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FDIC Federal Register Citations
State Bank of Withee

Walter Ollech
410 Division Street
Withee, WI 54498

May 3, 2005

Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW.
Washington, DC 20429

Dear Mr. Feldman:

We are a $60 million commercial bank located in Clark County with four
locations.  We are a rural bank with about 50% of our customers being in
or related to the dairy industry.

We appreciate the opportunity to comment on the proposed rule issued by
Federal Deposit Insurance Corporation and other Federal financial
institution regulatory agencies concerning outdated, unnecessary, or
unduly burdensome regulatory requirements pursuant to the Economic Growth
and Regulatory Paperwork Reduction Act of 1996 (EGRPRA).

This letter primarily offers comments in the area of money laundering, as
our costs for compliance in this area have increased substantially.  We
used to be able to open a new account in fifteen minutes, now it takes
thirty minutes.  We also had to buy software  at a cost of $1,100.  All to
comply with AML

Money Laundering Regulations:

Our bank strongly supports the goals of the Bank Secrecy Act (BSA) and its
related regulations and recognizes the significant value these rules
provide in the fight against the financing of terrorism and other illicit
enterprises. The decision by the Agencies to address the many issues
associated with BSA and anti-money laundering (AML) compliance is
encouraging news to the industry. We understand that addressing the issues
raised by BSA and AML compliance cannot necessarily be resolved in a brief
period of time. Nonetheless, we strongly believe there are recommendations
that can be implemented in a relatively short period of time so as to
provide much needed and more immediate regulatory relief in this
particular area of compliance.

We encourage the Agencies to reconsider certain rules relating to Currency
Transaction Reports (CTRs), Suspicious Activity Reports (SARs), and Money
Service Businesses (MSB). One of the major concerns we share with the
Agencies is the massive volume of reporting and the clogging effect it has
on the system. First and foremost, the $10,000 threshold for CTRs should
be increased. This threshold has not been adjusted for inflation since
first introduced. At a minimum, the increase should reflect inflationary
pressures in effect since its introduction in 1979. Considering the
frequency of transactions in this range nowadays, failing to adjust this
figure will only contribute to the clogging of the filing and reporting
system and the dilution of the quality and value of information the
government receives.

Additionally, this low CTR threshold has the effect of artificially
increasing the number of SAR filings. To illustrate, a customer deposits,
deliberately or inadvertently, an amount of cash below but close to the
$10,000 threshold. The deposit could conceivably be deemed to be an
attempt to circumvent reporting requirements by structuring cash
transactions. This would be considered suspicious and would trigger a SAR
filing. Thus, a low CTR threshold amount artificially increases the number
of SAR filings. The effect of a low CTR threshold and its impact on SAR
filings is equivalent to the effect defensive SAR filings have.

Of course, the artificial increase in SAR filings means that bankers are
now obligated to fulfill other due diligence, reporting, and recordkeeping
requirements. Financial institutions are expected to file SARs every 90
days after the initial SAR filing. This requirement should be relaxed so
that a SAR filing every 90 days is necessary only if suspicious activity
is believed to be taking place, not just as a matter of course. To be
consistent, an increase in the CTR threshold should be accompanied with an
increase in the SAR filing threshold.

From a more general standpoint, the purpose for the filing and reporting
requirements pursuant to CTRs and SARs ought to have a wider rather than
narrower focus. In other words, we argue that a better approach is one not
focused on a cash transaction event on any given date, but one where the
focus is on the cash transactions over a relatively longer period of time.
We further argue that it is easier to detect a pattern of potentially
illegal or improper activities when data is analyzed over an extended
period of time, such as biweekly or monthly. This will also decrease the
volume of filings and resources spent by financial institutions and the
Agencies alike.

With regard to MSBs, the filing requirements are triggered when an
individual conducts $1,000 or more in money services on any given date.
For small accounts or an account where this event is rather sporadic,
filing and recordkeeping requirements can be burdensome. This is
especially true for smaller financial institutions.

We strongly encourage the Agencies to change the language in this rule
such that the triggering event is one where the $1000 or more threshold in
money services is a standard practice.

As stated above, other BSA and AML issues are more complex and require a
long-term approach. First and foremost, we strongly believe that BSA and
AML efforts ought to be centralized. The Agencies, and the government in
general, should assume a more proactive approach to this very important
issue of money laundering and terrorist financing. Section 314(a) of the
USA PATRIOT Act is a case on point.

Section 314(a) requires the Secretary of the Treasury to adopt regulations
to encourage regulatory authorities and law enforcement authorities to
share with financial institutions information regarding individuals,
entities, and organizations engaged in or reasonably suspected, based on
credible evidence, of engaging in terrorist acts or money laundering
activities. Section 314(a) enables federal law enforcement agencies,
through FinCEN, to reach out to 41,530 points of contact at more than
20,000 financial institutions to locate accounts and transactions of
persons that may be involved in terrorism or money laundering.

