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B of A Fined $4.75 Million for Not Reporting Cash Dealings : Bank Also Cancels Its Dividend

January 21, 1986|JOHN M. BRODER | Times Staff Writer

Bank of America today was fined a record $4.75 million for failing to report thousands of large cash transactions as required by federal law.

The Treasury Department said the nation's largest bank had committed 17,000 violations of the Bank Secrecy Act, a tool used to battle the laundering of cash used in drug smuggling and other illegal activities. The law requires financial institutions to report all cash dealings of more than $10,000 to the Internal Revenue Service.

The bad news came on the same day that Bank of America reported a $337-million loss for 1985, the second-largest annual loss in U.S. banking history and Bank of America's first yearly deficit since the Depression. The figure reflects massive loan losses in agriculture, real estate, energy and Third World countries.

In addition, the bank suspended payment of the 20-cents-a-share dividend on common stock, which had been reduced from 38 cents a share just five months ago. The move is a blow to tens of thousands of small shareholders who depend upon Bank of America dividends for living expenses.

Crocker Percentage Higher

The Bank Secrecy Act fine was the largest civil penalty ever imposed under the law, eclipsing the $2.25 million levied against Crocker National Bank of San Francisco last August for failure to report 7,877 transactions. However, the fine against Crocker represented a higher percentage of its $22 billion in assets than the Bank of America levy.

BankAmerica, parent of Bank of America, has $120 billion in assets and is the nation's second-largest bank holding company.

"The violations by Bank of America were widespread throughout the units and branch system of the bank," Francis A. Keating II, assistant secretary of the Treasury for enforcement and operations, said.

"While Treasury has no information that the bank engaged in criminal activity in connection with these violations, it is certain given the volume and nature of violations that the non-filing of information about cash transactions deprived the government of timely law enforcement leads in drug, tax and other investigations."

Conscious Involvement Denied

Bank officials have maintained throughout the government scrutiny of its compliance with the law that it voluntarily reported numerous "inadvertent" violations. It strongly denied any conscious involvement in drug money laundering or other illicit activity.

"We're glad to have this agreement behind us. The violations were not willful and no evidence was found linking the bank or its employees with any illegal activities," bank spokesman John Keane said. "We've substantially improved our reporting systems over the last year."

Bank of America has 935 branches in California and a broad network of offices around the globe. It was not immediately known which branches and which countries were the most heavily involved in the illegal activity.

Treasury officials said extensive violations of the reporting law were uncovered by auditors from the Office of the Comptroller of the Currency. The office, which regulates national banks, conducted an exhaustive and, by most accounts, hostile, examination of Bank of America in the spring and summer of 1985.

'Cooperated Fully'

The Treasury statement announcing the agreement on the civil penalty said the bank had "cooperated fully with Treasury in developing the scope of its liability."

Since early last year, the Treasury Department has been pursuing a crackdown of bank failures to comply with the law.

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