818(i)

This policy is substantially the same as “A,” above, except that the OCC has an additional alternative authority to impose a civil money penalty for the BSA violations pursuant to 12 U.S.C. ' 1818(i)(2)(A)(i).[66]  Under this policy, therefore, the OCC will have the option of pursuing one or more of four courses of action.  The OCC will (1) institute a cease and desist action pursuant to 12 U.S.C. ' 1818(b); (2) institute a civil money penalty action pursuant to 12 U.S.C. ' 1818(i)(2)(A)(i); (3) institute both types of enforcement actions;[67] or (4) refer the violations to FinCEN for the assessment of a civil money penalty by that agency;

The BSA enforcement policy and practice reflected in the Congressional testimony of former Comptroller of the Currency Hawke and Acting OCC Chief Counsel Stipano in June and July 2004, and set forth in OCC Bulletin 2004-50 (November 2004), as amplified and expounded upon by both Acting OCC Chief Counsel Stipano and Acting Comptroller Williams in published public presentations they made to the banking industry in February and March 2005 - all point to and are totally consistent with the policy delineated in “A,” above.  No other rational conclusion is possible.  The BSA enforcement authority and practice that the OCC advanced and argued before D.C. Circuit Court of Appeals in 2002 is precisely the policy reflected in “B,” above.

The final and crucial question is which of the two foregoing policies accurately portrays the official published enforcement policy and de facto practice of the OCC regarding its enforcement authority to assess formal sanctions for violations of BSA and BSA-related regulations?  Curiously,, a determination that either policy is correct is problematic for the OCC.[68] Based upon the clear preponderance of public pronouncements of the OCC in 2004 and 2005 discussed above, the leading candidate of the correct answer to the question posed is the policy reflected in “A.”  Although the OCC strenuously professed to adjudicating officials in 2001 and 2002 that it had adopted and followed the policy set forth in “B,” there is nothing - not even a footnote or parenthetical hint or suggested possibility - in the public record that supports the agency's contention.  Rather, there is only the naked assertion by OCC attorneys that the agency followed such policy and practice in pleadings, briefs and oral arguments presented on behalf of the agency. 

CONCLUSION

Based upon all available reliable information in the public record, there is only one logical conclusion.  Simply stated, the official published policy and de facto practice of the OCC to enforce violations of BSA is set forth in policy in “A,” above.  If that is correct, the determination is inescapable that the OCC engaged in a deliberate course of action designed and intended to deceive and mislead adjudicatory officials and federal appellate judges charged with the responsibility of deciding the legal merit of Mr. Washburn's application under EAJA.  Such misconduct resulted in a monumental injustice.[69]

            The public record shows there has been only one case or occasion where the OCC followed the policy stated in “B,” above.  That solitary case began in 2001 when the agency instituted a civil money penalty action against Mr. Washburn for violations of 12 C.F.R. ' 21.21 by the bank, and continued into 2002.  At that time, and in order to support and bolster its decision to institute that action against Mr. Washburn, agency representatives misled the presiding administrative law judge, the executive office of the OCC, and the Court of Appeals for the D.C. Circuit by repeatedly averring falsely that the OCC had an establish history of following the same policy and practice of assessing civil money penalties for BSA violations on numerous prior occasions.[70]  It was more important for the OCC to Asave face@[71] than to admit it made a mistake when it instituted the civil money penalty action against Mr. Washburn.  That case therefore stands as a classic example of where the desired result is exploited to justify the use of any means to affect that result, including deception and professional misconduct.


ENDNOTES

[1]. Most of the provisions of the Bank Secrecy Act are codified in titles 31 of the United States Code; however, some provisions of that law are codified in titles 12 and 18.  See, e.g., 12 U.S.C. '' 1818(s), 1818(i)(2)(A)(ii) and 1829b, and 18 U.S.C. '' 1956 and 1957.

[2]. The OCC regulation was promulgated in accordance with the statutory mandate in 12 U.S.C. ' 1818(s)(1) and became effective in January 1987.  At the same time, all of the other federal banking agencies promulgated substantially identical regulations, requiring the supervised institutions to adopt and maintain policies and procedures reasonably designed to assure compliance with all of the recordkeeping and reporting requirements of BSA and the implementing regulations promulgated by the Treasury Department at 31 C.F.R. Part 103.  Procedures for Monitoring Bank Secrecy Act Compliance, 52 Fed. Reg. 2858 (1987), adding 12 C.F.R. '' 21.21 [OCC], 208.14 (recodified as 208.63) [Federal Reserve Board], 326.8 [Federal Deposit Insurance Corporation], 563.177 [Office of Thrift Supervision], and 748.2 [National Credit Union Administration].

[3]. The complete title of the legislation is Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.  President Bush signed USAPA into law in October 2001.  The new law strengthened measures to prevent, detect, and prosecute terrorism and illicit money laundering activities.  Two sections of USAPA (Section 314 [Information Sharing] and Section 326 [Customer Identification Program]) have had the greatest impact upon the banking industry.  The new law effectively modified BSA and resulted in the promulgation of additional implementing AML regulations by the Treasury Department, all of the federal banking agencies, as well as the SEC.