I believe that a multifaceted approach to a financial institution’s review
of the  section 314(a) list is necessary to allow for more expeditious and
efficient handling of such requests. We strongly encourage that the
Agencies allow key data processing vendors to have access to the section
314(a) list directly on behalf of their financial institution clients. In
that way, a review of the list is accomplished with a mainframe data
processing solution, much like OFAC reviews are accomplished.

Moreover, the rules should be harmonized and promulgated by one body.
Currently, there is one body of BSA and AML law but several different
regulatory agencies imposing similar but sometimes different standards,
interpretations, and examination procedures. For instance, a SAR must be
filed when there is (a) money laundering or BSA violations involving
amounts of $5,000 or more; (b) insider abuse regardless of the dollar
amount; (c) a federal crime conducted through the institution or that
affects the institution, with a known suspect, involving the $5,000
threshold; (d) and if there is no known suspect, the threshold jumps to
$25,000. Notice, however, that (a) above is a requirement imposed by the
Department of the Treasury (Treasury). The other requirements are imposed
by the Agencies. This is extremely important because if a financial
institution fails to report a case of structuring, for instance, both the
Treasury and our institution’s primary Federal regulatory agency may
properly cite our institution. 

There can be no question that this lack of a unified approach to BSA and
AML compliance, and lack of concrete guidance by the Agencies and the
government alike, has contributed to confusion in the industry. For
example, more guidance is needed to help bankers understand when to file a
SAR. Currently, the rules are such that it requires a banker to use law
enforcement techniques, subjective judgment, and sometimes detailed
knowledge about allegedly suspicious customers to determine if a SAR
should be filed. SAR reporting essentially turns financial institutions
into criminal investigation bureaus.

Unfortunately, it has been well documented that a very small fraction of
SAR filings receive follow up by the appropriate agencies. We strongly
encourage the Agencies to coordinate training and guidance with other
government agencies, such as the FBI, that are better equipped to provide
specific guidance and direction as to what is adequate, complete, and
useful information that will minimize the volume of filings but increase
the frequency of investigations by the Agencies or other governmental
bodies. Perhaps issuing a publication on a regular basis that highlights
elements, events, or circumstances that prompted further investigation by
the investigating governmental body would be helpful to the industry. Out
of so many filings, knowing what exactly made certain filings worthy of
further investigation will benefit the industry and perhaps reduce the
volume of filings.

In addition, a safe harbor or clear guidance is needed addressing
Regulation B concerns when attempting to comply with BSA’s Customer
Identification Program (CIP) requirements. On the one hand, many
institutions’ CIP policies require the copying of a photo ID in order to
verify the identity of the customer. Yet, on the other hand, the Agencies
frown on this practice indicating it could easily result in a Regulation B
violation of illegal discrimination in lending.

Also, financial institutions need better, and more reasonable guidance
with respect to “politically exposed persons.” Treasury issued a
regulation implementing Section 312 of the USA PATRIOT Act, which requires
U.S. financial institutions to guard against accepting the proceeds of
foreign corruption from kleptocrats, their families, and other associated
“politically exposed persons.”  For this deterrence policy to effectively
work, we believe that better guidance is needed on what is really expected
when transacting with “politically exposed persons.”  Limiting the scope
of individuals who are covered will result in greater efficiencies for the
Agencies and the financial institutions charged with monitoring and
reporting on these individuals.

Another unresolved issue more appropriately addressed by a unified
approach deals with whether or not the disclosure of SAR information to
the institution’s board of directors should eliminate the protections
afforded by SAR safe-harbor rules. We argue that if the institution’s
policies allow for the sharing of SAR information to board members and the
information is not disclosed or shared with others outside the board of
director’s meeting, then this sharing should absolutely fall within the
protection of the safe-harbor rules.

Appraisal Standards for Federally Related Transactions
Much like CTRs and SARs, Safety and Soundness rules are primarily
contingent on a rigid monetary threshold and should be revised to be more
representative of today’s economy and better reflect its realities. Hence,
we strongly encourage the Agencies to increase the $250,000 appraisal
threshold to reflect historical and current inflationary pressures and to
routinely make cost-of-living adjustments. In 1994, the Agencies issued
the Interagency Appraisal and Evaluation Guidelines to primarily foster
prudent appraisal and evaluation policies, procedures, practices, and
standards. Since then, however, the $250,000 threshold has not been


I appreciate the opportunity to comment and make recommendations
concerning this most recent review of money laundering and other rules.
While the review of such rules pursuant to EGRPRA will take a long time,
we strongly encourage the Agencies not to overlook short-term approaches
to provide some much needed regulatory relief, particularly in the area of
money laundering rules. Given the costs incurred by our financial
institution to comply with these rules, more specific guidance resulting
in a reduction in the volume of filing is needed. Thank you for your
consideration of our comments.


Walter Ollech

Last Updated 05/04/2005

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