Boston bank says it misread law that led to record-setting fine
Officials of the First National Bank of Boston, the 16th largest banking company in the United States, Tuesday attributed the bank's involvement in unreported currency transactions to a simple misreading of a five-year-old federal regulation. The bank pleaded guilty last week in federal district court to a felony charge of failing to report $1.22 billion in cash transactions with nine foreign banks. Much of the cash was in denominations of $20 or less and came from foreign banks in Europe.
Federal law requires banks to report to the Internal Revenue Service all cash transactions of more than $10,000, including transfers to and from foreign banks. The law is intended to help the government check money laundering operations and track organized crime.
At a press conference, bank chairman William Brown said bank lawyers simply misinterpreted the law and believed no IRS reports were necessary.
``Shipping currency is a business that is basic to banking and is highly competitive,'' Mr. Brown said. ``There is nothing illegal or unsavory about this business whatsoever. We are continuing in this business.''
He said the $1.22 billion during the four-year period was ``relatively small when compared with our current monthly volume to our domestic correspondent banks of about $1.4 billion.''
Mr. Brown noted ``the suggestion that there is somehow a link between this `systems failure' and organized crime. . . . To the best of our knowledge this is also untrue,'' he said.
An investigation into the activities of a Boston family allegedly involved in organized crime alerted a federal strike force to the overseas currency transactions at Bank of Boston, according to affidavits filed in connection with the organized crime investigation.
The bank was fined $500,000 for the unreported transactions -- the largest fine ever imposed on a bank for violating federal currency reporting laws. This was the first time an American bank has been prosecuted for illegal international transfers to and from foreign banks.
The money, say bank officials, comes from foreign banks; each transaction is initiated by a foreign bank; and the bank has no idea who the individual customers are. Bank of Boston uses it as assets to make loans and takes a fee for handling transactions.