[4]. The stepped-up level of intensity of enforcement of BSA by the banking agencies clearly reached its zenith in the latter part of 2004 following Congressional hearings in June and July of that year.  Those hearings were critical of the regulatory and enforcement efforts of the Treasury Department and the federal bank regulatory agencies regarding the requirements of BSA and the AML provisions of USAPA. They were prompted in large part by the discovery of a massive money-laundering scheme involving hundreds of millions of dollars that had been operating undetected for several years by the former Chilean dictator Augusto Pinochet, numerous members of his family, and certain high-ranking military officers who served under Pinochet.  The primary banking intermediary that facilitated its illicit operation was Riggs Bank, N.A. in Washington; however, several other major insured depository institutions throughout the United States were also heavily involved.  See, Report of the Permanent Subcommittee on Investigations of the Committee of Homeland Security and Governmental Affairs of the U.S. Senate, March 16, 2005.  As discussed later in the main text, the written and oral testimony at those hearings of former Comptroller of the Currency John D. Hawke, Jr. and Acting OCC Chief Counsel Daniel P. Stipano clearly delineated the OCC enforcement policy and practice regarding compliance with BSA and BSA-related regulations, as well as the AML provisions of USAPA.

[5]. Although the supervisory responsibilities and enforcement powers of all of the federal bank regulatory agencies regarding compliance with BSA are essentially the same, this article will only address those applicable to the OCC.

[6]. See, Woodrough, Stephens. B., Civil Money Penalties and the Bank Secrecy Act - A Hidden Limitation of Power, 119 Bank. Law J. 46 (2002).  The content and conclusions drawn in the article were the product of legal research occasioned by the institution of a civil money penalty action by the OCC against an individual officer of a national bank for violations of 12 C.F.R. ' 21.21 that were allegedly committed by the bank.  The author served as counsel to the accused officer, and filed a motion for summary disposition to dismiss all charges based upon the agency's alleged lack of jurisdictional authority to assess a civil money penalty for violations of BSA or its implementing regulations, including the OCC regulation at 12 C.F.R. § 21.21.  Shortly thereafter, the OCC summarily dismissed the action without filing any response to the summary disposition motion.  The OCC vehemently disagreed with the contention it did not have the enforcement authority to institute the civil money penalty action, explaining (somewhat dubiously) that its decision to dismiss that action was based upon a determination that it was not economically feasible for the agency to litigate the issues raised by the alleged charges vis-à-vis the relatively small size of the penalty ($2,500) sought by the agency.

[7]. Violations of the statutory provisions of the Bank Secrecy Act, the USA Patriot Act, and/or any federal regulation promulgated by the various federal regulatory agencies for the purpose of implementing the requirements, limitations or prohibitions of those laws, including the federal regulations identified in note 2, supra, promulgated in accordance with 12 U.S.C. § 1818(s)(1) are hereinafter referred to collectively as “BSA violations” or “violations of BSA.”


[8]. Section 1359(a)(1) of Money Laundering Control Act of 1986, Pub. L. No. 99-570, 100 Stat. 3207-27, added a new subsection (s) to section 8 of FDIA, 12 U.S.C. ' 1818(s).  Section 8(s)(1) requires each banking agency to promulgate regulations requiring the institutions it supervises to adopt policies and procedures designed to assure compliance with BSA.  Cf. note 2, supra.  Section 8(s)(3) states that for violations of any regulation promulgated under section 8(s)(1), Athe agency shall issue an order in the manner prescribed in subsections (b) or (c) of this section requiring such depository institution to cease and desist from its violation of [such] regulations.@ [Emphasis added.]

[9]. Pub. L. No. 101-73, 103 Stat. 462, codified as amended at 12 U.S.C. ' 1818(i)(2)(A)(i) (1989).

[10]. The acronym is for the Financial Institutions Criminal Enforcement Network, which is a bureau of the Treasury Department.  The Secretary of the Treasury has designated and charged FinCEN with the overall administration and enforcement of BSA and all BSA-related regulations promulgated by the Treasury Department and the federal bank regulatory agencies.  In implementation of those responsibilities, the Secretary of the Treasury has delegated to the Director of FinCEN the enforcement authority to impose a broad range of civil money penalties for violations of BSA See, 31 U.S.C. '' 5318, 5318A and 5321, and 31 C.F.R. '' 103.56-103.57.

[11]. 135 Cong. Rec. S2379-02 at S2393 (daily ed., March 8, 1989); and 1989 WL 171463.  It is significant that this gloss on the language “violation of any law or regulation” was prepared by the Department of the Treasury to preserve the exclusive authority of Treasury, exercised through FinCEN, to assess civil money penalties for BSA violations, and was presented to the United States Senate by Senator Jake Garn, who was then Chairman and ranking member of the Senate Committee on Banking, Housing and Urban Affairs.  The cited excerpt was included in that part of a section-by-section analysis of FIRREA prepared by the Senate Banking Committee that specifically pertained to the newly added provision Aviolation of any law or regulation@ in section 8(i) of FDIA, 12 U.S.C. § 1818(i).

[12]. It is undisputed that between 1982 and 1989, the Treasury Department and FinCEN (under a delegation of authority from Treasury) were the government agencies with the exclusive enforcement authority to assess civil money penalties for violations of BSA.  Congress first vested that authority with the Treasury Department in 1982 with the enactment of the Bank Secrecy Act.  See, Section 1356 of title I of Pub. L. No. 97-258, 99 Stat. 877, 999 (1982) (codified in title 31 of the U.S. Code by adding sections 5318 and 5321).  Section 5318 (31 U.S.C. ' 5318) authorized the Secretary of the Treasury to “delegate duties and powers under this subchapter [II of Chapter 53 of Title 31] to an appropriate supervising agency.”  Such powers include the authority to impose civil money penalties for BSA violations, as granted by Congress to the Secretary of the Treasury in section 5321 (31 U.S.C. ' 5321).

[13]. Title IV of the Riegle Community Development and Regulatory Improvement Act of 1994 is also known by its popular name, the Money Laundering Suppression Act of 1994.

[14]. Congress vested the Secretary of the Treasury with discretionary authority to delegate to the banking agencies the power to impose civil money penalties for violations of BSA when that law was first enacted in 1982.  31 U.S.C. ' 5318. According to the sworn testimony of the Assistant Secretary of the Treasury for Enforcement in March 1994, the Secretary of the Treasury never exercised that authority.  Cf. note 15, infra.

[15]. 1994 W.L. 224698.  See also, concurring description with a cross-reference to the Assistant Secretary's testimony in H.R. Conf. Rept. No. 103-652 at 190, reprinted in 1994 U.S.C.C.A.N. 1977 at 2020-21.

[16]. Crawford Fitting Co. v.  J.T. Gibbons, Inc., 482 U.S. 437, 445 (1987); Busic v. United States, 446 U.S. 398, 406, (1980); Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979); Radzanower v. Touche Ross & Co., 426 U.S. 148, 153 (1976); Morton v. Mancari, 417 U.S. 535, 550-51 (1974); and Preiser v. Rodriguez, 411 U.S. 475, 489-90 (1973).

[17]. Dole Food Co. v. Patrickson, 123 S.Ct. 1655, 1661 (2003), citing Mertens v. Hewitt Associates, 508 U.S. 248, 258 (1993); and United States v. Nordic Village, Inc., 503 U.S. 30, 36 (1992).

[18]. Universal Interpretive Shuttle Corp. v. Washington Metropolitan Area Transit Comm'n., 393 U.S. 186, 193 (1968); State of Georgia v. Pennsylvania R. Co., 324 U.S. 439, 456-57 (1945); and Posadas v. National City Bank, 296 U.S. 497, 503 (1936).

[19]. Cf. note 6, supra.  The targeted officer's name is Dale Washburn, who at the time the alleged violations of 12 C.F.R. ' 21.21 occurred, was the Chief Executive Officer, Director, President, and BSA Compliance Officer of the First National Bank, Seneca, Missouri.

[20]. 5 U.S.C. ' 504.  The statute is a limited waiver of the sovereign immunity of government agencies and provides, generally, that where an adversary adjudication action is instituted by an agency against a person subject to the supervisory authority of that agency, the respondent of that action is entitled to recover all attorney fees and related legal expenses (subject to certain limitations) incurred in defending against such action if that person is deemed a “prevailing party,” and if it is also determined the agency was not “substantially justified” in instituting the action.

[21]. The style and OCC case number of the EAJA action is In the Matter of Dale E. Washburn, Equal Assess to Justice Applicant, AA-EC-01-04 (Sept. 2002).

[22]. The decision and order issued by Comptroller focused only upon the issue of whether violations of BSA constitute violations of “any law or regulation,” as that terminology is used in 12 U.S.C. § 1818(i)(2)(A)(i).  The Comptroller answered that question in the affirmative, holding that such determination is clearly within the “plain meaning” of that statute.  Comptroller Hawke  made that determination, however, without  any analysis or consideration of whether it was equally clear that such violations of BSA were also within the “plain meaning” of  the provisions of  12 U.S.C. § 1818(s)(3)  that provide, where a banking agency determines that BSA violations have been committed by a bank subject to that agency’s supervisory authority, “the [banking] agency shall issue an order in the manner prescribed in [12 U.S.C. §§ 1818(b) or (c)] requiring [the offending bank] to cease and desist from its violation of such regulations.”   If that question were resolved in the affirmative, the ultimate deciding issue  then is whether there is any legal basis or principle that would support a determination that application of  one of the two statutes in question should take precedence over the other as a matter of law.  Unfortunately, the final decision and order of Comptroller Hawke never addressed that issue since his analysis  failed to consider the predicate question of whether violations of BSA are also clearly within the “plain meaning” of the provisions of 12 U.S.C. § 1818(s)(3) that require the OCC to issue a cease and desist order against the offending institution for BSA violations.

[23]. Washburn v. Office of the Comptroller of the Currency, Circuit Case No. 02-1171.  The Court of Appeals for the D.C. Circuit denied Mr. Washburn's appeal in a decision and order issued per curiam.   Washburn v. Office of the Comptroller of the Currency, Slip Copy, 62 Fed. Appx. 357, 2003 WL 21025276 (D.C. Cir. May 2003); pet. for reh’ng. and reh’ng en banc den. (D.C. Cir. July 2003).  The Court's opinions were not published in the Federal Reporter.

[24]. The United States Supreme Court denied Mr. Wasburn's petition for certiorari in November 2003.  Washburn v. Office of Comptroller of Currency, Case No. 03-591, 540 U.S. 1018, 124 S.Ct. 588 (Mem.), 157 L.Ed.2d 433, 72 USLW 3292, 72 USLW 3340, 72 USLW 3347 (Nov. 2003).

[25]. What the OCC failed to mention in its written and oral arguments before the Court was that the OCC instituted all of the referenced prior civil money penalty actions “concurrently” with FinCEN and the statutory authority of that agency to assess civil money penalties for BSA violations under a delegation of Treasury's authority in 31 U.S.C. ' 5321.  (See notes 33 and 70, infra, and the accompanying text.)  Because of that omission, the adjudicating officials involved in the referenced EAJA action were totally oblivious to the fact that none of the claimed prior civil money penalties imposed by the OCC for BSA violations were instituted by the OCC in its own right, i.e., without any participation or involvement of FinCEN similar to that which occurred when the OCC issued a civil money penalty order against Riggs Bank, N.A. for multiple violations of BSA in 2004.  Cf. note 33, infra.

[26]. The public record does not support the OCC averment that the agency has actually exercised the referenced optional enforcement authority.  Presumably, the OCC enforcement policy regarding the exercise of that power would necessarily include certain guidelines and criteria that distinguish between the two different sanctions, reserving the assessment of a punitive civil money penalty for the more egregious violations of law, or violations with aggravating circumstances.  There is nothing in the public record, however, that indicates the OCC has adopted and follows such a policy.  For example, there is nothing in the OCC instructions to bank examiners, Comptroller's Handbook for Safety and Soundness/Compliance, or any OCC Bulletin issued by the agency that indicates the OCC follows such a policy.  The only public pronouncement of guidelines and standards under which civil money penalties will be assessed for BSA violations committed by banks subject to the supervisory authority of the OCC is reflected in a Memorandum of Understanding (“MOU”) between the Director of FinCEN and, inter alia, the Comptroller of the Currency that was executed in September 2004.  Cf. note 65, infra, and the accompanying text.

[27]. The issues related to the institution of a cease and desist action and a civil money penalty action by the OCC against the same institution for the same set of BSA violations are addressed in more detail later in the text.  See notes 66 and 67, infra, and the accompanying text.

[28]. Because of the summary disposition of both appeals, the pure legal issue of whether the mandated sanction specified in 12 U.S.C. ' 1818(s)(3) takes precedence over the permissive grant of generic authority in 12 U.S.C. ' 1818(i)(2)(A)(i) has not been formally examined and adjudicated by any federal appellate court.

[29]. The OCC published the full text of both statements on the Internet.  Former Comptroller of the Currency Hawke's oral statement is online at http://www.occ.treas.gov/ftp/release/2004-43a.pdf, and his written statement appears online at http://www.occ.treas.gov/ftp/release/2004-43b.pdf.

[30]. Cf. note 4, supra.

[31]. Boldfaced type and underling emphasis in the original.

[32]. As worded, this sentence is literally correct.  What is not stated, however, is that the “enforcement authority” of the OCC does not include the power to impose civil money penalties for BSA violations in its own right, i.e., without any involvement of FinCEN.

[33]. The characterization of “concurrent authority” to assess a civil money penalty for BSA violations is an invention of the Treasury Department, FinCEN and/or (most likely) the OCC.  The phrase is not used in any federal statute or implementing regulation pertaining to BSA, and it has never been used by any agency witness to describe the enforcement authority of the OCC to assess a civil money penalty for BSA violations in any Congressional hearing or conference report pertaining to the long legislative history of BSA, as amended and supplemented by Congress over the past thirty-five years.  On the contrary, and as noted earlier (see notes 11 and 12, supra, and the accompanying text), Congress expressed a clear intent in 1989 that different regulatory agencies would not exercise concurrent authority to assess civil money penalties for the same violation of law. The designation Aconcurrent@ is highly misleading since there is no evidence of any Congressional intent to vest a dual grant of enforcement authority in both agencies to assess civil money penalties for violations of BSA.  [It is ironic that in 1994, Congress actually intended to grant such concurrent enforcement authority to the banking agencies and to Treasury/FinCEN when it enacted the provisions codified in 31 U.S.C. ' 5321(e).  However, the Secretary of the Treasury effectively frustrated that intent when he failed to comply with the directive in that statute to delegate to the banking agencies the enforcement authority of the Treasury Department to institute civil money penalty actions for violations of BSA.]  Accordingly, there is no actual Aconcurrent@ enforcement authority between FinCEN and the OCC regarding penalty actions for BSA violations.  The plain fact of the matter is that when the OCC referred the Riggs Bank BSA violations to FinCEN, the only valid and enforceable civil money penalty order issued in that case was the penalty order issued by FinCEN - not the penalty order issued by the OCC.  The supplemental OCC order against Riggs Bank, N.A. was pure propaganda designed solely to “send a message” to the banking industry (and to Congress) regarding the seriousness and importance of compliance with all of the BSA/AML requirements and prohibitions..

[34]. Although not expressly stated in the testimony of either Comptroller Hawke or Acting OCC Chief Counsel Stipano, the phrase Aour own actions@ is unquestionably a reference to the institution of cease and desist actions by the OCC in accordance with the statutory mandate in 12 U.S.C. ' 1818(s)(3).

[35]. Cf. note 29, supra, at pages 5, 15 and 16.

[36]. Most of Acting OCC Chief Counsel Stipano's written statement tracks verbatim that submitted a month earlier by former Comptroller of the Currency Hawke to the Senate Committee on Banking, Housing and Urban Affairs.  The written statement and oral testimony of Mr. Stipano are substantially the same.

[37]. The OCC published the full text of Acting OCC Chief Counsel Stipano's testimony on the Internet.  Mr. Stipano's written statement is online at http://www.occ.treas.gov/ftp/release/2004-57a.pdf, and his oral testimony appears online at http://www.occ.treas.gov/ftp/release/2004-57b.pdf.

[38]. Ibid. at page 5.

[39]. The predecessor unit of FinCEN was known as the Office of Financial Enforcement (“OFE”).  The referenced “referral guidelines” in Mr. Stimpano’s testimony that were promulgated and issued by OFE to the federal bank regulatory agencies were never published by OFE or the banking agencies.  As a result, it was extremely difficult for persons outside of the regulatory agencies to ascertain exactly what policy or procedures were followed by the banking agencies when a case was referred to OFE for the assessment of a civil money penalty by that agency.

[40]. Cf. note 37, supra, at page 12.  The referenced FinCEN referral guidelines in Mr. Stipano's remarks were publicly promulgated by FinCEN and the banking agencies three months later in October 2004.  (See note 65, infra.)  The plain meaning of the cited text of Mr. Stipano's written statement is unavoidable.  In those instances where the BSA violations are sufficiently egregious to conform with the FinCEN referral guidelines, the OCC follows a practice of referring such cases to FinCEN.  The sole purpose of such referral is to ask that FinCEN exercise its discretionary authority to assess a civil money penalty for such BSA violations pursuant to the enforcement authority delegated to that agency by Treasury.  Clearly, therefore, the OCC does not follow (and has never followed) a policy or de facto practice of assessing civil money penalties for BSA violations on its own authority.  No other rational conclusion is possible.  Why follow a policy of assessing civil money penalties for BSA violations Aconcurrently@ with FinCEN, if the OCC actually possesses the authority to assess a civil money penalty for BSA violations in the first instance, independent of any involvement of FinCEN?  There is only one answer: The premise that the OCC possesses the enforcement authority to assess civil money penalties for violations of BSA is false.  FinCEN, acting under a delegation of authority from Treasury, is the only agency empowered to assess civil money penalties for BSA violations.  Indeed, that policy and practice is reflected in a written agreement between FinCEN and the banking agencies.  See note 65, infra.

[41]. The OCC announced OCC Bulletin 2004-50 on November 10, 2004, and published the full text of the OCC Bulletin on the Internet at  http://www.occ.treas.gov/ftp/bulletin/2004-50.doc.

[42]. The OCC published the full text of the presentation made by Acting OCC Chief Counsel Stipano on the Internet at http://www.occ.treas.gov/ftp/release/2005-13a.pdf.

[43]. The significance of the stated year of 1999 is unknown and is probably a typographical error.  A more logical year to cite is 1989.  Cf. note 9, supra, and the accompanying text.

[44]. There is nothing in the speech that identifies the differences between the old and new policies or practices.  The author believes, however, that the most significant difference is that the institution of a formal enforcement action under section 8 of FDIA for violations of BSA must be approved by a much higher authority (viz., the Washington Supervision Review Committee) under the new policy than was required previously under the old policy.

[45]. This continues to be the case today.  The other bank regulatory agencies have not promulgated procedures similar to those announced in OCC Bulletin 2004-50.  On the other hand, in July 2004, all of the banking agencies announced the issuance of new bank examination procedures for examining compliance with BSA, as supplemented by USAPA, with particular emphasis upon the examined bank's customer identification program.  See, e.g., the release published by the FDIC on the Internet at http://www.fdic.gov/news/news/press/2004/pr7904.html.

[46]. Boldface type and underline emphasis in the original.

[47]. Cf. note 42, supra, at pages 7 through 9.

[48]. Cf. note 6, supra, and the accompanying text.

[49]. Cf. notes 23 and 24, supra, and the accompanying text.

[50]. The OCC published the full text of the presentation made by then Acting Comptroller of the Currency Williams on the Internet at http://www.occ.treas.gov/ftp/release/2005-29a.pdf

[51]. Italics emphasis in the original.

[52]. It is more probable that the referenced “OCC@ guidance”  pertains to the BSA/AML enforcement policy set forth in OCC Bulletin 2004-50 (Nov. 2004), than to the joint announcement by FinCEN and the banking agencies a month earlier in October 2004.  The October announcement pertained to the inter-agency compact regarding BSA information sharing and reporting, and the referral of certain egregious BSA violations to FinCEN for enforcement.  Cf. note 65, infra.

[53]. Based upon the content and context of the quoted excerpts from Ms. Williams= presentation, the reference to the agency's recognition of the “gravity” of a cited BSA violation is clearly predicated upon the mandatory institution of a cease and desist order required in 12 U.S.C. ' 1818(s)(3) for such violations.  Because of the compulsory nature of a specified enforcement sanction delineated in that statute, the BSA enforcement policy reflected in OCC Bulletin 2004-50 and the comments of Acting Comptroller Williams make it clear that the determination of whether a BSA violation will be cited in an OCC bank examination report will require the prior approval of very senior agency representatives in Washington.  The establishment of an agency review process at that level for determining the existence of a violation of BSA is unprecedented in the BSA compliance and enforcement experience of the OCC.

[54]. The last two sentences of this paragraph are remarkably similar to the remarks Acting OCC Chief Counsel Stipano made in his presentation in February 2005, quoted previously.  (See note 42, supra, and the accompanying text.)  Both sentences track the second and third sentences of the last quoted paragraph of Mr. Stipano's presentation almost verbatim. There is no doubt, therefore, that Acting Comptroller Williams and Acting OCC Chief Counsel Stipano are Aon the same page@ and in complete agreement in their description of the OCC enforcement policy and practice regarding BSA violations, and the procedural process used by the agency as a means of facilitating the execution of that policy.

[55]. Cf. note 50, supra, at page 4.

[56]. The Financial Services Roundtable represents 100 of the largest integrated financial services companies in the United States that provide banking, insurance, and investment products and services to the general public.  FSR members, taken as a whole, manage assets totaling more than $18 Trillion that generate annual revenues that exceed $678 Billion, and they provide jobs for almost 2.5 million persons.  FSR is a major force in the banking and finance industry in the U.S.

[57]. The FSR petition is published online at  http://www.fsround.org/pdfs/PetitionforRulemakingonSARsFinal.pdf

[58]. Boldface type emphasis in the original.

[59]. The referenced legislation did far more than merely “authorize” the Treasury Department to delegate to the banking agencies its statutory enforcement authority under 31 U.S.C. ' 5321 to assess civil money penalties for violations of BSA against banking institutions supervised by those agencies.  Congress actually directed (mandated) such delegation of authority by the Secretary of the Treasury.  ("The Secretary of the Treasury shall delegate to ..." [31 U.S.C. ' 5321(e)])

[60]. Italics emphasis in the original.

[61]. The widely disparate standards of proof applicable to civil money penalties imposed by FinCEN under 31 U.S.C. ' 5321 and those imposed by the federal banking agencies under 12 U.S.C. ' 1818(i), and the impact that evidentiary proof of those standards has upon the total amount or size of the penalty to be imposed by those agencies was also cited by the author in the previously mentioned article as evidence of still another reason why the legal authority to impose civil money penalties for BSA violations is vested solely with Treasury/FinCEN.  See, Woodrough, Stephens B., Civil Money Penalties and the Bank Secrecy Act - A Hidden Limitation of Power, 119 Bank. Law J. 46, at 53-54 (2002)

[62]. Cf. note 57, supra, at page 9.

[63]. In general, the egregiousness of the violations measures the degree of culpability under which the violations were committed.  For example, willful violations or those that occurred as a result of recklessness or a wanton indifference to the requirements of BSA or the implementing OCC regulation would be treated as far more egregious than violations that occurred as a result of simple negligence or oversight.  Similarly, violations that served to further or facilitate the actual operation of money laundering scheme or an operation that funded terrorist activities are far more egregious than violations pertaining to the accuracy of reporting requirement in BSA where there is no evidence of any accompanying illicit money laundering activity or terrorist financing. See also note 65, infra, regarding the criteria and guidelines adopted by FinCEN and the banking agencies for the referral of certain BSA violations to FinCEN for the institution of a civil money penalty action by that agency.

[64]. Such factors include considerations such as those enumerated in Acting OCC Chief Counsel's testimony before Congress in July 2004 (see notes 37 and 40, supra, and the accompanying text), as well as other factors such as the substantive/technical nature of the violations, the number of violations, a history of similar violations and/or prior supervisory warnings, the extent of any loss or damage to the institution caused by the violations, and the failure or refusal of the offending bank to institute timely and effective affirmative actions to correct the violations and prevent their recurrence by strengthening the banks BSA compliance program.  See also note 65, infra.

[65]. The referenced FinCEN guidelines were first announced to the public on October 1, 2004 in a press release issued by Under Secretary of the Treasury Stuart Levy for the Office of Terrorism and Financial Intelligence of the Treasury Department. (Treasury Press Release JS-173, 10-1-04). The press release announced the execution of a Memorandum of Understanding (AMOU@) between the Director of FinCEN and the agency heads of all of the federal banking agencies in late September of 2004 wherein FinCEN and all of the banking agencies agreed to the terms, conditions, and procedures under which detailed bank examination information pertaining to compliance with BSA and its implementing regulations by institutions examined by the banking agencies will be forwarded to FinCEN.  The Treasury press release and the MOU were published on the Internet by Treasury and are online at http://www.treas.gov/press/releases/js1973.htm.  The MOU contemplates that the banking agencies will prepare and file several different types of reports with FinCEN regarding the results of BSA compliance examinations by the agencies, with different degrees of detail and different types of data required for each type of report.  Under the terms of the MOU, the banking agencies have agreed to provide FinCEN with Annual Reports (MOU, Par. II A.), BSA Program Documents Reports (MOU, Par. II B.), Quarterly Reports (MOU, Par. II C.), Special BSA Examination Project Reports (MOU, Par. II D.), and Significant BSA Violations Reports (MOU, Par. II E.). The provisions of the last-cited paragraph of the MOU contains the criteria that define those cases the banking agencies have agreed will be referred to FinCEN for the institution of a civil money penalty action against the offending banking institution.  The MOU also requires FinCEN to file certain reports and notifications to the banking agencies regarding, inter alia, those instances where FinCEN imposed a civil money penalty order upon any banking institution supervised by the agencies (MOU, Par. III B.).  Interestingly, the term Acivil money penalty@ is never used  in the MOU to describe the sanction that may be imposed for violations of BSA.  Instead, the MOU only uses the indefinite characterization, “enforcement authority” of FinCEN and the banking agencies.  The MOU concludes, “No provision of this MOU is intended to affect the Agencies= respective enforcement authority.” (MOU, Par. VI)  There is nothing in the MOU, however, that contravenes or is in any conflict with either of the following propositions: (1) the “enforcement authority” of the banking agencies to impose a formal sanction pursuant to 12 U.S.C. 1818 for violations of BSA is restricted to the issuance of a cease and desist order, as provided in 12 U.S.C. ' 1818(s)(3), and (2) the “enforcement authority” of FinCEN to impose a formal sanction against a banking institution for BSA violations includes the issuance of a broad range of civil money penalty actions against the offending institution pursuant to 31 U.S.C. ' 5321.

[66]. Since FinCEN (with the concurrence of the banking agencies) has promulgated written referral guidelines under which it will consider the imposition of a civil money penalty for BSA violations under its delegation of authority from Treasury, the OCC option under this policy to assess a civil money penalty for BSA violations is necessarily limited to those cases the OCC has not agreed to refer to FinCEN, i.e., where the circumstances of the violations in question are not sufficiently egregious to satisfy the FinCEN referral guidelines.  Under this policy, therefore, the OCC could only assess a civil money penalty for BSA violations in those instances where FinCEN would decline to assess such penalty vis-à-vis the FinCEN referral guidelines in the MOU.  The questionable wisdom and efficiency of any policy that contemplates the imposition of punitive monetary sanctions based upon such a Adouble standard@ are self-evident.

[67]. Ibid.  Under this policy, therefore, the OCC would not institute both types of actions in those cases where the context and surrounding circumstances of the violations satisfy the FinCEN referral guidelines.  In such cases, the OCC has agreed with FinCEN to refer the case to FinCEN for the assessment of a civil money penalty by that agency.  As noted, all of the other federal banking agencies have entered into the same agreement with FinCEN.  There is nothing in the MOU agreement that indicates the possibility that an examined institution with serious BSA violations that fall within the referral guidelines would be subject to the imposition of a civil money penalty order by both FinCEN and a banking agency for the same BSA violations.  Similarly, there is nothing in the MOU that indicates where, arguendo,  civil money penalty orders are issued by both FinCEN and a banking agency, only the order issued by FinCEN shall be enforceable, as was the case with Riggs Bank, N.A. (See notes 4 and 33, supra, and the accompanying text.)  In sum, the inter-agency agreement reflected in the MOU does not contemplate that the OCC (or any of the other banking agencies) can and/or will institute enforcement actions to assess civil money penalties for violations of BSA.

[68]. A finding that the OCC follows the policy in AA@ effectively renders all of the representations in agency arguments to the D.C Circuit Court of Appeals regarding its alleged alternative authority and de facto practice of assessing a civil money penalties for violations of BSA as nothing more than bogus rhetoric designed to misinform and mislead the Court. That conclusion is augmented by the fact that Congress has not amended the scope of the statutory enforcement powers of the OCC for purposes of enforcing compliance with BSA since 1986.  On the other hand, a finding that the OCC follows the policy in AB@ raises the question of whether the practice reflected in the Congressional testimony of former Comptroller Hawke and Acting OCC Chief Counsel Stipano, and the enforcement guidelines in OCC Bulletin 2004-50, as explained by the Acting Comptroller of the Currency and Acting OCC Chief Counsel, are accurate.  Stated differently, if the official OCC enforcement policy and de facto practice follows the policy in AB,@ why did the former Comptroller, the Acting Comptroller, the Acting OCC Chief Counsel, and the OCC Bulletin all fail to make any reference or mention the existence of the optional power of the agency to institute a civil money penalty for BSA violations?  The only logical answer, of course, is that such optional power does not exist and does not reflect the official published BSA enforcement policy and de facto practice of the agency.  The poignancy of that conclusion is heightened when the underlying purpose of the OCC Bulletin and presentations by the Acting Comptroller and OCC Chief Counsel in February and March of 2005 are considered.  All of those measures were undertaken for the express purpose of formally communicating with the banking industry regulated by the OCC and (for the first time in the history of the agency) spelling out and detailing the scope and nature of the agency's BSA enforcement policy and practice.  If those communications were designed and intended to educate and provide a clearer understanding of the agency's BSA enforcement policy, why would the agency not mention or make any kind of reference to the previously claimed optional power to assess a civil money penalty for BSA violations?  Certainly, the OCC has not adopted a “secret” policy of instituting civil money penalty actions for certain “special situations” involving violations of BSA.  Nor is it plausible that the OCC intends to follow a practice of “sandbagging” the institutions it supervises by exercising the power to impose an enforcement sanction for BSA violations that the agency had never published or otherwise announced publicly.

[69]. Mr. Washburn incurred attorneys’ fees and related legal expenses of more than $85,000 defending all of the charges of wrongdoing the OCC issued against him, and convincing the OCC to dismiss the civil money penalty action it instituted based upon those charges.  In the end, therefore, the OCC effectively imposed a monetary penalty on Mr. Washburn by instituting an enforcement action it knew would have to be dismissed if it were challenged, and then dismissing that action just prior to the trial hearing, using the attorneys’ fees and legal expense incurred by Mr. Washburn to prepare for that hearing as a substitute for the civil money penalty sought by the agency.

[70]. The inherent deception and misleading nature of the representations made by the OCC to support its position are rooted in their status as “half-truths.”  OCC attorneys deliberately omitted material information when it made factual representations in arguments to bolster the agency's position that created a false impression designed to mislead the adjudicating official(s) away from the truth.  When the OCC repeatedly asserted that it had imposed civil money penalties for BSA violations in numerous prior cases, the OCC advocate kept secret the material fact that all of the referenced prior penalty actions were instituted under the so-called “concurrent authority” of OCC and FinCEN (see note 33, supra), as was the de facto OCC enforcement policy and practice with Riggs Bank, N.A. in 2004. (Ibid.) The deliberate concealment of that fact unquestionably contributed to an erroneous conclusion by the adjudicating official(s) that the OCC had/has an established history of instituting and assessing civil money penalties for BSA violations pursuant to the agency's authority in 12 U.S.C. ' 1818(i)(2)(A)(i).  The truth of the matter is that FinCEN, not the OCC, assessed all of the referenced prior civil money penalties.  The OCC knew that to be the “whole truth,” but said nothing, allowing the “half-truth” to suffice.  Mr. Washburn, for his part, was unable to force the issue for lack of information.  The OCC repeatedly refused to respond to multiple requests that the agency  identify the previous cases it claimed to have assessed civil money penalties for BSA violations.

[71]. Prior to issuing formal written charges against Mr. Washburn, the OCC made several written and oral threats over a period of almost a year.  The agency threatened to institute a formal enforcement action against Mr. Washburn for the assessment of a civil money penalty of an undefined amount, unless Mr. Washburn entered into a stipulation agreement with the OCC that provided for the issuance of such order by consent.  Having made such repeated threats, the OCC was unwilling to take any action that might be construed as a lack of agency resolve to make good on its coercive tactic.

 

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Last revised: June 1, 2012.